Quantcast
Channel: Kenya Association of Manufacturers
Viewing all 516 articles
Browse latest View live

Closure and relocation of local Industries: Meeting with the Parliamentary Committee on Finance, Planning and Trade

$
0
0

Displaying

Closure and relocation of local Industries: Meeting with the Parliamentary Committee on Finance, Planning and Trade 

Members of the Kenya Association of Manufacturers (KAM) today (30 Oct.) appeared before the Parliamentary committee on Finance, Planning and Trade to discuss the recent spate of closure of local industries. Eveready, Cadbury and a number of local companies have recently shifted their operations to other countries and the committee sought to understand the reasons for these closures. 

KAM was represented by the CEO, Ms. Betty Maina, accompanied by board member, Mr. Polycarp Igathe and the CEO of partner BMO KEPSA, Ms. Carol Kariuki.  Representatives of member organisations that are sorely affected by unfriendly regulations were also present such as General Motors and Ndume Agricultural and the Edible Oil Sub sector (EOSS) was represented by Mr. BJK Karingithi, 

Ms. Maina presented the challenges leading to the relocation of multinational companies which included the high cost of production that is hurting industry.
She also talked of the lack of the right infrastructure to support sophisticated manufacturing. "
While the cost of power has started to come down with quantity increasing to 5000 MW, other areas that do not require substantial resources continue to hurt us," she said. The tax administration has been particularly harmful since Tax rates have a differential impact such as the exempt vs zero rated VAT status which has been difficult for certain sectors such as the pharma sector. 

Market access in the region has also been deeply impacted by the delay in signing of EPAs and other hindrances in the East African market such as the duty regime continue to dog exporters. 

She also spoke of substandard, counterfeit and illicit goods which contributed greatly to the departure of Eveready. The failure to fight counterfeits means that these companies can no longer compete in a level playing field.
Mr. Karingithi in addition explained that these same challenges are now affecting the Edible Oil sector that they are no cutting down on their staff while Mr. Igathe added that cartels in the country were selling fake LPG cylinders.

Mr. Benjamin Langat, chairman of the Parliamentary committee, committed to scrutinise factory closures and relocation from Kenya. He promised that the committee will meet with the different regulators and make enquiries to see what is being done to stem this tide. They also promised to engage the Treasury and to make proposals to correct VAT anomalies. Part of the scrutiny will also involve in the long term, an enquiry into Industrialisation as the key to advancing manufacturing in the country. 


EAC Presidents at the Launch of The Single Window System

Management Team

Board Members

plague

Manufacturers Engage Chief of Defence on Security Issues

Manufacturers Engage President Kikwete on NTBs

KAM Chairman Presents token of Appreciation to President Museveni


CIPE faciltators Wumi and Michael with Governor of Uasin Gishu

BASF Chief executive Peter van de Hoek signs to the Code of Ethics in Kenya

Policy Stability

$
0
0
Overview

Policy uncertainty for investors arises out of unpredictably of investment policies, laws, and regulations. Policies may either be changed without sufficient advance notice and debate or the interpretation applied by public officials varies from time to time or firm to firm. Firms require a stable and predictable policy environment in order to make plans for growth and expansion.

The Government in the Vision 2030 Medium Term Plan (MTP 2 2013-2017) has clearly committed to growing the Manufacturing Sector in order to achieve a GDP of 10% by 2017. The manufacturing sector is keen to see the consistency of the policy on manufacturing at legislative and implementation of Government policy.

Recommendations
  1. Consistency of government policy is required at the county and national level in order to support manufacturing growth.
  2. The Government human resource policy is a critical policy for the growth of the manufacturing sector as the availability of skilled labor is critical for firm competitiveness. The policies of governments with regard to education and training have a great contribution to make with regard to labor force development and assembly of relevant skills.
  3. The minimum wage policy, wage bargaining, employment stability, social cost, workplace regulations and hiring and firing have an impact on a firm’s’ labor costs and the wage earners engaged. The Kenyan government has a minimum wage policy which is usually reviewed annually. For a long time, businesses have appealed against this ceremonial wage increase, which is not pegged to productivity of labor. In some industries, the minimum wage set is too high as to discourage engagement of more workers in secure contracts.
  4. Tax policies - Tax incentives remain an important strategy for attracting FDI for investors wishing to exploit the natural resource base in Kenya and those viewing Kenya as an export platform for EAC and Eastern and southern Africa (ESA) regional markets. Recent manufacturing incentives schemes, in Kenya have, however, been ineffective. There is need to reform of the incumbent incentives including those related to export zone processing, manufacturing under bond, and other incentives involving tax refunds is therefore necessary to address the challenges reducing their utilization 5. Sector Specific Value Chains Approach in policy decisions- Manufacturing sectors are highly heterogeneous; accordingly, sector-specific strategies and policies are required to ensure that policy alleviates binding constraints.

