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Export and Promotion of Services

The services sector has continued to show remarkable growth with a positive balance of payments for the past five years contributing over 60% of the Gross Domestic Product. The services sector in Kenya is dominated by tourism and travel related services. Other key services traded include transport and logistics services, telecommunications, banking and insurance services. Kenya’s export basket is dominated by merchandise trade, with services trade accounting for 30% of total exports.
Excerpt: Strategy for Promotion of Professional Services in Kenya (June 2009)

Modes and Classifications of Trade in Services
Article I of the General Agreement on Trade in Services (GATS) identifies and defines the modes through which international trade in services may be conducted. The modes of services delivery are shown below:

 Classification Mode of delivery How the service is offeredExamples of services 
 Mode 1Cross border supplyThe service is produced within Kenya, but consumed abroad by the buyerBusiness Process Outsourcing, data / call centres, transcriptions facilitated by ICT platforms
 Mode 2Consumption abroad The service is produced within Kenya, and also accessed and consumed in Kenya Tourism, services provided by hotels, travel, business or training conferences
 Mode 3Commercial presenceThe service offered by a Kenyan firm, but is produced and consumed abroadForeign based operations such as KCB in Uganda, KCB in Tanzania
 Mode 4Movement of natural personsThe service is produced and delivered by skilled Kenyans by travelling temporarily to the other countrySkilled services by doctors, engineers, consultants delivered for a short duration in the foreign country.

Potential for Service Exports
There are several service sectors in Kenya that have great potential and have been exported from Kenya. These services are exported to the regional and overseas markets and include the following:
• Tourism and travel-related services
• Business management services
• Telecommunication services including ICT related services
• Construction and related engineering services
• Logistics, transport and distribution services
• Educational & training services
• Developmental & environmental services
• Financial and insurance services
• Health-related services
• Recreational, cultural and sporting services

The regional market is the prime destination for Kenyan service exports. The value and volume of service exports from Kenya has not been documented in the past due to the lack of a proper data capture system within the region. However, it is known that numerous reports have been written about Kenyan consultants and service providers such as engineers and construction companies working in foreign countries for many years. These countries include the East African Community, COMESA, Americas, Europe and as far as Australia.

The marketing of Kenya’s service exports has been secondary as compared to marketing of merchandise and physical goods. There has been dominance in marketing traditional exports of tea, coffee and horticulture. The most prominent promotional activity for services is in the tourism sector which is currently undertaken by the Kenya Tourism Board. The biggest challenge for promoting services is in changing the perception of international buyers to accept Kenya as an exporter of quality goods and quality services as well.

The Internet revolution and advancements in information communication technology including the installation of the fiber optic cable have made it possible for trade in services to increase dramatically in the last few years. Kenya’s service sector needs to adopt new technologies in order to facilitate online trade in services. Developing countries in Asia such as India have benefited immensely from such service exports and there is still a great potential and opportunity for other developing countries such as Kenya which has highly skilled labour at reasonable cost and relatively good telecommunication infrastructure. This is an opportunity to earn foreign exchange and improve the trade balances by giving more focus to service exports.

Tips for SME service exporters

  • The size of the SME or the financial capability of the SME should not be a deterrent to small sized SME companies in services sector.
  • Service exporters must develop skills in relationship marketing and how to utilize a network of contacts to get potential customers
  • Market research is important for the SME service exporter as it assists in understanding the target markets, exploration of potential business opportunities, partners and in identifying any regulations or requirements in the selected market.
  • Service exporting is challenging because it offers a ‘promise to perform’ and it not a tangible good. Hence, SMEs must institute measures to offer high quality service at competitive prices so that theie clients are ready to give referrals to other customers
  • Export planning is critical for all service exporters and should be incorporated in the SME’s overall objectives and business strategy.
  • Participation in events promotion is key to the growth of your business and in building strong networks for the future of your business
  • Getting the SME registered with an international quality systems certification such as ISO assures potential customers of the high level of service that the SME offers
  • Innovation, modernization of business processes and adopting ICT technologies is a major driver in building competencies of service exporters.
  • The government now offers contracts to private sector companies. This gives an opportunity for Kenyan SME service exporters to bid for jobs in government departments
  • Service firms are never too small to export. Those that have integrated ICT into their systems will adapt faster to client needs and demands.
  • Networking with service based institutions and associations will assist the SME to develop a strong network of members and other service industry associations which offer a good infrastructure for growth in the service sector.
 
 
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