Business Daily (Nairobi)
Jim Onyango
7 May 2008
From Nairobi's Industrial Area to the jua kali sheds on Landhies Road, the story is the same. Manufacturers are looking for an expanded market for their goods.
If that is not the case, then the country's ever growing work force is looking for jobs in the industrial or informal sector. But because of difficulties in doing business, Kenya's industrial base is not expanding fast enough to meet the demands for new employment outlets.
These are some of the key issues manufacturers and private sector players tabled before some Cabinet ministers at a breakfast meeting in Nairobi on Tuesday.
Nairobi Metropolitan Minister Mutula Kilonzo, says he is drawing up new plans for the city that will encompass industrial parks within a 100 km radius. This will entail the joining of 12 neighbouring municipalities.
It is intended at expanding the country's industrial outlets to accommodate more manufacturers who will open doors for employment.
The manufacturers complained about an unfair trading environment that puts them at a disadvantage when competing in export markets.
Industrialisation Minister Henry Kosgey, said the issue would be addressed if locally manufactured goods are to maintain their competitive edge in regional markets.
Mr Kosgey said his office was inundated with letters from manufacturers demanding to be shielded from unfair competition from counterfeits and high production costs.
"We want to partner with industry players so as to create a conducive environment for the industrial development" he said. Kenya Association of Manufacturers chairman Steven Smith, said local producers were being harmed by counterfeits and heavy taxes, which were cutting the competitive edge of local manufacturers.
But the industries also need an expanded market, probably within the East African Community trading bloc and beyond.
"Our businesses thrive on the size of the market. Kenya's manufacturers cannot be confined to the local market," said Smith. One of the solutions that was proposed is the implementation of the Comesa Customs Union which comes into force in December. It will deepen the markets for value added goods from Comesa countries.
The Customs Union has been a major step in establishing the East African Federation, it was signed in March 2004 and will be implemented from December 2008.
Under the terms of the treaty, Kenya, the region's largest exporter, will continue to pay duties on its manufactured goods entering the other four countries until 2010, based on a declining scale. A common system of tariffs will apply to goods imported from countries outside Comesa.
The manufacturing sector, with a total output of Sh561 billion in 2006, is so important to Kenya's economy that Lands Minister James Orengo, said the government would reduce production costs so as to hold onto the industries based here.
This is also aimed at giving Kenya's goods a competitive advantage abroad. According to the latest Economic Survey, the manufacturing sector accounts for 10 per cent of GDP.
However, the industrialists are still complaining that the high input costs and unfriendly business environment have the potential of cutting the 6.9 per cent national economic growth recorded in 2006 .
The economic survey says employment in the industry increased from 247,000 persons in 2005 to 253,000 in 2006.
This came despite the closure and relocation of some plants due to high costs of production and competition from cheap imports.
Overheads are also threatening the development of the country's industrial sector. For example, electricity is about to get more expensive by Sh2 per kilo watt hour from this month.
Kenya Power and Lighting Company (KPLC) is preparing to implement a fuel cost adjustment in all meter readings taken in April.
The company advertised a notice of in the Kenya Gazette on April 11 that electricity energy will be liable to a fuel cost adjustment of 284 cents per kWh for all meter readings taken in April 2008.
"KenGen and KPLC have done good work to make power available. However let's not ignore the burden of the cost. The government should look at taxes on fuel imports to help if we are to have cheap energy" said Mr. Smith.
Manufacturers say the meeting with a section of the cabinet yesterday was the beginning of a dialogue which will involve interaction with the government.
They expressed hopes that this would enable the industry to be involved in policy decision making processes that have the potential to shake the industrial sector.
Mr Vimal Shah, the deputy chairman of KAM and the CEO of Bidco Oil Refineries, summed it up :
"What we need is a listening government."
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