Building capacity to help Africa trade better

The status of paperless trade in Kenya


The status of paperless trade in Kenya

The status of paperless trade in Kenya

The digitalisation of trade – as we move to paperless trade – will have a profound effect on trade management. The conclusion of the first multilateral trade agreement, the Trade Facilitation Agreement, by the World Trade Organisation (WTO) since its inception not only marked a significant milestone in the global trading system, but also demonstrated the commitment by states to eliminate the non-tariff barriers and most importantly, adopt digital solutions to facilitate trade. Digital solutions supported by the use of information and communications technology (ICT) is transforming the way we trade. According to the 2020 UNCTAD B2C Commerce Index, Kenya ranked position 88th in fastest growing e-commerce economies worldwide, and 4th in Sub-Saharan Africa. Also, going by the Statista market forecast data[1], e-commerce revenue is expected to experience a compound annual growth rate of 7% between 2021-2025, resulting in a projected market volume of US$4,432 million by 2025. This data shows how digital trade and digitally enabled transactions have been gaining traction in Kenya. Digitalisation in Kenya has further been buttressed by legislation governing Information and Communications Technology (ICT) services; and a Digital Economy Blueprint[2] that was adopted in 2019.

Some of the steps that the government of Kenya has undertaken to promote paperless trade includes developing the National Electronic Single Window System[3]. Its development began with a project at the port of Mombasa in 2005 and was subsequently upscaled into a national single window system which was launched in 2014. Its major objective is to facilitate international trade by reducing delays and lowering the cost of clearance of goods at the borders, while maintaining the requisite controls and collection of duties and taxes, where applicable. The system has over time facilitated cross-border trade by increasing transparency and reducing bureaucracy in export and import processes. It has also provided traders with an electronic application facility on a 24/7 basis, and allows for multiple payment channels.

Additionally, the government continues to improve the legal framework that facilitates international trade. An example is the amendment to the Information and Communications Act, No. 2 of 1998 (Rev 2020)[4], to regulate e-commerce and recognise electronic contracts for digital transactions. The Act also provides that e-signatures are legally valid and admissible in the court of law. This enhances the ease of engaging in e-commerce trade, whether locally or across the border, considering that some foreign states have also recognised e-signatures.

Owing to the several online payment platforms for both domestic and international transactions, with the use of credit cards being the most prevalent method of making international payments, Kenyan export and import agencies have adopted affordable, efficient and safe payment systems, including mobile-money. This move has led to a reduction of cost and time taken in making payments at a physical financial facility and promoted convenience for all cross-border traders. However, to enhance digital cross-border trade, cross-country collaboration still remains instrumental in creating synergy with the different payment systems across the world.

Realising that access to information and understanding of the required regulatory procedures to import and export was a major impediment to cross-border trade, Kenya launched the Information for Trade in Kenya Portal (InfoTradeKenya)[5]. It is a web-based platform that enables traders to access a step-by-step guide on all the requirements to import/export commodities in Kenya. By providing the stakeholders with relevant information to trade across border, the portal has lowered trade costs, reduced the time required to do business and enhanced transparency on the procedures and rules that must be followed when engaging in cross-border trade. Importantly, this has made Kenya compliant of Article 1.2 of the WTO-TFA that obliges governments to be transparent and to provide information to businesses digitally.

Even though Kenya has made very significant strides towards paperless trade, a lot still remains to be done. The most prominent challenge that Kenya continues to grapple with is change management, even with the legality of electronic signatures, Kenyans still don’t seem to trust the digitised systems because aside from submitting import and export documents electronically, they still request to review the physical documents for verification. This is an issue which has a lot to do with change management.

System operational excellence is a major requirement to a successful digitalised trade, and reducing downtime plays a critical role to the realisation of a seamless paperless trade. Unplanned downtime continues to derail Kenya’s Integrated Customs Management System, consequently crippling the paperless operations of these cross-border processes. This impacts the bottom line of time and cost to trade. Bridging this downtime gap will enable Kenya to proceed beyond just technology to fully embracing the benefits of digitalisation.

Another factor that hampers engagement in paperless trade is lack of information on the trade agreements that provide preferential and free market access for Kenyans. Therefore, many Kenyans do not engage in cross-border trade and will not benefit from the digitalised methods that the government has put in place to enhance paperless trade. In rural areas there is still lack of awareness that it is possible to sell products in foreign markets under preferential arrangements. Farmers therefore continue to produce agricultural products for local consumption even if the local purchasing power remains low. The government needs to roll out country wide programs on sensitisation of the Trade Agreements that Kenya is party to, whether bilateral or multilateral. This could see a notable increase in cross-border trade, and an improved interaction with the digitalised systems. This will also enhance inclusivity in trade.

Owing to the steps that Kenya has taken towards paperless trade and the policies outlined in the government’s Digital Economy Blueprint, it is well positioned to expand its digital trade especially within the Regional Economic Communities that it belongs to, including in the Africa Continental Free Trade Area (AfCFTA). To be a competitive global player benefitting from paperless cross-border trade, it must address the challenges that impede an inclusive digitalised trade, system downtime and support change management in government agencies.

[1] E-Commerce – Kenya/Statista Market Forecast, available at https://www.statista.com/outlook/dmo/ecommerce/kenya

[2] Digital Economy Blueprint; Powering Kenya’s transformation, available at https://www.ict.go.ke/wp-content/uploads/2019/05/Kenya-Digital-Economy-2019.pdf

[3] The National Electronic Single Window System Draft Bill, 2016 if enacted, will establish the Single Window system, see https://www.kentrade.go.ke/wp-content/uploads/2018/02/Draft-National-Single-Window-System-Bill-2016-Revised-January-20185.pdf

[4] Kenya Information and Communications Act, 1998 (Rev 2020) available at http://kenyalaw.org:8181/exist/kenyalex/actview.xql?actid=No.%202%20of%201998

[5] See link to InfoTrade portal, https://infotradekenya.go.ke/

About the Author(s)

Edna Oduwo

Edna Oduwo is an advocate of the high court of Kenya with 4 years’ experience in both the public and the private sector, and a specialty in International Trade Law and Policy, which she is very passionate about. She worked with the Kenya Law Reform Commission for 3 years as a legal researcher, thereafter worked at the Ministry of Foreign Affairs, Office of the Registrar of Treaties, as a legal researcher for another 1 year.

Currently, she works with DHL as a GoTrade coordinator, Sub-Saharan Africa. GoTrade is a massive trade facilitation project that streamlines cross-border processes and capacity builds the private sector on matters global trade.

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