REGIONAL STRATEGIC FACTORS INFLUENCING ECONOMIC DIPLOMACY BETWEEN KENYA AND SOUTH AFRICA

Abstract

Trade in the modern world has evolved due to liberalization and integration of the world into one unit leading to the practice of trade in multilateral, regional and bilateral frameworks. Foreign trade is influenced by key regional strategic factors like comparative advantage, level of investment and domestic absorption rate. Trade between Kenya and South Africa has been uneven for the last three decades with South Africa reaping more from exports compared to Kenya. Although Kenya dominates the market in EAC and South Africa dominates the market in SADC, the bilateral trade between the two states is characterized by more exports from South Africa, a gap that this study sought to bridge. Thus, there was need to determine the regional strategic factors influencing the economic diplomacy between the two states. The specific objectives of the study were; to examine the regional strategic factors towards bilateral trade between Kenya and South Africa, to assess the effectiveness of existing economic diplomacy for trade between the states and to evaluate the opportunities and challenges within economic diplomacy between the two states. The standard theory of international trade, Keynesian theory of international trade and power theory were used to inform the conceptual foundation for the study. The target population was citizens of the Republic of Kenya, representatives from South Africa High Commission in Kenya and South African investors to Kenya. A sample size of 318 participants was drawn from the study population. A descriptive approach was adopted to bring out the relationship in the variables. Purposive sampling and simple random sampling techniques were adopted. Interviews schedules and questionnaires were the data collection tools. Data analysis was carried out using the Statistical Package for Social Sciences (SPSS) software and results presented thematically and through verbatim quotations. The findings were presented via charts, graphs and frequency distribution tables. South Africa has a higher competitive advantage on international trade over Kenya due to its comparative advantage which is characterized by low level of investment and a high domestic consumption rate. Further, although Kenya was found to be effectively represented in the regional trading blocs/free trade area, the bilateral trade between Kenya and South Africa is conducted based on Memoranda of Understanding (MOUs). Additionally, the existence of trading blocs, state and non-state actors like opinion leaders, activists, NGOs and private entities was found to influence policy formulation and provided favourable terms of trade. The opportunities within economic diplomacy were found to be economic growth and development, trade promotion, attraction of Foreign Direct Investment (FDI), creation of job opportunities and representation in regional/global policy formulation. Although, it was identified that the Kenyan government had not completely leveraged on these opportunities to realize maximum potential. Conversely, challenges within economic diplomacy were found to be trade shocks/trade deficits, fragmentation of regional/global trading system, political mistrust settlement through sanctions, tariffs, restrictions and regulations and lack of mandate to enforce and implement MOUs. Despite Kenyan and South African governments addressing these challenges, it was found out that more needs to be done to achieve maximum results. The study recommended emphasis by Kenya on addressing the key regional strategic factors, more favourable trade agreements and leveraging on the opportunities of economic diplomacy and addressing the challenges of economic diplomacy.