Transforming Kenya’s economy through advocacy
How KAM is helping value-add manufacturers to thrive
With over 3,700 members who are engaged in value add manufacturing or offer support services such as consultancy, banking, standards and logistics services, the Kenya Association of Manufacturers is no doubt the apex advocacy body for the private sector. KAM engages and unites industrialists by offering a common voice and providing a link for cooperation, dialogue and understanding between its members and the government in promotion of trade and investment, and upholding standards for the purpose of developing Kenya’s industrial potential.
Competitive manufacturing is all about creating an enabling business environment and that is what KAM strives to achieve. The organization partners with the Government to address a wide range of policy and administrative issues that affect the cost of doing business in Kenya. At every turn, KAM works on behalf of manufacturers in Kenya to advance policies that help them do what they do best: create economic strength and jobs.
By Bella Akinyi
“A lot of gains can be highlighted which point to the success of our advocacy work over the years,” says Phyllis Wakiaga, CEO, Kenya Association of Manufacturers. “The reduction in the number of licenses, introduction of Single Business Permit, our engagements in expanding our markets is evident through EPAs and extension of facilities such as AGOA which ultimately lead to massive job creation. The high level buy-in for the Buy Kenya Build Kenya campaign, by the President and the Government as a whole, is a big score for the local manufacturing sector. The commitment is being actualized through incremental implementation in some of the on-going mega projects like the Standard Gauge Railway (SGR) and this is being monitored very closely”
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. KAM is also engaging with Commission on Revenue Allocation in addressing trade related challenges within and across counties. Through KAM/CRA partnership, draft revenue laws and policy guidelines have been developed to guide in the drafting of county revenue laws to ensure that business is facilitated to be more competitive by the counties. The uptake of the legal and policy guidelines by the Counties is very encouraging.
KAM also acknowledges and appreciates the work that has been done so far by the Government of Kenya in supplying reliable and cheap energy. We are not exactly where we want to be in terms of pricing but clearly great strides have been taken and inspire confidence that we are on track. With a major component of the energy mix being from renewable sources, the cost of energy in Kenya has since dropped from US¢ 18.7/kWh to the current US¢ 15/KWh. Courtesy of the relentless efforts by the Government, Kenya now sits in the league of the top 10 world’s largest producers of geothermal energy.
Kenya Power is also fronting Buy Kenya Build Kenya where the long-term support is to actively open up opportunities for local investors who manufacture the materials and equipment used in the national distribution infrastructure. Further, through the energy audit initiatives spearheaded by KAM, with the support of the GoK among others, companies saved over Ksh 10 billion over the past 10 years by implementing energy efficiency and good energy management measures.
Buy Kenya Build Kenya to spur economic growth
“Preference and Reservations regulations provided for local preference for public procurement. On June 1, 2015 the President of Kenya H.E. Uhuru Kenyatta reiterated his support for the consumption of local goods and creation of local jobs by directing public institutions to source over 40 per cent of their requirements locally. This was music to manufacturers ears and we are very grateful for the directive as we expect to see it translate to higher volumes of sales and less import reliance,” says Wakiaga.
One of the ways that Buy Kenya Build Kenya has been spearheaded by the government is through the introduction of the policy in public procurement entities to only gazette or advertise for potential suppliers to apply for pre-qualification before the tender is competitively tabled to pre-qualified suppliers. This is due to concerns regarding a clause in the Public Procurement and Oversight Authority Act on the definition of a locally manufactured product. Clarifications have been made to mean a product made in Kenya and not a product which is imported and supplied by a Kenyan company.
Despite this clarification, loopholes on the ground still exist. It is still possible for a rogue manufacturer to win a tender and then procure the goods externally. Kenya Association of Manufacturers has been lobbying to have changes made so that before a government tender is approved, a reputable body is allowed to vet all potential bidders to ensure authenticity. A checklist of what is available locally is being prepared and once finalised will be shared with Government to facilitate this process.
“There are many local industries that have capacity but are denied opportunities due to underhand dealing. Such companies need our support so that we can increase local jobs and export.. In the textile industry, for example, it would be wise to at least purchase our own flags from the local industry and not from other countries,” Wakiaga points out.