Fighting Fakes, Substandard and Illicit Goods

$
0
0
Overview

Illicit trade is the production, import, export, purchase, sale or possession of goods failing to comply with legislation. It includes production, shipment, receipt, possession, distribution, sale or purchase of such products. It additionally includes all actions or conduct intended to facilitate such activities. Many industries all over the world are affected by this vice. Illicit trade takes many forms including: Trading in prohibited goods e.g. narcotics, ivory, guns and pornographic material, infringement (Stealing) of IPR, smuggling of genuine goods through illegal entry points, counterfeiting operations, false declarations to Customs Officers at point of entry, tax evasion and money laundering, diversion of transit goods into local market.

Kenyan manufacturers lose over Kshs 30 billion (US$ 42 million) annually due to counterfeit products. The government loses Kshs 6 billion (US$80million) in potential tax revenue. Small outlets commonly referred to as stalls in the city centre popular for imported items, Electrical and electronics products. According to the Global Financial Integrity (GFI), at Global Agenda Council on Illicit Trade 2012-2013, the value of illicit trade, primarily the sale of counterfeit goods, is estimated at US$ 650 billion worldwide.

Recommendations

The Judiciary need to determine cases brought before them expeditiously (to reduce the turnaround time). There is need for the Judiciary to be aware of the gravity and nature of Illicit Trade cases brought before judiciary for prosecution.

The various Law Enforcement Agencies need to nurture a collaborative approach in addressing Illicit Trade crimes, similar to approach taken against insecurity and disasters. There is need for all enforcement agencies to understand the overlapping nature of their mandate as defined by the various pieces of legislation that govern their operations.

Joint prosecution of Illicit Trade offenders by various agencies would result in achieving greater impact – maximize the charge counts

These include stiffer monetary penalties, longer jail terms, deportation of aliens, forfeiture of assets, etc.

Legislations on Illicit Trade should be consolidated into a booklet for easy reference and use by the Judiciary and law enforcement officers handling cases on illicit trade.

Provide the Necessary Education, Training and Skills

$
0
0
Overview

Kenya has invested a lot in developing education with nearly universal coverage of primary education and increasing coverage of secondary education. However we need to be aware of that higher education is critical for sustained growth in Kenya. It can improve productivity by providing the skills; technical, intellectual and behavioral required by the market and drive innovation and growth in the economy. There is also a need to review curricula in tertiary institutions to reflect the latest changes in industrial technology. This should be done on a regular basis in both universities and vocational training institutions.

Despite expanded access, many young people still enter the job market without adequate skills. Indeed a stark observation is that 92% of the unemployed youth (between 18 and 25) and those who graduate from higher education lack the skills and right mix to drive competitiveness. The education system should be developed in a manner that ensures that students are able to put classroom theory into practice and even become entrepreneurs, thus creating jobs rather than searching for them.

Kenya has a lot to learn in stepping up measures to harness technology, innovation, productivity and promoting linkages between industry and universities, polytechnic institutes and other training institutions. Improvement of policy on R&D, innovation, and technology utilization will boost the country’s global competitiveness.

Recommendations
  1. The government must commit itself to delivering quality higher education that meets the requirements for industry and the growing economy by reviewing curricula to be demand driven, better adapted to latest industrial technology. There is need to transform theoretical knowhow to practical usage.
  2. The government must allocate sufficient resources to science and engineering. National polytechnics and other technical training institutes need to have their infrastructure upgraded in order to meet the needs of industry.
  3. Tax incentives to industry for investment in research and development to promote increased private-sector R&D through increased government spending on Research and Development in Industry through a R&D fund
  4. Foster deeper linkages between university and industry to develop the skilled labour for the economy. Closer collaboration between training institutions of higher learning and private sector should be encouraged in order to offer demand-driven curricula that target Kenya and the east African region as well.
  5. Improve secondary and tertiary education level enrolment; quality of math and science education; and enrolment in engineering and technical subjects needs to be increased to develop the pool of highly skilled scientists, engineers, technicians and workers.
  6. Improve research and development (R&D) encourage staff training; promote linkages between university, vocational, training and other tertiary institutions; and increase funding for R&D. Establishment of research centers, that will develop new and innovative ways of manufacturing.

