Reduced government spending on textbooks has handed the book publishing industry its biggest setback yet at a time when it is hurting from the twin blows of advancing technology and piracy.
The industry that has enjoyed a windfall for almost a decade since the government introduced the free primary education (FPE) and free day secondary education (FDSE) is now bleeding after the government cut down on textbook purchasing.
The sector was the biggest beneficiary of the over Sh28 billion the government releases to schools every year for teaching material.
Handsome returns from the business had attracted more players in the sector. The number of publishers has grown exponentially from just six a decade ago to more than 130 currently.
There are also hundreds of briefcase companies eyeing a piece of the market. The FPE and FDSE programmes made the government the single largest buyer of textbooks.
But last year, the government stopped bulk purchasing of books, ending the windfall that started in 2003.
“Publishers wholly depend on school books to survive. The sad truth is, if you pull the textbook business away from them, most will just close,” Mr Herman Manyora, the chairman of Hillman Publishers told Saturday Nation.
The situation is made worse by the fact that most publishers concentrate on school books only.
“Convincing a publisher to publish anything other than school textbooks is very difficult. However, there are a few who are doing religious and motivational books, but they are yet to get them to a scale that makes it profitable and sustainable for the long-term,” Mr Manyora said.
This over-reliance on school textbooks came to haunt Longhorn Publishers this week after it posted a Sh22.4 million loss for the year ending June 2012. Sales reduced 29.4 per cent to Sh775.9 million from the Sh1.1 billion last year. In 2010, it recorded a profit of Sh127.4 million, a staggering 530.5 per cent rise.
“In an environment where government funding accounts for over 80 per cent of textbook purchases in the major market segments of primary and secondary schools, reduced fund allocation and disbursements resulted in a commensurate reduction in textbook market size,” Ms Janet Njoroge, the outgoing Longhorn Publishers chief executive officer, said in the statement accompanying the results.
Longhorn listed at the Nairobi Securities Exchange on May 30.
The Kenya Publishers Association (KPA) says the situation has been worsened by the teachers strike as they will lose a season of sales.
“Reduction in government orders is mainly due to the fact that it is only ordering books for replacement or those that are worn out,” Mr Lawrence Njagi, the KPA chairman, said. Mr Njagi is also the managing director of Mountain Top Publishers, which posted a 20 per cent increase in sales despite the difficulties.
“Children’s books such as story books and other reading materials like dictionaries are always stable markets that contribute between 10 to 15 per cent of the revenues. But no publishing house can survive on this segment alone,” Mr Njagi added.
Publishers say private schools are becoming a major market for them after the government.
According to Phoenix Publishers, firms that publish other books such as story books have been cushioned from the lower orders from schools.
“If we didn’t have private schools today, several publishers would close down. The situation is bad, the government has diverted funds meant for books to other pressing matters. We are yet to receive the second batch of money from the government,” Phoenix Publishers managing director John Mwazemba said.
The pain of the industry recently played out in the public when KPA threatened to go to court and join teachers in a nationwide strike to demand the release of the more than Sh11 billion free primary and secondary schools funds, which had been delayed.
Publishers were demanding over Sh8 billion for supplying books and other learning material on credit to public schools.
Publishers say they spend 30 per cent of the cost of publishing on book production, 35 per cent on booksellers, 15 per cent on marketers, and 10 per cent on royalties for authors.
This leaves their profit margins at 10 per cent. The costs could be further cut if schools adopted e-learning or received textbooks on online platforms. But the downside in technology is that the industry would lose revenue from volumes, given that books on soft copy can be copied and seem to last much longer.
“Our major cost comes from printing paper. This rose significantly last year. We cannot move to the digital space just yet because this will require training of teachers, accessibility, affordability of gadgets and Internet connections to schools,” Mr Njagi noted.
Treasury recently hinted that it would also review the policy of buying books every year when the course list is reviewed every three years.
The slowdown in government orders is expected to last longer given that there are even more competing interests at this time.
“The challenges of high inflation and depreciation of the Kenya shilling against major world currencies had an adverse impact on the publishing industry. This is because funds allocated to education in general and textbook procurement in particular were redirected to other priorities,” Longhorn said.
Publishers are now counting on cross border trading to plug the losses.
“We are looking at crossing borders to countries such as South Sudan, Somalia and Uganda which are warming up to our books. The other new markets are the Francophone countries in the region that are gradually converting to English speaking,” Mr Manyora said.