Strategic deal with SMEs to cement Kenya-Europe trade agreement

Kenya's economic ties with Europe received a significant boost with the signing of the Economic Partnership Agreement (EPA) in August, aimed at unlocking new trade opportunities and increasing the flow of goods between the two markets.

The agreement seeks to give Kenya duty-free and quota-free access to the EU, its biggest export market, while European goods will receive progressive tariff reductions.

Under the deal, Kenya would also benefit from other provisions that consider its development needs such as special safeguards for agriculture, measures on food security and infant industry protection.

The agreement marked the first broad trade deal between the EU and an African nation since 2016 and follows a spending spree by China on lavish infrastructure projects across the continent.

Nevertheless, the deal is seen as a pivotal step toward expanding Kenya's global trade footprint, particularly within Europe, as it enhances access to one of the world's largest and most lucrative markets.

To keep the ball rolling, France, the fourth-largest European investor in Kenya, has seemingly taken the lead in advancing this agreement by forging a new partnership with Kenyan Micro, Small, and Medium Enterprises (MSMEs) through financial service provider, Equity Bank.

The deal, between the Kenyan lender and the French public sector investment bank, BPIFrance, will focus on value chain strengthening to support the growth of SMEs in the country.

This is with further plans of scaling to other East African states: Uganda, Tanzania, South Sudan, Rwanda, the Democratic Republic of the Congo and Ethiopia.

Equity Bank CEO James Mwangi, while speaking to the Eastleigh Voice, on the sidelines of this year's Inspire and Connect East Africa forum held by BPIFrance in Nairobi, featuring Kenya and French businesses, said the new partnership signals a shift from conventional credit arrangements to a more integrated and strategic collaboration.

"We want to partner together to facilitate trade. So there is a component of doing trade finance together, opening lines of credit, and opening guarantees together as a joint initiative to facilitate customers. But we also want to play a catalytic pivotal role in creating a bridge between Africa and France," Mwangi said.

He explained that the collaboration will enable the lender to de-risk investments for French companies seeking to invest in Africa through syndicated loans in local and foreign currencies.

"We want to use this relationship to bring European companies to invest in Africa so that we stem the challenge of exporting raw materials. We want them to bring their technology, their capital and their entrepreneurship."

The partnership spans several key sectors, including agriculture, education, energy, technology, and construction.

The forum under which the deal was signed was done in preparation for France hosting the France-Africa summit in 2026 in Kenya.

Kenya shares a preferential trade relationship with France, as the imports from the European country stood at $263.65 million (Sh34.1 billion) in 2023, according to the United Nations COMTRADE database on international trade.

Some of the key imports from the country include miscellaneous edible preparations and chemical products, pharmaceutical products, machinery, nuclear reactors, boilers, electronic equipment and beverages, spirits and vinegar.

On the other hand, Kenya's export trade value to France stood at $125.23 million (Sh19.7 billion) in the same year, causing a trade deficit of around Sh14.4 billion in favour of France.

Key products exported to the European nation include vegetables, fruit, nut food preparations, edible vegetables and certain roots and tubers, edible fruits, nuts, peel of citrus fruit, melons, live trees, plants, bulbs, roots, cut flowers and animal, vegetable fats and oils.