THE KENYAN AGRIPRENUER AND THE SOLUTIONS IN AGOA


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  • By: Edwin N. Kimani

    Ms. Were is what you would consider as a modern Kenyan agripreneur. She grew up in the city of Nairobi, passed her certificate exams both at the primary and secondary level and decided to pursue engineering at the tertiary level. Upon completion, she interned at a civil engineering firm in the City. Here, she was entrusted with various assignments that made her travel to various parts of the country. This gave her exposure to the various socio economic and cultural settings of different people in the various regions she traveled to.

    What really caught her attention was younger generation of farmers she met during her engagements in this region. Of particular interest to her was a guy named Muinde. Mr. Muinde had an interesting story of his journey to agripreneurship. Mr. Muinde had a job before he started his journey of agrireneuriship. He was a mid-level manager in a foreign owned financial advisory firm. Things were going well for him until he was informed that the firm was scaling down operation in a bid to close shop and divest its investments in the country. His gut feeling informed his that he would be among the first to be let go, and it came to pass when he was called to the Human Resource office where they wished him all the best in his future endeavors.

    After months of applying for jobs and being unsuccessful, he decided to retreat to his rural home. He felt defeated, but was sure that he had something in him that could alleviate his conditions. He noticed that his father had plenty of land that he could spare, and then decided to start his journey as an agripreneur. The rest is history. Mr. Muinde is doing quite well for himself as a famer, as he is some sort of a rock star to his colleagues and admirers on various platforms.

    Ms. Were, decided to dip her toes into this world. She had some money to spare and had done some research on various produces. She left her job as an intern, got extra cash from a small loan from her parents and rented a piece of land somewhere in the outskirts of the city. She started growing a green peppers, apples and a variety of beans. As her crops were almost maturing, she realized that she hadn’t done enough research on the available markets for her produces. She was afraid that local cartels would take advantage of her situation, pose as legitimate buyers or market links and buy her produce at a throw away price. Or worse still, find no buyer for her produces.

    Ms. Were, has heard so much about farmers growing their enterprises and becoming successful through export. She thinks that her produces could fetch a good price if she sold them in the international market. However, she has no clue on how she can sell her products in the international market. She has heard about AGOA. That it creates an opportunity for farmers to export to the United States of America.

    Ms. Were’s situation highlights the current state of affairs with many agripreneurs. They produce a great variety of product, however, they can’t find markets for the reasons that, there could be blockages to the markets in the form of cartels, or, unavailability of local markets for their produce.

    This raises the necessity to explore other markets, and AGOA could be part of the bigger solution to the lack of markets for agricultural products or even bypass market cartels.

    ABOUT AGOA

    AGOA, otherwise known as the African Growth and Opportunity Act (AGOA), is a United States Trade Act, enacted on 18 May 2000 as Public Law 106 of the 200th Congress. AGOA has since been renewed to 2025. The legislation significantly enhances market access to the US for qualifying Sub-Saharan African (SSA) countries. The purpose of this legislation is to assist the economies of sub-Saharan Africa and to improve economic relations between the United States and the region.

    Simply put, it is a piece of Law, from the United States, that seeks to enhance trade between SubSahara Africa (Kenya included) and the United States. Under the Law, African enterprises, can export a certain select goods without worry of quotas, which means that they can export unlimited amounts of a category of products, and duty free. The AGOA legislation is unilateral and non-reciprocal. This simply means that its trade preferences relate only to the opening of its own market to the qualifying exports from African countries.

    Under the Law, there are approximately six thousand to seven thousand (6,000 – 7, 000) qualifying products free of import duty into the United States.

    KENYA ECONOMY AND THE NECESSITY OF AGOA

    The narrative of Kenya’s economy is well explained in both Mr. Muinde and Ms. Were’s story. It’s a narrative of unemployment, and entrepreneurship, a narrative of hope with little help. It is one of disparities. Simply put, it is hard to properly fathom how Kenya, being the largest economy in east and central Africa, has the largest youth unemployment in the same region. To further explain this we seek to break down Kenya’s economy into figures and explain the necessity of AGOA to the Kenyan agripreneure.

    Kenya, a leading developing country in East Africa, has been a significant beneficiary under AGOA and is one of the leading apparel exporters to the US in sub-Saharan Africa.  However, it’s key development challenges still include poverty, inequality, climate change and the vulnerability of the economy to internal and external shocks.

    Real GDP grew an estimated 5.9% in 2018, from 4.9% in 2017, supported by good weather, eased political uncertainties, improved business confidence, and strong private consumption.

     

    Despite the impressive figures, and as shown in the Muinde and Ms. Were’s narrative, Kenya still hasn’t found a solution to its high youth unemployment rate. For instance, the World Bank notes that in the period 1998-2005, aggregate unemployment fell from 15% to 12.5%, but the share of the youth in unemployment rose from 60% to 72 %. This is double the adult average of 21 percent.

    Other research institutions paint a comparative shocking picture of youth unemployment. Various youth unemployment rates bestride public debate in Kenya. A 2017 study backed by the British government put it at a “staggering” 22% of those aged 15 to 24 in 2016. In a much-reported 2016 survey, two Aga Khan University scholars found the rate among those over 18 but under 35 to be 55%. Some publications have put youth unemployment at 90% of all unemployed Kenyans, while a September 2018 statistical update by the United Nations Development Program placed Kenya’s youth unemployment rate at 26.2% in 2017. This was for those aged 15 to 24.Compared to the rest of East Africa, Kenya stands tall as shown in the figures below. What the table shows, is that the rate of unemployment grows faster that the GDP of the country. The situation, as noted by the World Bank, is very volatile.

