East Africa’s Trade Struggles: High Costs, Poor Infrastructure, and Missed Opportunities

East Africa’s trade potential remains largely untapped due to serious challenges in infrastructure, financial access, and economic diversification. A new report by MCB Group highlights the hurdles preventing African nations from reaping the full benefits of intra-continental trade.

Trade Costs Remain High

• Shipping goods within Africa is often more expensive than importing from overseas.
• Moving a container from Mombasa to Kampala costs more than shipping from China to Mombasa.
• Poor transport networks, slow border procedures, and high tariffs inflate costs.

Kenya’s investments in projects like the Standard Gauge Railway and port expansions aim to cut these costs. But are they enough?

AfCFTA: A Work in Progress

The African Continental Free Trade Area (AfCFTA) was launched to boost intra-African trade.

• Implementation remains slow due to inconsistent regulations and infrastructure bottlenecks.
• Political tensions between nations further delay progress.
• Despite this, Rwanda’s exports to Kenya increased by 42% between 2020 and 2022, showing some benefits.

Over-Reliance on Raw Exports

• Many East African economies rely heavily on tea, coffee, and minerals.
• Without value addition, these commodities bring in low returns.
• The report suggests a shift to manufacturing, agro-processing, and renewable energy.

Kenya already leads in renewable energy, with lower costs than many global benchmarks. Could this be the key to unlocking trade growth?

Informal Sector and Finance Gaps

• Informal businesses dominate East Africa’s economy, limiting tax collection and financial structuring.
• The region faces an annual trade finance gap of $80–120 billion.
• Solutions like the Pan-African Payment and Settlement System (PAPSS) could help ease transactions.

The Way Forward

East Africa has the potential to lead Africa’s trade revolution. But without major reforms in infrastructure, financial access, and industrialization, the region will continue to struggle.

Kenya, as a regional hub, has a chance to drive this transformation. Will policymakers seize the moment?