Drivers of agricultural exports in Eastern Africa: evidence from Kenya, Uganda, and Tanzania

Abstract

Agriculture contributes substantially to the overall economic growth of East African countries. This sector alone accounts for 25%, 31.1%, and 43.2% of the GDP for Kenya, Uganda and Tanzania, respectively. More than 70 percent of the population in Eastern Africa live in rural areas and rely heavily on agriculture for their survival. Agricultural exports have continued to earn Eastern Africa the much- needed foreign exchange for financing imports for import dependent domestic industries. In 2005, export earnings in Kenya, Uganda and Tanzania, respectively were, US$3.173 billion, $768 million, and $1.581 billion. Out of the total export earnings, agricultural exports contributed more than 70 percent. This paper examines the key determinants of agricultural exports in Eastern Africa. It also evaluates the impact of regional integration and differences arising across countries in the region. It uses Nerlovian Partial adjustment model to fit data for 1974-2004. Results indicate that key factors influencing agricultural exports in the region are exchange rates, regional integration and technological progress. However, there are conflicting results regarding the role of International prices and country specific policies. While some similarities are noted, some differences are recorded across countries. We recommend policies that are outward looking with governments in the region creating conducive business environment to facilitate more foreign investment in export oriented agriculture.