Out of Africa, into Korea

Kenya envoy out to expand coffee exports, tourism and trade


The Korean coffee market continues to expand by leaps and bounds and behind the growth are countries offering some of the finest beans and blends.

The latest estimate of the market pegs coffee consumption at 2 kilograms per person per year, compared to an average per capita consumption of 0.2 kg in the Asia-Pacific region.

Widespread penetration of coffee in the country means that there is already a solid consumer base for coffee-related beverages.

Kenya is one country that is looking to establish a strong foothold in the market not only by supplying its beans but also introducing its teas and other agricultural goods.

“Coffee is currently Kenya’s No. 1 export to Korea and is increasingly becoming popular,” said Kenya Ambassador Ngovi Kitau to The Korea Herald.

More than 20 Korean companies are importing the product and others have expressed strong interest in the coffee business due to its high quality.

Still, while consumption of 2 kilograms per year sounds impressive, it is still a drop in the bucket compared to Nordic countries who consume, on average, 10 kilograms, and Japan at 3.4 kilograms.

One challenge the Kenyan coffee industry faces at the moment is high import duties for their coffees compared to other countries that enjoy favorable conditions through free trade agreements.

The import duty for Kenya’s roasted coffee is 8 percent and 2 percent on green beans. Furthermore, tea, another popular Kenyan product worldwide, is charged 40 percent once it enters these shores.

“This has made the prices very uncompetitive in this market as opposed to coffee where the source country has an FTA in effect with Korea,” he said, referring to countries such as those in Southeast Asia.

“Kenya plans to address the tariff barriers through initiating a comprehensive economic partnership agreement.”

The ambassador explained that the feasibility study for a possible Korea-Kenya CEPA agreement is in the books and hopes that negations will have started by the end of this year.

The reason why Kenya is pushing to enter the market is seen in the amount of coffee shops in the market.

Instant coffee achieved a high growth rate of 11 percent in off-trade value terms in 2009.

Local consumers increasingly enjoy the taste of coffee, and the culture of drinking it has become well-established.

Moreover, increased income levels with rapid economic growth and adoption of a Western lifestyle make coffee an affordable and fashionable drink for many of the nation’s young consumers.

But the growth of the coffee industry is just one cup on the ambassador’s table. The other big ongoing promotional campaign from the embassy is in the tourism sector.

After a brief hiccup due to the 2007 post-election violence, tourists are coming back to Kenya and Kitau is out promoting his country to anyone and everyone who wants to listen.

Under Kenya’s long-term development blueprint known as Kenya Vision 2030, tourism has become the country’s second-largest source of foreign exchange revenue after agriculture. Kenya’s services sector, which contributes about 63 percent of its GDP, is dominated by tourism.

“We plan to increase the flow of tourists from Korea to Kenya from the current 5,000 to 10,000 visitors per year by 2012,” he noted.

One of the ways the embassy will achieve this goal is by participating in the nation’s major travel fairs.

Kitau explained that the specific strategies to increase visitors will involve an aggressive strategy to develop Kenya’s coast by developing resort cities in two key locations in addition to the Isiolo resort cities.

There are also plans to increase the country’s premium safari parks and improving facilities in all under-utilized parks.

Other plans include creating new high-value niche products, revamping business-visitor offering by attracting high-end international hotel chains and by investing in new conference facilities.

“Korea is renowned for its high technology, I invite Korean construction companies to participate in the development of our tourism sector,” said Kitau.

The Paradise Group has already invested in the Kenyan hotel industry by opening the Safari Park hotel.

“It is one of the most popular five-star hotels in Kenya,” he noted.

Kitau explained that there are several factors that favor foreign direct investments in Kenya.

“We have a large supply of skilled and unskilled labor, low wage levels, flexible employment regulations and international transportation infrastructure through road, sea or air,” he said.

The Kenyan government also offers low cost on property and utilities such as water, electricity and telecommunications. There are also tax holiday and tariff incentives that would raise many eyebrows.

Moreover, Kenya offers favorable market access to the region and continent and also supplies 70 percent of its goods produced in their export processing zones to the United States and Europe

“Kenya’s strategic location as a business hub for East and Central Africa is the most ideal entry point to this market,” he said.

By Yoav Cerralbo (yoav@heraldcorp.com)