Opinion
Trade

UAE-Kenya trade deal paves way for investment boost

The Cepa will boost agricultural exports and drive infrastructure spending

February 25, 2025, 2:09 PM

More than two thirds of Kenyans rely on agriculture for their livelihoods, so expanding food exports is a priority for the government

Shoppers in the UAE accustomed to buying organic carrots, broccoli and pak choi from Kenya may see more such produce from the East African country on supermarket shelves in the months ahead.

In mid January the UAE formally signed a Comprehensive Economic Partnership Agreement (Cepa) with Kenya, the first such deal with a mainland African country. The agreement aims to deepen trade ties between the two nations by eliminating barriers and simplifying customs procedures.

The deal is expected to boost exports of agricultural products from Kenya and unlock new investment opportunities for UAE companies.

Kenya is the seventh-largest economy in Africa, with an estimated GDP of $139 billion in 2024.

Trade between Kenya and the UAE has more than doubled over the past decade. In 2023, total trade between the two countries reached $3.5 billion, with the UAE ranking as Kenya’s sixth-largest export destination and the second-largest source of imports.

Kenya mainly exports meat, fruit, vegetables and flowers to the UAE, which supplies Kenya with petroleum, machinery and chemicals.

Kenya is however working towards becoming a middle-income economy under its Vision 2030 development programme, launched in 2008. President William Ruto, having won the August 2022 election, is responsible for delivering the vision’s fourth medium-term plan, which covers the 2023-28 period.

More than two thirds of Kenyans rely on agriculture for their livelihoods, so expanding food exports is a priority for the government.

But in a country where 60 percent of the population lives in slum areas, many without access to electricity, water, or sanitation, there is also a huge need to invest in infrastructure.

The cost of the fourth medium-term plan is estimated at $113 billion, including $50.4 billion of infrastructure spending. Having inherited a huge debt burden, which currently stands at $83.4 billion, the Ruto government is looking to the private sector to play an increased role in developing infrastructure.

Opportunities abound in Kenya. However, the market has its challenges

Kenya’s largest bilateral creditor is China: most of its $6 billion debt to Beijing relates to the construction of Lamu port in the north of the country and a new standard-gauge railway. China has since cut back on lending to Africa, which delayed the final phases of the railway project.

Several UAE firms are already present in Kenya. The Dubai-based retailer Majid Al Futtaim, the operator of Carrefour, has opened 23 branches since entering the market in 2016.

Amea Power is working on several schemes in Kenya, including two wind projects in advanced development, a green hydrogen plant, and a 200 megawatt geothermal power scheme announced at the UAE’s Cop 28 climate event. (Kenya is a leader in geothermal energy, ranking sixth worldwide for installed capacity.)

Also, at Cop 28, the UAE’s G42 signed a memorandum of understanding with the Kenyan company EcoCloud to develop a 1 gigawatt green energy-driven data centre at the Olkaria geothermal hub in Naivasha, northwest of the capital, Nairobi.

On top of this, Abu Dhabi is keen to help Kenya develop its minerals sector: the country has abundant reserves of gold, copper, ilmenite, tantalum and non-metallic minerals.

In April 2024, it signed a memorandum to collaborate on minerals exploration and mine development, while the Abu Dhabi sovereign fund ADQ agreed to establish a finance and investment framework to support up to $500 million of investment in priority sectors of the Kenyan economy.

Last month, ADQ formed a joint venture with the mining specialist US Orion Resource Partners. Over the next four years, the company plans to make strategic investments worth $1.2 billion in the metals and mining sector in Africa, Asia and Latin America.

The Cepa is expected to open up further investment opportunities for UAE businesses in Kenya’s energy, transport, water, agriculture, health, IT, tourism and real estate sectors.

Although hydrocarbons were discovered in the Lokichar basin in 2012, Kenya is not yet an oil producer.

Opportunities abound in Kenya. However, the market has its challenges, which are common to most African countries. These include weak institutional capacity, a burdensome bureaucracy that facilitates corruption and a lack of access to long-term affordable financing.

Kenya also has an active competition watchdog, an independent judiciary and a strong civil society. In 2023, the competition regulator fined Majid Al Futtaim $7 million for forcing suppliers to accept lower prices through discounts known as rebates and unfairly transferring costs to suppliers.

Kenya has a reputation for being one of the more stable countries in Africa. However, in June 2024, the Ruto administration was rocked by a wave of protests over living costs and perceived failures in governance. The president was forced to cancel planned tax increases and fire several ministers, but held onto power.

With elections due in mid-2027, the politically charged atmosphere will continue to bubble under the surface.

Ruto, unable to cover budget gaps through higher tax revenues, turned to Abu Dhabi late last year for a $1.5 billion commercial loan, further cementing ties between the UAE and Kenya. According to reports, Kenya is also in discussions with the UAE to finance the extension of its standard-gauge railway to Uganda and South Sudan.

While the IMF keeps warning that the country is at high risk of debt distress, Ruto looks to have found a supportive friend in the UAE.

Liz Bains is a projects-focused business journalist covering Africa and the Middle East