The draft ‘Buy Kenya, Build Kenya’ policy is currently being prepared. Wakiaga says, we need to think beyond the current framework and scope of domestic consumption and see how well the Buy Kenya, Build Kenya policy will serve us in coming years. KAM is currently expanding its operations in the extractive sector country. Benchmarking with Nigeria which not only has a Local Content Act but also a Nigerian Content Development and Monitoring Board. This would be a wise move to avoid capital drift. It is not too early to start developing skills for this upcoming sector. It is even visionary to expand the scope of the Buy Kenya, Build Kenya policy to incorporate these elements for a more prosperous economy. Eventually as East Africans there maybe need to expand and have a reciprocal preference for regional procurement.
The manufacturing sector directly contributes 11.3 per cent of Kenya’s GDP. The sector comprises of about 3,700 manufacturing units and is divided into several broad sub-sectors. However, manufacturing performance over the past seven years could have been better. The average manufacturing growth over the last seven years (3.1 percent) has lagged overall economic growth (5.0 percent). The manufacturing sector’s contribution to value added and merchandise exports decreased relative to other sectors, and there are indications that firms are operating well below their capacity and that employment growth is far below their potential. Moreover, the relative size of Kenya’s manufacturing sector has been stagnant, the sector has lost international competitiveness, and it is struggling with low productivity and structural inefficiencies.
Kenya has been classified as a middle-income country after a statistical reassessment of its
economy increased its size by 25.3 percent. The country effectively becomes Africa’s ninth largest economy, up from the 12th position, surpassing Ghana, Tunisia and Ethiopia. The jump by Kenya’s economy into this middle-income status was driven largely by three key sectors; agriculture, manufacturing and real estate. Agriculture remains the backbone of the Kenyan economy with its Gross Domestic Product (GDP) contribution going up from 24.1 percent to 25.4 percent based on a 5-year average calculated from 2009 to 2013. Manufacturing contribution to GDP on the other hand increased from 9.5 percent to 11.3 percent. The Medium Term Plan 2 (2013 – 2017) of Vision 2030 states that the overall goal of the manufacturing sector is to increase its contribution to GDP by at least 10 percent per annum and is expected to register a growth of 10 percent in the planned period. This growth will be driven largely by expansion to local, regional and global markets.
The recently launched Kenya’s Industrial Transformation Programme by the Government is of great importance to the industrial sector and the nation as a whole. It is the right path in growing Kenya back to the Industrial hub it needs to be. The blueprint provides the roadmap of industrialising this country. It also identifies the current challenges which if addressed can lead to the growth of the sector.
“The plan targets 4 key things; an increase of manufacturing to over 15 percent of GDP, the creation of 1 million jobs, a fivefold increase in our Foreign Direct Investment (FDI) and securing a top 50 position in the ease of doing business index. All this will be driven through 5 pillars, 4 of which will be built on the growth and expansion of the SME sector. The other four pillars include the expansion of our export engine, the growth of the agro processing sector in the country, harnessing local content resource and enhancing the non industrial sector for job creation. KAM is working closely with the Government to actualise the programme,” the CEO explains.
There are many thriving light industries in Kenya today that look up to KAM for support to be able increase their competitiveness and scale. Under the KAM SME Development Unit, the organization offers advisory services to the SME manufacturers. KAM works towards addressing identified value chain constraints that hinder growth and competitiveness of light-manufacturing, construction and agro-industry SMEs. This is done by offering well researched and custom-made capacity building activities (trainings) and practical technical firm-level interventions that offer solutions regarding: Raw Materials Supply (Supply Chain Management); Technical Human Resource; Capacity Upgrading; Access to Credit/Capital; Processing Technologies (Efficiency); Quality Standards and Certification; Product Development and Market Access; Innovation and Patenting and Policy, Regulatory and SME Environmental Challenges.
As its mission declares, KAM strives to promote competitive manufacturing in liberalised markets. One of its key priority areas of focus is ensuring markets are secured for members both locally, within the EAC and globally. KAM works towards export competitiveness in the region.
The EAC integration process is a subject that KAM is passionate about. Regional Integration is critical for development both at the regional and national level. The result of a well integrated region will create a positive snowball effect of a strengthened business sector through increased trade, job creation, economic growth and ultimately poverty reduction. KAM has been keen and has championed engagements at the regional level.