Improve Trade Logistics and Keep Kenyans and their Goods Moving Swiftly and Safely – with a Focus on Infrastructure, Transport, Borders

$
0
0
Overview

An efficient trade logistics system is important for trade facilitation and trade competitiveness. The efficiency of the trade logistics system is based on all the activities and processes between the points of the initial shipment of tradable products to the point of their destination. These include the efficiency of the cross-border clearance processes, quality of trade and transport - related infrastructure, including ports, railroads, roads, and information technology; competence and quality of logistics services, including transport operators and customs brokers; ability to track and trace consignments; and timeliness of shipments in reaching their destination within the scheduled or expected delivery time.

The Port of Mombasa on the Kenyan coast plays a strategic role in the facilitation of trade both for Kenya and the neighboring countries. Manufacturer’s in particular face numerous challenges when the port performance is inadequate, and hold the view that Mombasa port performance, transit costs and procedures lay at the heart of the logistics supply chain. Currently the inefficiencies at the Port of Mombasa contribute significantly to the cost of doing business on the Kenyan logistics chain.

The launch of the (LAPSSET) corridor in March 2012 and the construction of the Standard Gauge Railway is welcome and has potential to link up Kenya with the region and will bolster trade.

Recommendations
  1. The Government should prioritize the Smooth implementation of the Single Window System (SWS) and Electronic Cargo Tracking System (ECTS) and monitors the implementation process.
  2. Kenya needs to particularly improve port infrastructure, customs processes and capacity to track and trace freight goods. This will improve efficiency of port or airport supply chains reduce costs and save time for improved efficiency of trade in manufactures.
  3. Develop road, rail, air and maritime transport infrastructure, as well as energy supply and telecommunications systems to improve service flows to manufacturing.
  4. The collection of revenue for improvement of infrastructure should be ring fenced to ensure that it delivers the desired benefit. The Government needs to deliver its promise to reduce the IDF fees to the same level as other EAC countries.
  5. Clear information on procedures for imports and export should be provided to businesses with clear timelines and deliverables.

Ensure Tax legislation and Tax Administration Promote Production

$
0
0

Regulations related to paying taxes pose particular challenges to the business community. The four main taxes paid by businesses in Kenya are: corporate tax, which is governed by the Income Tax Act (Cap. 470 of Laws of Kenya); Value Added Tax (VAT), which is governed by the VAT Act 2013 (Cap. 476 of the Laws of Kenya); Customs duty, which is governed by the East African Customs Management Act 2005; and the Excise duty, which is governed by the Customs and Excise Duty Act (Cap. 472 of the Laws of Kenya).

The number of tax payments and returns that a business has to make has become untenable and is adding to the cost of compliance and needs to be reviewed and streamlined. They include Corporate tax (5 times p.a), NSSF (12 times p.a), PAYE (12 times), applicable withholding taxes (monthly), Single Business Permit, Standards Levy, Industrial Training levy (2 times per annum), road maintenance levy, fuel excise duty, rates, rents, stamp duty, VAT (monthly returns), and petroleum development levy. Kenyan businesses make up to 65 tax and tax like payments annually which add up to 50% of Profit. These taxes are not collected at the same location and different agencies are collectors.

The key challenges in complying with tax regulations that have been identified are as lack of clarity on key provisions including on refunds; delays on the part of the Kenya Revenue Authority (the tax administration Authority in the country); heavy documentation requirements including maintenance of documents up to 10 years back for corporate taxes; and lack of transparency in obtaining tax compliance certificates.

