Why companies exit Kenyan market - Daily Nation

Why companies and imports exit Kenyan market

Saturday March 18 2017

Kenya Association of Manufacturers chief executive Phyllis Wakiaga. PHOTO | WILLIAM OERI | NATION MEDIA GROUP

Kenya Association of Manufacturers chief executive Phyllis Wakiaga. PHOTO | WILLIAM OERI | NATION MEDIA GROUP 

In this interactive series, we invite our readers to send in questions to select public figures. Answers will be published in the next print and online editions. This week, Kenya Association of Manufacturers chief executive Phyllis Wakiaga responds to your questions.

What is your view on the exit of some companies and staff redundancies under the guise of increased operational costs? What can be done to tame this? 
Andrew Maranga Ratemo, Malindi 

Operational costs for business in the country have increased especially the costs of doing business in counties whose taxation is yet to be harmonised. Increased cost means that the business is not operating at full capacity and is unable to support staff that it needs to make profits.

What benefits do KAM members get and what is the annual contribution of manufacturing to the country’s annual Gross Domestic Product?
Githuku Mungai

Members are guaranteed that they stand out in government tender applications, as our certificate gives them credibility. It also provides a green channel for them during the application of Pre-Verification of Conformation. Due to the various challenges faced by the sector, manufacturing has remained stagnant at 11 per cent of GDP over the past 10 years. However, we are working with various partners, including the government, to increase this contribution to 15 per cent by 2025.

What is KAM on the skyrocketing charges county governments are levying on manufacturers like paying entry, parking, distribution and branding fees. Don’t you think this discourages potential investors?
Otunga Baraza, Mombasa 

With regard to permits and licences, the Nairobi County government has recently pooled together all business-related licences into the Unified Business Permit. So, in as much as the fee might appear higher, it is actually a sum of all the licences and permits we have been paying for separately in the past, now made into one permit.

Doing business across counties, however, remains a challenge because taxes are not harmonised and we still face multiple levies and charges.

I believe Kenya can fast develop industries if we made product manufacturing part of the primary and secondary school curriculum. What are you doing to make manufacturing a way of life to Kenyan learners and what are you doing to take manufacturing to the country side?

Ichenga Mugao, Tharaka Nithi

Policy advocacy being at the centre of our mandate, we advocate for a better environment in which industries can grow and operate in full capacity to provide productive and sustainable jobs to Kenyans. We are also involved in the shaping of our education curriculum by being part of revamping the Technical Vocational Education and Training (TVET) centres in Kenya.

What are some of the measures KAM is taking to punish cartels, especially in parastatals,  some of which have serious implications on our economy?
Paul Kamau Kariuki, Nairobi

KAM houses the UN Global Compact Network in Kenya, of which I am the country representative. The 10 principles of the UN Global Compact, including that which emphasises on the role of business in shunning corrupt practices, guide all our operations as well as membership recruitment processes. We have organised our members into working committees and sectors that are mandated to deal with any cases of impropriety brought forward.

The consumerism craze in Kenya targeting imported goods has baffled many observers. In fact, the multi-billion-shillings shopping malls that are coming up across the country largely sell foreign products. From where you sit, does this trend pose long term danger to your association?
Komen Moris, Eldoret

The issue of imports flooding the market has been a long-standing one that has diluted the ability of our local products to compete fairly in both the local and regional markets. We have lobbied for tax regulations to help curb this problem and in some instances, for example, steel and metal, this has worked. We have a long way to go, however, especially to change the market perception on products made locally vis a vis the imported ones.

What role, if any, does KAM play in our society and equally what is your relationship with the local consumer organisations?
Francis Njuguna, Kibichoi

KAM is the voice for the manufacturing sector in Kenya. We use fact-based policy advocacy to champion for an industrial transformation for our country in order to create a sustainable economy for future generations. We partner with consumer organisations in various ways, for example, fighting against counterfeit products that are harmful to consumers’ health and wellbeing and negative impact on local businesses.

What is the cost of power Kw/h to local manufacturers and what does this say about the installed energy capacity? Are you satisfied that the current energy capacity is enough to support the growth of manufacturing sector in Kenya? Compared to other countries in the region; does the energy capacity give Kenya any competitive advantage?