“We first introduced an initiative of working together to develop a common voice in 2010 through the EAC Business Network which worked towards attaining a business friendly East African Community and Common Market. The Network endeavored then to facilitate a pro-business implementation of the Common Market Protocol and worked towards promoting a conducive business environment within EAC,” says the CEO.
The network focused on: Harmonising VAT regimes, ensuring mutual recognition of product standards, improving dispute resolution systems and fast tracking the implementation of the EAC directives. The network managed to bring these issues to the attention of policymakers both at the national as well as the regional level and initiated a dialogue on how to improve the situation on the ground for business.
This year KAM championed the establishment of the EAC Manufacturers Network that will provide a joint platform which will help streamline manufacturing issues and concerns within the EAC region while proposing solutions towards the same. The network will provide thought leadership and coordination towards growing the manufacturing sector in the EAC region as well as drive industrialization agenda in the EAC.
“We have also had engagement with the Ministry of Foreign Affairs as well as Ambassadors and Trade Officers in Kenyan Embassies Abroad on how we can enhance our competitiveness within the region.”
Tackling the energy challenge
KAM in conjunction with the Ministry Of Energy and Petroleum Development established the Centre for Energy Efficiency and Conservation (CEEC) in 2006. The Centre runs energy efficiency and conservation programs designed to help companies identify energy wastage, determine saving potential and give recommendation on measures to be implemented.
The Centre provides professional technical services for developing, designing and implementing energy efficiency projects to suit the needs of commercial, institutional and industrial consumers. The main aim is to reduce cost and enhance competitiveness and profitability while promoting a clean and healthy environment.
CEEC offers subsidized energy auditing services with the support from the government of Kenya (Ministry of Energy and Petroleum Development) and the Danish International Development Agency (DANIDA). The Centre runs an energy audit programme which is open to all companies doing business in Kenya who are interested in reducing their energy consumption. CEEC will audit member’s facility and give recommendations that can save his enterprise an average of 20% in energy costs.
The Centre offers Energy-related trainings at subsidized fee. The trainings cover a wide scope of courses with practical approaches to energy management by offering hands-on approaches to assist industries successfully implement energy management programs in the current energy scenario. The energy trainings serve to equip participants with understanding on how to apply energy management principles resulting in reduced energy consumption and significant cost savings.
The prestigious Annual Energy Management Award promotes excellence in energy management and recognizes enterprises that have achieved significant reduction in their energy consumption through implementation of energy efficient measures and technologies.
The centre coordinates exchange visits to enable engineers, energy managers, consultants among other players get firsthand experience on application of various Energy Efficiency and Renewable Energy technologies. The tours include visits to Solar powered farms, Mini-hydro projects, Biogas generation sites, among others. Several companies are at various stages of developing their own Renewable Energy projects as a result of this study tours.
CEEC with DANIDA is keen to support efforts towards implementation of resources efficiency in organizations. The resource audits will assist manufacturers and other target sectors to reduce production costs through increased efficiency, thereby increasing profits, increasing employment opportunities, creating more wealth and alleviating poverty. In addition, this exercise will help reduce greenhouse gas emissions and thus contribute to mitigation to climate change.
The impact of climate change is already being felt in Kenya and it is expected to have a direct effect on both energy supply and demand, as well as on energy related infrastructure. Kenya’s Greenhouse Gas emissions have risen on a steep curve and energy sector emissions are estimated to have increased by as much as 50%. Thus the center carries out awareness programs on climate change and participates in policy formulation with the government.
Through the energy audit initiatives spearheaded by KAM, with the support of the government among others, companies saved over Ksh10 billion over the past 10 years by implementing energy efficiency and good energy management measures.
KAM’s strategic thrust
Every year KAM prepares the Manufacturing Priority Agenda – a concise guide presentation on the most burdensome challenges facing industry in Kenya and which should receive the highest attention in its engagement with the Government and related public authorities throughout the year. The agenda is developed from engagements with its members and observations of emerging public policy as well as other regulations and review of the business environment.
