WOOL EXPORT FROM AUSTRALIA TO KENYA

Wool export from Australia to Kenya

Kenya is one of the fastest growing economies in east African region. According to the latest census (2009), the country has a population of about 40,000,000 people. Kenya has a great potential market for wool and wool products.

Export potential

Kenya has a great need for wool product due to the inadequacy of its wool products supply from its internal processing industry. The country has only a few ill–equipped wool industries. Most of the textile industries in Kenya declined in the early 1990s due to low demands for their products, increased competitive imports, inadequate information on markets and buyers regulations (Ikiara and Ndirangu, 2002 p. 62). Plans to expand the plants have met great challenges of inadequate supply of the main raw material, wool. Liberalization of Kenyan markets in 1990 led to the fall of Kenyan textile industry (McCormick et al, 2001 p.16). It therefore follows that Kenya has never had enough supply of quality manufactured wool products since its independence in 1963. Kenya wool manufacturers have not been able to meet the great demand for wool. Kenya imports 80% of the wool used in its industries. This is a great market demand.

This clearly indicates that there have been increased unmet demands for wool products in Kenya, a gap that Australia can fill. With proper value- chain analysis in both Kenya and Australia establishment of a bilateral wool trade can be feasible. According to Johnson and Scores (1993), business ventures should identify the chain players, functions, roles, governance, value activities and relationships before commencing business (p.12). Kenya has had cordial relations with the Australian government since independent. This therefore demonstrates that the two governments can be able to conduct a bilateral trade with ease and for mutual gains. Kenya has also experienced a serene and peaceful trade environment since it has not had political squabbles, wrangles or major internal conflicts. The country’s policies on international trade are also open for potential investors. The ministry of trade and industry in collaboration with the ministry of foreign affairs has been working with the president to woo international investors to Kenya. This is therefore an opportune time for a country like Australia to come in with its wool products. This can be done after the value chain analysis. According to Kaplinsky (2000), value chain analysis gives useful insights to policy hindrances that face the public sectors (p.20).

The government of Kenya practices its regulations and control on international trade though levying import tax and export tax. This duty is carried out by the Kenya Revenue Authority. Trade barriers and tariffs have been lifted to allow for increase in international trade. The country has also been signing trade agreements with other countries to expand its trading potential. Kenyan law protects the international commercial law. The country also protects the intellectual property of individuals and companies. The Kenya Industrial property Institute is the body that is charged with securing and inspecting all manufacture or imported products for (IP). This will protect the exporter from counterfeit production of seemingly similar products. There is also great security in the county following its devotion to fight terrorism and external invasion. There has also been a good coexistence between Kenyans and foreign nationals. This is evident by the increased number of tourists who visit Kenya every year. Kenya is also a compliant of the international law and a signatory of the Rome statute.

In Kenya, there has been a tremendous development in infrastructure since 2003. The Kenya highway authority has been able to tarmac all the major roads in the country. Highways have also been constructed to comply with international highways standards for example the recent construction of Thika super-highway that has cost the country about 30 billion. This will therefore ease transportation of wool products within the country. Kenya is also well accessible by sea through the port of Mombasa, by air through major international airports like the Jomo Kenyatta International Airport, and trough railway line like the Kenya-Uganda railway. This means that wool products can be exported from Australia by air or by sea. On arrival to Kenya they can also be distributed from the warehouses by either road or rail. Furthermore with trade agreements and registrations there are minimal trade restrictions in the country. The country restricts any import of meat and meat products, drugs animals and weapons. There are no restrictions on imports of wool and wool products.

Export product

Australia is a great producer and exporter of wool products. It produces the finest quality of wool from its merino sheep. Selective mode of breeding has enabled Australia to produce the finest quality merino wool. Due to its good climate and rainfall patterns, the country does well in agribusiness. This has enabled it have an upper hand in cattle keeping and breeding.

Since Australia is geographically isolated, it has great monitoring leadership and is known for quarantines, the country is able to manufacture above the notch quality products. The country is also able to supply wool products throughout the year. This will hype its supply in the Kenyan markets since there is always a low supply of animals for wool during droughts. The country has also invested greatly in scientific methods of farming hence increased animal production.