    Comparative change in GDP and Youth Unemployment Rates in Kenya and SSA from 2000 to 2016; the respective numbers for 2000 have been levelled at 100 – based on ILO estimates and World Bank Data (ILO 2016a; World Bank 2017f)

    This very volatile situation has led the rise of agripreneurs in Kenya, however, cartels and corruption is causing a dent on their passion. International trade through instruments such as AGOA could be part of the answer. It provides hope for small and large entrepreneurs to establish new markets and avoid cartels and corrupt activities within the larger Kenyan markets.

    QUESTION: BUT HOW DO I EXPORT THROUGH AGOA?

    It is not that difficult to export under AGOA. There are generally two major steps one has to take in order to complete the export process.

    Step 1: Register Business

    The exporting entity must be registered. It is a statutory requirement that every business operating in Kenya isregistered and/or fully incorporated. This registration is important for businesses and export-related transactions asit demonstrates the credibility and legality of the entity. To register a business, one can easily visit their lawyer and have the process done within 10 -30 days.

    Step 2: Prepare and Obtain Export Documents

    Documents and authorizations required for export transactions include:

    • Commercial Invoice,
    • Bill of Lading or Airway Bill,
    • Export Packing List,
    • Certificate of Origin (non-textile) or AGOA Textile Visa and Certificate of Origin,
    • Manufacturers Certificate for AGOA visa, and
    • Phytosanitary Certificate (for plants and other products)

    Commercial Invoice

    A commercial invoice is the bill for the products from seller to buyer. The buyer needs the invoice to prove ownership and arrange payment. It may also be used for the transaction ofgoods not intended for further sale, returned products, and goods intended only for temporary import, among others.

    The invoice must contain the following:

    • Complete name and address of the buyer or importer, seller or manufacturer, and the shipper;
    • Detailed description of the products with quantities, and the Harmonized System (HS) codes of the goods;
    • Total value per item;
    • Country of origin, with reason for export; and
    • Statement certifying that the invoice is true, and a signature.

    Bill of Lading

    The bill of lading is a contract between the owner of the products and the carrier. They are two types, namely:

    1. A straight bill of lading, which is non-negotiable, and
    2. The negotiable/shipper’s order bill of lading, which can be bought, sold, or traded while goods are in transit and is used for letter-of-credit transactions. The buyer usually needs a copy of the bill of lading as proof of ownership to take possession of the goods.

    For air carriers the bill of lading is known as airway bill.

    Export-Packing List

    An export-packing list specifies the material in individual packages and shows their net, legal, tare, and gross weights. The export-packing list is normally attached to the outside of the package in a clearlymarked waterproof envelope. It is a useful document for customs officials who use it to check consignments atinspection points.

    If wood packaging is utilized, the wood must be treated in accordance with the International Standard forPhytosanitary Measures (ISPM) No 15. The exporter must therefore liaise with Kenya Plant Health InspectorateService (KEPHIS).

    Certificate of Origin

    The Certificate of Origin is a document indicating the country of origin for products being imported. It ensures thatproducts originating in certain countries get the preferential treatment to which they are entitled.

    A certificate of origin is usually issued by exporting countries’ state agencies. It includes information such as contactinformation for the importer, exporter, and producer; the basis for which preferential treatment is claimed; and adescription of the imported merchandise. Importers are required to have the certificate in their possession at thetime of the claim and to provide it to Customs and Border Protection (CBP) officers upon request.

    THE UPSHOT AND CONCLUSION

    The stories of Ms. Were resonate quite a lot to many entrepreneurs in Kenya, and probably in the larger Africa. AGOA, may not be the answer to the employment issues, but it could be part of the answer to it. Giving hope to entrepreneurs and agripreneurs on accessing new markets is very important. The Government has taken the initial steps to sign AGOA as a trade agreements but hasn’t done much to sensitize communities on its existence and importance. However, this should not be used as an excuse for the failure of the agriculture industry and its promise to the youth of Kenya.

    There are organizations in the United States that are actively purchasing under the AGOA trade agreement. At the same time, there are those that facilitate as active market linkages. The diaspora, can come in too and assist as market linkages, either as active purchases, logistics, markets, lawyers or any other viable solution. It is important that we grow the brand Kenya through this trade agreements for the good and welfare of Kenya.

    About The Author and the Company

    Edwin N. Kimani is an Advocate of the High Court in Kenya. He is currently pursuing International Economic Law at the University of Nairobi. He has extensive knowledge and working experience in the legal sector. He is passionate about helping enterprises grow and seek new markets.

    He is the managing partner of Avikele Legal Services, a professional service and consulting firm that has had engagements in East and Central Africa. The firm focuses on areas of tax, trade and investments advisory, transactions as offshore services.

    For more about the firm please see avikeleservices.com . Follow our Knowledge Center page on Medium or call +254727363338 for consultancy, advisory or more on the topic.

    Edwin N. Kimani is a LL.B, Dip. KSL, LL.M Candidate (U.O.N), Advocate of the High Court of Kenya.

     

     

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