Recommendations
  1. VAT law should support production (value addition) and not consumption and provide incentives for the manufacturing sector. The current VAT Act 2013 should be reviewed to ensure that it supports the growth of the manufacturing sector.
  2. There is also need to regulate refunds and make the process speedy, fair and transparent. KRA currently owes Kenyan businesses a considerable amount in refunds. Time taken to make refunds must be regulated and KRA must be penalized for not administering it right.
  3. Streamline the process of making tax payments by reviewing the number of periodic returns required by KRA to simplify tax administration. The complexity of forms and time taken to file returns should be addressed as they impose administrative burdens on taxpayers leading to tax avoidance and high enforcement cost on part of government.
  4. Modernization of the Income Tax Law. It is more than 40 years old, has been amended many times, is complex and hard to understand for both business and KRA and therefore woefully in need of modernization which must be considered a priority.
  5. Kenya needs to move expeditiously to spearhead the resolution of the anomalies noted in the EAC Common External Tariff to ensure proper classification of products. The Government should set up a permanent inter-ministerial Budget committee to handle various tariff anomalies, especially with regards to harmonization and rationalization of EAC customs Union. Furthermore, provisions to allow for changes in the Protocol should be followed to avoid unilateral decisions in violation of the protocol and imposition of non-tariff barriers by Partner State.

Provide Adequate Security

$
0
0
Overview

Peace and stability are a prerequisite to social and economic development, rampant insecurity is detrimental to the economic growth and shutters economic opportunities for the people.

According to the Global Competitiveness Index (GCI), Kenya ranked 131 out of 148 countries in the security. The country continues to be at the epicentre of global terrorism especially after the recent Westgate attacks in Nairobi last year. This is turn has an effect on the overall competitiveness of the country. Security reforms that would lead to a better responses and coordinated efforts in the event of future terrorist attacks have been focussed mainly on police reforms.

Kenya lacks a national security policy and until rampant insecurity is arrested, the Kenyan economy will suffer and economic opportunities for our people of Kenya will nosedive.

Recommendations
  1. There is need to develop a National Security Policy with security actors’ roles, responsibilities clearly prescribed with a move from the authoritarian system of the past, to a new system that is managed and operated in a way that is subject to civil authority and is more consistent with democratic norms, human rights law and the principles of good governance.
  2. Reorganization of the security apparatus in Kenya to restore investor confidence and end insecurity. There is need to boost enforcement officer’s presence across counties and enforce Community Policing initiative to curb terrorist and other threats.
  3. A disaster preparedness team should be in place to map out potential disasters and ensure rapid response in case of disasters and to coordinate response by all agencies in the country in when disasters occur. They should ensure that there is disaster preparedness by training the security personnel. Public and private organisations should also have emergency drills.
  4. The country should have the capability to prevent terrorist attacks, and to rapidly and effectively respond to, and recover from, any terrorist attack or major disaster that occurs. To achieve this the Government need to invest in the latest security equipment.
  5. Kenya should continue to play the role of an “anchor of stability” in East and Central Africa and ensure that there is peace within the region in order to create a conducive environment for investment and economic growth.

Ensure Order and Manage the Costs of Devolution

$
0
0
Overview

The Constitution of Kenya 2010 introduced the devolved system of Government in Kenya. While devolution is meant to improve service delivery in the country, it poses challenges to business and ensuring freedom of commercial activity. It is acknowledged that county governments need resources to enable them deliver on their mandates of service delivery and that the business community are key partners in this quest. However the conduct of county governments needs to inspire existing investors and create the framework for attracting new.

Within a year of the introduction of devolved government, Manufacturers are now confronted with the issue of double taxation where members are forced to pay similar charges and levies in more than one county without attendant improvement in service delivery. To ensure devolution delivers the promise and does on exacerbate the costs of doing business, it is critical that National and County Government maintain constant and regular dialogue with business to ensure that Devolution does not exacerbate the Costs of doing business,

Recommendations
  1. The levying of fees and charges at the County level should be streamlined through policy and legislation to ensure that tax collection is harmonised. The Constitution in Article 209 (5) guarantees freedom of commercial activity in the country without disruption by multiple taxes and fees. However the overarching legal framework to deliver this and deal with conflict in laws has not yet been enacted. It is critical that such a legislation is developed and enacted expeditiously.
  2. Public participation is a key principle under the Constitution of Kenya 2010. Counties are still trying to find their feet in these early stages of devolution, there is need to establish ways to engage the business community at policy and legislative levels on issues that affect the business environment, productivity and competitiveness.
  3. With the related drive to disperse economic activities to various regions within the country, there is an opportunity to capture positive spillover effects by nurturing industrial districts through cluster policies. Manufacturing cluster development strategies will enable production cost reductions and will promote innovation. In addition the strategy will promote county manufacturing depending on natural resource endowments of various counties for county-specific products.
  4. Improved service delivery by counties charged with the provision of important infrastructure necessary for the smooth running of business. This will bring down the transaction cost of business in the counties. It is is critical that counties identify and prioritise service delivery to industrial zones as many of them are principally rural. If they prioritise rural development over urban service provision, they could compromise industrial development.