Australia has well developed processing plants fitted with new technology in animal production (Kadolph et al, 2007 p 63); it can therefore be the solution for the increased unmet demand for wool products in Kenya.

The Australian Wool Industry has the capacity to meet the need for quality wool products in Kenyan markets. According to Australian Statistics bureau, 9% of world wool comes from Australia. Out of the total worlds wool production 50% of world merino sheep wool comes from Australia. The industry has the ability to export high quality wool products due to its sophisticated technology and it’s throughout the year supply of animals. Wool export can be facilitated by both the private sector and the government. For example, the government of Australia has legislated the Woolmark Company and Australian Wool Innovation Limited company. These companies facilitate the production and export of wool. Australia exports 90% of its wool product. Since there has been a decrease in wool prices in some of the counties that it sells its products then Kenya would be the best alternative for its wool.

Trade restrictions

Although Australia has faced trade restriction on its wool products due to outbreaks of diseases like the Bovine disease, there are fewer restrictions in Kenya. There are minimal restrictions in the world markets on export and import of wool. Kenya has no restriction on wool import. However, Kenya normally levy import tariffs duty on man-made textile fiber items. In addition, there is also a value added tax (VAT) of 16% on all imports. The tariff rates for wool products in Kenya ranges between 10-15% for subheading of 5105-5110 and 0% for subheading of 5111-5113.

Trade volume and value in the next five years

Table I

Table of Australian wool export from 2001-2007

Year	2001-02	2002-03	2003-04	2004-05	2005-06	2006-07
Value in million dollars	2,713	3,318	2,397	2,196	2,187	2,138

This table indicates that there has been a decrease in the total amount of returns from wool export in Australia.

According to the national bureau of statistics of Kenya, Kenya import wool items worth about 116 million dollars per year. This means that there will be a tremendous increase in the returns if Kenya imports this wool and wool products from Australia.

If we take the above table of statistics, the projection with an average of 116 million dollars increment per year in the next five years would be as follows.

Table II

year	1	2	3	4	5
Value in million dollars	2,254	2,370	2,486	2,602	2,718

Kenya import 80% of all the wool it uses. This is because the number of sheep reared in the rift valley province of Kenya is not adequate to meet the wool demand in the country. Most of the farmers in Kenya also prefer slaughtering the sheep for meat than keeping them for wool. This is why the demand for wool in Kenya is still unmet. If the export of wool from Australia gains market in Kenya then it means that this 80% need can be supplied.

Executive summary

In conclusion, there is a great need for wool import in Kenya. Globalization has broadened inter-relationships in trade and foreign investments (Wignaraja, 2001 p42). Since Australia is well endowed with wool, then bilateral trade between the two nations can be productive. In Kenya sheep rearing is done in the rift- valley province which does not meet the need for wool in the country. The high demand for wool will move the market towards the scarce supply (Dawkins and Kenyan 2000 p.9). Kenya is a net importer of wool. Women in Kenya are the major users of wool and woolen products. Woolen products are also rare in Kenya due to the increased demand for them. Kenya spends about 116 million dollars every year in importing wool from foreign countries. Women in Kenya practice weaving of clothes. According to the National Baseline Survey of 1999 about 41,372 hand weavers in Kenya use low level technology in their enterprises. In this exercise they use imported wool. They weave sweaters, shirts, blankets and head scarf. It is therefore possible to tap the Kenyan market using the ready wool product from Australia. There is not trade prohibition of wool in Kenya. Australia uses the latest farming methods in sheep rearing especially in the southern coastal area hence it has a continuous supply of wool throughout the year. Since Australia produces about 9% of the world wool, then exporting part of it to Kenya is easy. The world market prices for wool have also gone down hence Australia should look for countries that can provide better markets. It can also get into bilateral trade agreements to secure its wool from the effects of the declining wool markets in the world. If the two countries get into a bilateral trade, then the declining returns from Australians sale of wool can be tamed. The unmet demand for wool in Kenya can also be met.

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