Would Kenya continue to be a major MPO export destination?

Source: Oil World, MPOB, MPOC Estimates

For the past five years, Kenyan palm oil imports had risen by 43.6%, from 694,900 MT in 2016 to an estimated 1 million MT in 2020.  From 2016 to 2019, Malaysian palm oil import share stood at 24% on average. However, 2020 saw an exponential increase of Malaysian import share, commanding and estimated 51.3% of the market share, thus becoming the largest market for MPO in Sub-Saharan Africa. There are several reasons for this significant increase. This increase in mainly attributed to the waiver of CPO export duty by the Malaysian government, in which Kenya had taken advantage to increase their imports, in addition to their own CPO import duty of 0%, making MPO much competitively priced. The second reason is that Indonesia had not been able to export CPO to the African countries as Indonesia had to fulfil its domestic requirement and biodiesel mandate. Indonesia also must cater to demand from other CPO importing countries such as India and EU countries. The absence of supply from Indonesia created a supply gap, which led to the shift in imports to MPO.

(MT) Jan-Mar 2021 Jan-Mar 2020 Change (MT) Change (%) Jan-Dec 2020
Crude 107,140 24,999 82,141 328.58 455,717.38
Refined 3,144 2,642 502 19.00 65,040.96
Total 110,284 27,641 82,643 298.99 520,758.34

Breakdown of MPO imports to Kenya January to March 2021
Source: MPOB

January to March 2021 saw a very strong imports figures. Kenya imported a total of 110,284 MT of MPO, a staggering 299% increase from the previous year. 97% of the imports are in the form of crude during this period. Although Malaysia did not continue with the CPO export duty exemption, demand in Kenya is expected to continue to be strong. Kenyan palm oil imports are currently being driven by its favorable import duty regime that benefits CPO imports. Another driver for palm oil imports in the country is the growth in food demand, especially in the FMCG sector, which benefits palm oil as the most competitively priced compared to other vegetable oils, which would be attractive to the lower income population.

However, the first half of 2021 would also pose its own challenges to the Kenyan economy. With Kenya easing its COVID-19 restrictions, the Port of Mombasa experienced a “busier than usual” cargo volumes, with 1 million tonnes of non-containerized cargos are expected to move through the port in 2021 alone, compared to 800,000 tonnes in 2020. This would pose a challenge in terms of port clearings, freight time, and costs. Another challenge faced in the region would be its purchasing power. Imported commodities, such as rice, onions, fish, sugar, and palm oil, saw hiking prices. The main reason for this is due to weakening Kenyan Shillings against US Dollars, caused by their hard-hit tourism industry during the COVID-19 pandemic. The weakening Kenyan Shilling has put a pressure on purchasing power. In addition, VAT tax that was reduced from 16% to 14% had been reinstated, leading to higher price hike.

Keeping in view of the above factors, it is expected that Kenya would continue to be one of the major markets for MPO in Sub-Saharan Africa. Recovering economy and trade is expected to negate the above stated challenges. Although most of the imported palm oil are consumed locally, MPO were seen rerouted to its neighbouring countries such as Burundi, Rwanda, and Uganda. This would pose opportunity to transform Kenya as a re-export destination. With African Continental Free Trade Area came into force, intra-Africa trade is more facilitated and would see increase in demand for finished products. Further penetration of MPO can also be achieved through investment in strategic areas such as bulking installation or refineries, to further gain access to its neighbours.

Prepared by Fazari Radzi 

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