Ensure Energy Security – with a focus on Sufficiency, Reliability, Quality and Cost

$
0
0
Overview

Kenya currently generates about 1,672 MW of electricity with over 60% of generated energy into the national grid used by manufacturing enterprises. A comparison of the electricity costs between Kenya and key competitor countries like China, India and South Africa, shows that Kenya is quite un- competitive on cost and quality of power as the cost depends on the amount of thermal energy in the system which is susceptible to changes in international oil prices. The problem mostly arises because Kenyan electric power is mainly hydro-based, thus exposing the country to power shortages in times of drought and is distributed by a monopoly, the Kenya Power Co. Ltd.

Manufacturers in Kenya experienced an average of between 8 to 12 power outages per month in 2010, which together with power surges, resulted in an average lost production value of 7% of total annual sales.

We acknowledge the plans by the Government to deliver 5,000 MW of power within 40 months and to diversify the sources of energy. We urge that these projects are completed on time to deliver the expected benefits. It is estimated that flagship projects outlined in Vision 2030 will require an estimated 42,700 MW, meaning we need a lot of investment to be energy secure. It is prudent therefore that any energy policies that are proposed must be aligned to the industrialization policies as well as Kenya’s Vision 2030 if we are ever to unlock our over dependence on imported goods.

Recommendations
  1. We need concerted action that unites industrialists and Government stakeholders in the Energy sector in the delivery of required capacity. The prices should be reasonable and supportive of industrialization.
  2. An increase in public investment in electricity generation and the expedition of investment in transmission and distribution can ensure utilization of capacity. Failure to do this means that existing capacity is not fully utilized even though consumers pay for it.
  3. The government should also incentivize private sector investments in geothermal, renewable energy alternatives and other least cost energy sectors. Today the private sector accounts for 15 percent of the power supply. It can be increased. The country should enhance exploitation of geothermal, solar, wind and biomass resources to supply at least 5,200 MW for domestic and institutional energy requirements by 2030.
  4. Provide support and incentives for industries and businesses to reduce energy wastage. Some businesses have made the required investments and saved themselves lost energy. Others might require support and incentives. Establish clear rules for private generators’ “open access” to the transmission network, as established in the energy policy.
  5. Ensure that electricity pricing maintains the financial viability of power companies, while protecting the most vulnerable consumers. The short term solution to stable energy prices would be to fast track geothermal energy development that will relegate thermal plants to peaking plants and to establish petroleum fuel reserve stocks that can last at least for 90 days to move the economy from the risk of price shocks

MANUFACTURING PRIORITIES 2014

$
0
0

To meet the aspirations of Vision 2030, the manufacturing sector is expected to grow at a sustained growth rate of 10% per year until 2030 so as to create jobs, generate foreign exchange, and attract foreign direct investment. To achieve these goals, Vision 2030 focuses on improving the sector’s productivity; raising the share of Kenyan products in the regional market; and developing niche products in which Kenya can achieve a global competitive advantage.

In Kenya, a number of factors constrain investment, growth, productivity, and innovation in the manufacturing sector. Chief among these are the vast shortcomings in trade and transport infrastructure, high costs and low reliability of electricity, inadequate access to credit, the burden of corruption and regulatory constraints, the lack of competitively priced inputs and technical barriers to trade, especially to regional markets.

We would like to bring to the attention of the Government the Manufacturing Priority Agenda 2014, which highlights the key issues affecting business in Kenya. The Government has embarked on tackling a number of the issues and this needs to be sustained and addressed conclusively in order for businesses to thrive and create employment and contribute to the growth of the economy.

KAM Consulting Overview

$
0
0

KAM Consulting is the business division of the Kenya Association of Manufacturers charged with helping KAM members and customers reduce their operational costs and enhance their revenues through Energy Efficiency Management, development and financing of renewable energy resources, management and leadership training's, consultancy services and surveys, supply chain linkages, business information services and global market expansions

The unit buoys the sustainability of KAM through income generating projects.

KAM Consulting carries out these responsibilities through 5 departments, namely:

  • Centre for Energy Efficiency and Conservation
  • AFD/SUNREF
  • Manufacturing Academy
  • Business Information Services
  • SME Development services
Viewing all 516 articles
Browse latest View live


Latest Images