FIFI PETERS: A very important story is happening in the economy. President Cyril Ramaphosa, you would have seen, had a, quite a busy day on Tuesday, November 23, showing his guest President Uhuru Kenyatta of Kenya around. President Kenyatta is here on a state visit, the first in the country since the Covid-19 pandemic struck. To discuss the economic relations between the two countries I’m joined by Adrian Saville, who is a professor at Gibbs.
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Adrian, so good to have you on the show. Just help us understand the economic significance of this trip happening right now, and whether it is something that we should be taking notice of, or whether it’s something that presidents do – to visit each other.
ADRIAN SAVILLE: [Chuckling] I guess it is something presidents do, some presidents more than others. But it’s an indication or a gesture of cooperation, regional collaboration.
There are a couple of big talking points that sit around this visit. I want to say ‘if we can leave the politics aside’, but course we can’t. If you’d allow me to push the politics aside of the personalities and just talk to the big issues, one is the crescent- or banana-shaped zone of economic performance that runs from the Western Cape, up the eastern spine of southern Africa, through Mozambique and to Kenya. If you think of that crescent shape, that is a particular pocket or corridor of economic and industrial potential that that is punching above the regional weight. That’s one [thing] to keep in mind.
Another is the much broader prospect of the African Continental Free Trade Agreement, which speaks to the potential for pan-African integration and collaboration. I think that’s another talking point as a backdrop.
The third is the conflict, the terrorism in the region, which has to be solved at a multi-country level and cannot be solved by any single country in isolation. This is a problem that is present in the northern parts of Kenya and Ethiopia.
And then perhaps a fourth is to address imbalances, where you have a very large trade imbalance between South Africa and Kenya. So there’s a number of talking points here.
FIFI PETERS: Yes. Let’s talk about the last one – that trade imbalance – because I see that it’s basically weighted towards South Africa, or in South Africa’s favour. We export a whole lot more to Kenya than we import from it. Where do you see the opportunities to balance the scale between the two countries?
ADRIAN SAVILLE: There are probably two or three very obvious areas or immediate areas. The first is that one of the aspects that hamstrings Kenya’s ability to export is logistics. Although South Africans are very good at complaining about poor logistics, the expense of transport and so on, Kenya finds itself in an even more challenged circumstance. So [that’s] one way in which you can redress that overwhelming imbalance. Kenya exports very little in terms of goods to South Africa, and that’s a logistics issue.
The second is just to recognise the differentness in the economies. That’s where you get trade partnerships working particularly well – where one does something that the other can’t. Kenya is developing meaningful pockets of services excellence, including in fintech, in edutech. That would also need to be weighed into the prospect for trade, because what we’re talking about in terms of the imbalance, the overwhelmingly reported number is the movement of goods, not the movement of services, and Kenya has the prospect of competing globally in pockets of service excellence.
FIFI PETERS: I don’t have the Kenyan numbers, but I’m just looking at the South African numbers in front of me, Adrian. South Africa exported R7.5 billion worth of goods to Kenya last year, and imported only R329 million worth. So quite a sizeable gap there.
We constantly read about ‘blockbuster growth’ coming out of Kenya. It always features among the fastest growing economies on the continent, contrasted against the snail’s pace growth that we’ve witnessed here in South Africa, despite being a key industrial powerhouse on the continent. I’m wondering if there are any lessons that Kenya can teach us by way of getting our economic growth right.
ADRIAN SAVILLE: They’re very different economies. They come with different histories, different neighbourhoods in terms of geographic footprint, and who your trade partners are. There are some commonalities in terms of colonial history and both being developing nations. They face institutional challenges. I think there are some specific aspects, if I could add them to your observation, some aspects that perhaps South Africa could lend to Kenya, such as the strength of financial institutions. The prospect coming out of Kenya is excellence in particular industries, with agriculture being a case in point.
But I think, rather than this being about ‘let us show you what can we teach you,’ [it might be] ‘what can we learn from you?’ I think the far greater story here is about how we can help each other, what we can do together to strengthen the neighbourhood.
The fact that President Kenyatta is visiting the Aspen plant is I think an excellent case in point, because here you have in the Aspen plant, I would venture, one of South Africa’s most impressive manufacturing enterprises. If you go in that direction, looking at the size of your joint market, what can you do together? How can you help each other build that industrial enterprise and capability? To me that’s the story. It’s about the collaboration and the partnership that can come out of this.
It wouldn’t be lost on you if I pointed you to Kenya’s airline as a pocket of regional excellence, which could lend some lessons to South Africa. I have a smile on my face.
FIFI PETERS: [Laughing] I heard that apparently the two were discussing the possibility of merging their national airlines – KQ [Kenya Airways] with SAA – potentially creating a pan-African airline. I thought, okay, this could be quite interesting, but I think a conversation for another day.
ADRIAN SAVILLE: Add Ethiopian Airlines into the mix, and you’ve got a really interesting story.
FIFI PETERS: I think we need to discuss that story – a follow app interview with you, Adrian, if possible – on another day.
We’re out of time right now, but thank you so much, sir, for joining the show. Professor Adrian Seville is from Gibbs.