Manufacturing Priority Agenda 2015

SECURING INDUSTRY IN KENYA FOR SHARED PROSPERITY

Your (manufacturing) sector is a central pillar of our economy,…… without you, this country cannot achieve the goals of Vision 2030…..

Our economy needs a large number of new non-agricultural jobs to diversify, to cut poverty sharply, and to employ our young people. Without a strong manufacturing sector, our chances of finding many more non-agricultural jobs are low.

H.E President Uhuru Kenyatta, CGH, President and Commander in Chief of the Defence Forces of the Republic of Kenya - 9th December, 2014

Executive Summary

Contribution to Kenyan GDPContribution to Job CreationValue addition by the Manufacturing Sector

SECURING INDUSTRY IN KENYA FOR SHARED PROSPERITY

PILLAR ONESecuring Investment

• Policy stability for investment

• Taxation that promotes industrialisation

• Streamlining the function of trade and industry within the Government

• Streamlining Regulatory Institutions to avoid the duplication of roles

• Fighting Corruption

PILLAR TWOSecuring Markets – by

buoying the ‘Buy Kenya, Build Kenya’ Policy and Export Competiveness

Expanding the local market•Public procurement and

local content policies that support local manufacturing

• fighting against illicit trade, fakes and substandard goods

Expanding the EAC Market • Implementation of the

EAC Single Customs Territory and Common Market

• Promoting export competitiveness

• Review of CET in EAC to promote manufacturing

Expanding external markets

PILLAR THREESecuring Infrastructure

• Energy

• Water

• Transport and Infrastructure

• Land for Investment

PILLAR FOURSecuring

Constitutional Gains

• Elimination of Double Taxation

• Facilitiation of inter county trade through harmonised country revenue laws

PILLAR FIVESecuring Justice for the Economy

• A judicial system awake to commercial realities.

• Faster resolution of commercial disputes

PILLAR SIXSecuring Security

• Curbing rampant insecurity and the creation of safer communities

• Crime prevention

• Restoration of Investor confidence

• Cheaper security costs

PILLAR SEVENSecuring the

Future of Industry

• Support for Small and Medium Enterprises (SMEs)

• Renewed strategy in the establishment of Special Economic Zones (SEZs), Export Processing Zones (EPZs) and Industrial Parks.

• Education and training

• Promotion of Innovation

Focus on Agro processing as a Key Driver for Industrial growth

International Trade and Foreign exchange earningsConsumer benefits of ManufacturingContribution to Public FinanceInvestment

Executive Summary

Established in 1959, Kenya Association of Manufacturers (KAM) is the largest manufacturing association in Kenya, representing small and large manufacturers in every industrial sec-tor. KAM is the consistent voice of the sector and the leading advocate for a policy agenda that helps manufacturers compete both within Kenya, regional and globally and create jobs.We partner with Government to address a wide range of policy and administrative issues that affect the cost of doing business in Kenya. At every turn, we are working on behalf of manufacturers in Kenya to advance policies that help them do what they do best: create economic strength and jobs. 2015 All Rights ReservedA publication of the Kenya Association of Manufacturers (KAM)

in mobilizing and distributing wealth and resources in a county. The Constitution introduced the devolved system of Government in Ken-ya. While devolution was meant to improve service delivery in the country, it has also brought about a number of challenges for Kenyan manufacturers because of the introduction of regulations that are not favourable to businesses by county governments. Manufacturers are now forced to pay similar charges and levies in more than one county. This is a trade barrier or hindrance.

Securing justice for the economy is the fifth pillar. While it is true that judges need to be protected from outside influences which could bias their decision, even unbiased decisions must accurately interpret the law. Inaccurate or well-meaning decisions which fail to appreci-ate commercial realities and implications will decrease confidence in the legal system and increase uncertainty in economic activity. The judicial system must not only be impartial, it must be accurate and efficient as well. They have a fundamental role to play in dispensing justice and balancing the interests of various stakeholders in commer-cial disputes.

Securing security forms the sixth pillar. Rampant insecurity is detri-mental to the economic growth and shatters economic opportunities for the people. It affects investor confidence and increases the cost of doing business as companies spend more on security. Until rampant insecurity is arrested, the Kenyan economy will suffer and economic opportunities for our people will nosedive. Crime prevention can re-duce the long term costs associated with the criminal justice system and the costs of crime, both economic and social, and can achieve a significant return on investment in terms of savings, justice, welfare, health care and the protection of social and human capital. A safe and secure society is an important foundation for the delivery of other key services.

