28 May 2003

Kenya: Industrial Estate is Facing Cash Crunch

Nairobi — The Kenya Industrial Estate (KIE) is facing financial constraints due to bad loans and withdrawal of donor funding.

Funding through the Exchequer has also been dwindling lately and the state loaning body to small and medium businesses is struggling to survive.

Addressing a KIE strategic planning workshop at Reef Hotel in Mombasa on Monday evening, acting managing director, David Opiyo, said the institution has a high volume of non-performing loans.

Opiyo said out of a total portfolio of Sh1.6 billion, Sh1 billion is tied up in projects that are either in heavy arrears or have collapsed altogether.

"Out of a total portfolio of Sh1.6 billion, almost Sh1 billion is tied up in what we rank as category C and D projects. These projects are either in heavy arrears or have collapsed altogether," Opiyo explained.

The workshop is to come up with a management strategy that will give the troubled state firm a new lease of life. The Government is currently reviewing the status of parastatals in the country to determine those that require restructuring or to be phased out altogether.

The workshop was addressed by the director of internal trade Amos Otieno and KIE chairman Luka Cheptoo. Otieno represented Permanent Secretary in the Ministry of Trade and Industry Alex Keter.

Opiyo said KIE lacks sufficient funds to loan. He said the annual demand for KIE credit is estimated at Sh500 million while the firm is able to disburse only Sh40 million, including Sh20 million concessional loan from the Treasury.

He therefore said the KIE balance requires urgent restru- cturing in order to attract potential creditors. The KIE boss said the firm also lacks capacity in terms of modern Information and Communication Technology (ICT).

He said following the structural adjustment programme, KIE has reduced its workforce from 600 to less than 200 and merged branches from 32 to 21.

Opiyo said a memorandum that highlights the KIE constraints has been submitted to the Ministry of Trade and Industry for consideration.

"It is now crucial that KIE regains its front-line position as a strategic institution through which the Government can facilitate the development of indigenous entrepreneurship," Opiyo said.

Keter said his ministry assisted KIE with Sh19 million in 2001 and another Sh26 million last year and this year. "It is extremely important to strategise KIE's organisational operations towards self-sustainability," the PS said.

Cheptoo challenged KIE managers to improve on debt collection and management.

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