Industries flag hurdles facing Agenda Four - Daily Nation

Industries flag hurdles facing Agenda Four

Tuesday September 18 2018

Economic analysts say cost of transport set to

Economic analysts say cost of transport set to increase as VAT on fuel begins to take its toll. PHOTO | FILE 

By JAMES KARIUKI
More by this Author

Manufacturers now say the government’s Big Four development agenda will remain a pipe dream if a number of roadblocks standing on its way are not properly addressed.

The Kenya Association of Manufacturers (KAM) said their contribution to the national economy might fail to reach 15 per cent as envisioned since key factors of production are yet to be addressed.

“There is need to reduce the cost of power to USD 0.09/kwh, in line with this year’s budget where all taxes and levies on power bills for manufacturers will be removed. Restructure the time of use for the 50 per cent cut in tariff at night to incorporate more industries, especially small and medium enterprises,” KAM told Smart Company.

Manufacturers said more needs to be done on development and maintenance of roads especially within industrial zones to facilitate faster movement of goods.

They also faulted preference for imported goods among local consumers.

“Preference of imported products has eroded local manufacturers market share. The ‘Buy Kenya Build Kenya strategy’ remains a pipe dream since operational guidelines requiring government ministries, departments and agencies to dedicate 40 per cent of their allocations for local purchases is yet to be effected,” they said.

The Institute of Quantity Surveyors (IQSK) of Kenya Chairman Peter Kariuki said increase in fuel prices would hurt the Big Four development agenda as the costs of doing business are bound to go up.

Mr Kariuki said project costs will have to be reviewed upwards with studies undertaken on site to help financiers and project owners re-plan on how best to carry on with the projects.

“Starting at the quarry where diesel-operated stone cutters are to transport trucks as well as at the construction site where petrol-driven machines abound from rollers, pulleys, vibrators, hydraulic drills, concrete mixers, water pumps, tippers and trucks, businesses will be hard hit,” he said.

The IQSK chairman said the rise in fuel prices will deal a severe blow to the government-fronted affordable housing plan as all costs incurred by developers as well as material manufacturers will be passed on to the final buyers of the housing units.

“The disposable income for low income Kenyans has been hard hit. We have increased electricity costs for them, matatu transporters have hiked fares and food prices are also exorbitant. This means the planned government housing units will be bought by the rich,” he said.

Kibo Africa Chief Executive Huib van de Grijspaarde added that Kenya must redefine its import on fully built products to favour local assembly plants and enhance the government’s 40 per cent reservation rule for government tenders saying it could directly impact the manufacturing pillar.

“In our market segment (motorcycles), there are more imported brands sold locally than the ones we and other assemblers produce. We understand the terrain better and have redesigned our products to suit Kenya and the only way to help us reduce prices is for the national and county governments to reserve higher allocations for purchase of local motorcycles. Higher volumes means lower prices,” he said.

Establishing factories, Mr van de Grijspaarde added, will boost technical skills transfer giving Kenya an edge in aftersales management of equipment.

KAM said there is an “urgent” need to finalise the preference and reservation regulations under Public Procurement and Asset Disposal Act 2015, which will make it mandatory for all government entities to adhere to the ‘Buy Kenya Build Kenya’ rule.

In the Big Four, housing, healthcare, food and manufacturing have been earmarked for facilitation to promote enhancement of services and delivery of goods at much lower costs. The government is the largest buyer of goods and services that are largely sourced from foreign markets adversely affecting cash flow for local firms.

KAM lamented that this denied Kenyan companies an opportunity to also grow their expertise and monetary muscle to enable them bid for big-ticket jobs.

The industries are also calling for a revision on the 1.5 per cent Railway Development Levy (RDL) and 2 per cent Import Declaration Fees (IDF), downwards saying this increased the cost of production that was later passed on to consumers.

“A Waiver of the two on imported raw materials and intermediate inputs will increase competitiveness of Kenyan-made products locally as well as across Africa,” they said.

Companies are also calling for closer harmonisation of East African standards to facilitate free flow of goods and services saying Kenyan goods and service companies were still finding it impossible to access some markets.

“Some partner states refer to their standards thus locking out local manufacturers who in turn have to either find other export markets or go through the rigorous and costly process to access those markets,” it said.

Inclusion of manufacturing as a top priority investment area in the Big 4 was hailed as a major score for manufacturers who now enjoyed closer consultations with state agencies tasked with improving the business environment.

KAM also commended the ongoing fight on counterfeits and substandard goods imports saying it had helped stem illicit trade that had eaten up to 40 per cent of their market share.

Manufacturers also hailed then governments move to ratify the All-Africa Trade Treaty saying it gave them a wider market to sell their wares.

“The development of the National Export Development and Promotion Strategy will make Kenyan products more competitive on a global platform leading to higher productions, hence factory expansions and more jobs for Kenyans,” it said.

KAM urged for faster implementation of the export strategy saying it will play a critical role in driving the growth of our economy.

The Big 4 agenda, remains largely known to the government circles with private sector professionals seeking in vain to be included in its implementation.