The seventh pillar is securing the future of industry. 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. This can be done by supporting the SME sector, fostering appropriate education and training for the sec-tor, promoting innovation and focusing on the Agro-processing sector as a catalyst for more manufacturing activity in the country.

In addition to discussing the 7 pillars, this year’s Agenda focuses on Agro processing as a driver for economic growth. Agriculture is Ken-ya’s economic mainstay though often threatened by erratic weather patterns due to sole reliance on rainfall water. Value-added agriculture generates several billion dollars in economic impact. Agro processing offers immense linkages to other manufacturing sectors and emerg-ing trends already point to the successful development of countries such as China due to the development of their agro processing sec-tors. Still, Kenya’s Agricultural sector has suffered several challenges which have seen the contribution of key crops like cotton, sugar-cane, pyrethrum and sisal among others decline. We need to prop up these sectors as they are the source of raw materials for the manufacturing sector and also strengthen them.

Through these pillars it is hoped that the manufacturing industry, which contributes 25.4 per cent to the GDP of this economy, will con-tinue on an upward expansion trajectory to become the leading eco-nomic activity in the country. This in turn will lead to more jobs for Kenyans and the attainment of the Kenyan vision to be an industrial-ised state by the year 2030.

The Manufacturing Priority Agenda (MPA) is an annual publication of the Kenya Association of Manufacturers (KAM) developed from mem-ber’s views on the priorities for engagement with the government for a given year. In 2015, Manufactures identified seven pillars which if strengthened will lead to a better business atmosphere for the whole industrial sector resulting in economic gains for the whole country. The pillars were identified after a survey was carried out at the end of 2014 amongst manufacturers to determine the top ten priority issues for the sector. Rather than focus on individual issues, a collation ap-proach was adopted to help the government and its agencies adopt unified rather than uniform solutions to the problems affecting the sector which can sometimes overlap.

The first pillar that was identified is securing investment. Manufac-turers rely on a stable, balanced and common-sense regulatory en-vironment to create jobs and fuel economic growth. However, the burden of unnecessarily costly and duplicative rules weighs heavily on their ability to grow and create jobs. To secure investment in the manufacturing sector, the government needs to guarantee inventors a stable policy environment, supportive taxation measures, and an in-vestment climate that facilitates the growth of industry.

The second pillar is the securing of markets by buoying on the ‘Buy Kenya, Build Kenya’ initiative and export competiveness. Central to the development of the manufacturing sector are markets. For Indus-trial growth, the increased purchase of locally manufactured prod-ucts by the Kenyan Government, private sector and citizens cannot be overlooked. In encouraging imports we are actually creating jobs in foreign countries and draining our foreign revenues. ‘A Buy Kenya; Build Kenya’ philosophy needs to be inculcated in the minds of all Kenyan citizens.

Exports would enable the country to effectively deal with the fiscal and monetary challenges as it reduces the current reliance on do-mestic consumption as a major economic driver. Kenya maintains an open trade policy and is export oriented. This must be safeguarded and further enhanced. The government should actively pursue initia-tives related to promoting the uptake of local content and the curb-ing of illicit trade and counterfeits to secure local markets. To grow and diversify Kenyan exports, EAC regulations should be reviewed to expand our export share into the block. Other regional markets can be opened up through the conclusion and implementation of pending treaties and agreements with other countries.

The third pillar is securing infrastructure. Energy and Transport are important infrastructural issues that affect the day to day running of a manufacturing firm. The current cost and quality of electricity is discouraging new investments and constraining the expansion of industries. This is made worse by frequent power fluctuations and un-scheduled interruptions leading to lost time and equipment damage and making it difficult to plan ahead. While a lot has been done by the current government to increase energy supply and stabilize supply, the country is still not energy secure and capacity expansion is not in keeping with demand. Transport on the other hand impacts on the cost of goods and services while water is increasingly becoming a con-cern for businesses in the country due to the risk posed in the future of unavailability of water. As a water scarce country, we cannot continue to ignore this risk.

As a fourth pillar, manufacturers identified securing constitutional gains. The Government needs to secure the gains to business un-der the Constitution of Kenya 2010. Businesses are the main actors