Different issues affecting trade and the business environment take on different hues, sometimes gaining importance or sometimes retreating in the background in the light of more pertinent issues or as they are resolved by Government. This calls for a different agenda every year given the changing economic environment and considerations on the competitiveness of Kenya.
“In 2015, we have organized the Agenda under the broad theme of ‘SECURING INDUSTRY FOR SHARED PROSPERITY’. This is informed by our deep conviction that manufacturing is critical to the transformation of Kenya and creation of new jobs in addition to assisting the Government deliver on its promise to the Kenyan people. We have further collated the agenda into seven themes. If strengthened, they will lead to a more competitive environment for the whole industrial sector resulting in economic gains for the whole country.”
“Top on our agenda this year is the need to secure the future of industry. The importance of the manufacturing sector in development has been globally acknowledged. In Kenya, the realization
of the country’s long-term development policy framework, Kenya Vision 2030, whose goal is for the country to become a newly industrialised economy, identifies the manufacturing sector as a key driver in the attainment of this goal. The sector is seen as an important pillar in the achievement of Kenya’s development. Indeed, it contributes significantly to wage employment as well as to Kenya’s merchandise exports and accounts for a significant proportion of informal employment within the small and medium-sized enterprise (SME) sector. The long term vision of the sector presented in industrial policy (Republic of Kenya, 2012) is to enable Kenya become a regional leader in industrial growth and development contributing to more than 15 percent of the annual national GDP,” says Wakiaga.
There is need to secure the future of industry in order to achieve the desired growth in the
sector by resolving key challenges that could lead to the rapid and sustainable growth of
the sector. The SME sector is the largest provider of employment in most countries, especially
of new jobs, and SMEs are a major source of technological innovation and new products.
Wakiaga says that securing investments and new markets while strengthening the old ones is also key. Without vibrant markets for our exports, the sector cannot grow significantly. Exports will enable the country to effectively deal with the fiscal and monetary challenges by reducing the current reliance on domestic consumption as a major economic driver. The ‘Buy Kenya, Build Kenya initiative’ if well implemented, will in turn help the country secure the domestic market as a first step and critical step.
“Our concerns about infrastructure relate to the need to get our goods to the markets and in good time. Energy and Transport are important infrastructural issues that affect the day-to-day running of a manufacturing firm and Infrastructure that supports development and industrialization is needed. Transport in particular impacts on cost of goods and services and ongoing government projects in this area are laudable and need to be seen to completion. The other 3 pillars include securing constitution gains, securing justice for the economy, and securing security for industry,” she says.
About Kenya Association of Manufacturers
KAM was established in 1959 as a non-profit making private sector organization which is the premier representative organization for manufacturing value-add industries in Kenya. KAM is owned, funded and managed by its members. KAM has a membership of over 850 members in its portfolio.
The Secretariat serves its members both from its headquarters based in Nairobi, and the regional offices in Mombasa, Kisumu, Nakuru, Eldoret, Athi River, Thika, Nairobi Industrial Area and a satellite office in Gongoni, Malindi.
KAM advocates for a conducive business environment in which Kenyan industries can competitively operate in order to create wealth and employment for the benefit of all Kenyans. To do this, it promotes and protects the rights and interests of industry through healthy and mutual discussions between the sector and the government on all issues that directly impact on business.
As a membership organisation, KAM relies on membership for the upkeep of the Association. It also receives grants from development partners targeted at facilitating its policy advocacy work and member services with a special focus on Energy and SME services.
KAM also offers competitive firm level services to its members at a fee under its KAM Consulting Division. This includes services such as training both open house and in-house, energy and resource audits, renewable energy and energy efficiency support, processing of work permits, AGOA Export, Visa processing, SME Development services, among others.
The organization’s general services include: Policy Advocacy & representation to the government on various issues; Engagements at county level; Business information on trade arrangements; Technical advice on taxation matters; Promotion of Ethical business through the application of the 10 principles of the Global Compact Network and Networking and mentorship opportunities with other manufacturers and business sectors.
In June 2011, during the Annual General Meeting, members of the Association approved the proposal of the Board to put up a 5-storey State-of-the-art building at its Westlands premises to house the organisation and provide an income stream. In addition, the members agreed to support the project. This building is a realization of the aspirations of some of our previous and current leadership that seeks to make the organisation more sustainable in future.