Paul Gesimba, Nairobi

Currently, we are at Sh15 per kilowatt hour for industry and our installed capacity is 2,341 megawatts. Power interruptions have been a major issue, escalating cost of production. We are working closely with Kenya Power to ensure quality and reliable power supply through various platforms such as regional forums and Whatsapp groups in our Chapters around the country.

I believe that informal manufacturing is as essential as formal manufacturing. Which parties are KAM engaging to steer the informal manufacturing sector?
Nyaga Albert Muthomi, Embu 

One of the main deterrents of formalisation is taxation, which currently seems to be very high for a lot of businesses, and regulations that are perceived as rigid. We continue to advocate for a competitive business environment, especially with a view to bringing in the informal businesses into the tax bracket to increase our country’s revenue and give these businesses a nurturing environment to grow.

Madam, how do the big salaries and allowances awarded to doctors and many other cadres of government employees affect the economy in terms of taxes, job vacancies and development?

Mwangi K, Kandara

I can only address the importance of improving incentives for industry in order to make industry jobs lucrative and to further the growth of the manufacturing sector.

Overcoming the white-collar versus blue collar binary in terms of incentives to employees, sends a clear message that as a country we are committed towards creating a stable economic growth.

Is the “Buy Kenya Build Kenya” campaign alive and how is it helping local manufacturers or is it just another empty rhetoric by the government?

Derek Liech, Mombasa County

It is very much alive! The high level buy-in for the “Buy Kenya Build Kenya” campaign by the government as a whole is a big score for the local manufacturing sector. The commitment is being actualised through incremental implementation in some of the on-going mega projects like the Standard Gauge Railway. We are at the forefront of convincing consumers to believe in our locally made products in order to grow our industries.

What are the challenges women in manufacturing face and what is the difference between KAM and the Federation of Kenya Employers?

John Juma

There are numerous challenges specifically lack of financing and inability to access property which limits the growth of micro and small business discouraging a lot of women from starting or expanding their industries. Limited knowledge in STEM (science, technology, engineering and mathematics) subjects is also a hindrance for women wanting to start careers in industry.

The Kenya Association of Manufacturers is the credible voice for the manufacturing sector in Kenya, using fact-based policy advocacy to champion for a conducive business environment, specifically for industry. The Federation of Kenya Employers represents the collective interests of all employers in the country.

One of the mandates of KAM is to lobby for reduction in the cost of doing business for its members. To what extent has KAM achieved that?

Nyaga Albert Muthomi, Embu 

A lot of gains can be highlighted which point to the success of our advocacy work over the years. The reduction in the number of licences, introduction of unified business permit, our engagements in expanding our markets is evident through last year’s ratification of the Economic Partnership Agreements and extension of facilities such as the African Growth and Opportunity Act , which ultimately led to massive job creation.

There have been reported cases of the country being “flooded” with goods manufactured from outside thus interfering with the local manufacturing market. There are also claims that some of the imported goods in the market are sub-standard. What is your take on this?

Francis Njuguna, Kibichoi

Import of substandard goods and counterfeits continues to be a challenge for industry and negatively impacts our ability to compete for local and regional markets.

However, partnerships have been formed with institutions such as the Judiciary which has led to the development of the Illicit Trade Manual for combating illicit trade.

There is increased momentum in rooting out counterfeit goods and we are working very closely with the anti-counterfeit agency to solve this.

For a long time, the debate on mitumba has been shunned by politicians for obvious reasons. But the future of this country is at stake, taking into account the number of unemployed youths. It should be known that mitumba importation is directly equivalent to labour-export. What is your association’s stand and advice to the government on this issue?

Komen Moris, Eldoret

Second-hand clothes have provided an alternative for affordable clothing but a lot of times the idea of buying mitumba is not necessarily cost driven. Sometimes it is out of a need to find unique and quality designs which can be achieved if the local textile industry is fortified and the fashion industry thrives to meet these demands.

Other times it is really a socio-cultural issue and a mind-set that certain things are better quality because they are imported.

We are advocating for a three-year phasing out approach for second hand clothes within which we can put investment and effort in building the local textile and apparel industry to meet local demand.

Do you have an internship policy aimed at orienting Kenyan college and university students to manufacturing oriented careers in the market?
Ichenga Mugao, Tharaka Nithi

In our newly launched TVET programme which we are embarking on in partnership with the Ministry of Education and the National Industrial Training Authority, KAM through its members is currently running an apprenticeship programme – taking on students and giving them practical experience to bridge the skills gap and show them that industrial jobs are lucrative.