County Governor Dr. Alfred Mutua concluded the Machakos investment conference today (May 17) by reassuring manufacturers of his support. He also signed Memorandums of Understanding (MOUs) with over 20 companies on proposals to invest and work with the county on projects such as the factories to manufacture surgical gloves, waste disposal plants, paper recycling and container plants, juice factories, plants to manufacture equipment for the disabled etc. One of the companies plans to inject Sh5 billion to set up a steel manufacturing company, a construction company and a housing complex. Another company signed a deal of 10 million US dollars. Also present was a Korean company that will set up a prefabricated housing units. At the close of the day the county estimated signed Sh 56.3 billion worth of MOUs.

The second day began with a breakout session into sector roundtables. Each of the county ministers held a session on their docket and their plans for the county in their specific area. Kenya Association of Manufacturers (KAM) members were heavily represented in the Trade  sector with the County Minister for Trade, Economic planning and Industrialisation, Dr. Sunil Kumar Dhull.

In the town hall style sessions members were able to pose questions and get answers from the Ministers on the upcoming new city of Machakos, which the county intends to develop on a public private partnership (PPP) model. The  proposed city is situated around Maruba Dam and sits on over 4000 acres of land. The county government has pledged free land in the county specifically for investment. Land primarily in the new city and Maruba lake will be for residential property developments while other land in places such as Matuu and other areas scattered around the county will be available to Investors for other types of development.

To get free land, companies need to present a proposal to the county government on their project. The county will organise for visits to the parcels of land around the county with investors before signing a Memorandum of Understanding (MOU) once details are ironed out. Land will be leased out for 30 or 60 years and rates will apply. The county also showed its determination to attract investors by offering free businesses licenses during the first year of operations. Afterwards, companies will pay for the licenses.

Kenya Association of Manufacturers members this week participated at an investment conference in Machakos County. Governor Dr. Alfred Mutua on Thursday May 16, 2013 outlined his strategic plan for the county of Machakos in the first ever Investment conference in the County. The two-day event took place in Maanzoni Lodge and attracted over 1000 attendants amongst them foreign investors from Asia and Europe.

The former government spokesman promised investors that the county will facilitate and not frustrate business. The county has plans to set up one stop shops for investors to register their businesses in the county without encountering bureaucratic procedures. The offices  which will be digitally interconnected will be up and running in 3 months. “We will do the running for you even to Nairobi,” Dr. Mutua said. Investors intending to set up in the county were also promised free land for certain ventures. The county government intends to utilise private public partnerships (PPPs) and Build – Operate  - Transfer (BOT) models to finance infrastructure projects.

During the conference, the county ministers presented their agendas for the county and invited investments in the area.

Machakos County is rich in raw materials used in the construction industry such as sand and is home to a number of building and construction industries. Sand harvesting is already underway but the government wants to do this in an environmental friendly way. There are plans  to harness solar power by setting up wind and solar farms to add on to the electricity in the national grid. The government has plans to prospect for minerals such as coal and uranium.

To deal with security issues, the governor also promised to set up a forensic research centre where police can carry out DNA testing and other services which will make it easier to catch criminals. Police vehicles will be stationed in every sub location as part of the counties emergency response services.

The county unveiled plans for a new Machakos city and took participants to visit the new site before hosting them to a cocktail at the proposed site. Situated within a short distance of Nairobi city and Konza Technopolis, the county has strategically placed itself to be the ‘dormitory’ of both cities and has plans to build houses for inhabitants of the two cities in the new area. Machakos currently has a population of 1.2 million.

The Governor of Machakos county, Dr. Alfred Mutua, on May 10, 2013 convened a meeting with representatives of various manufacturing firms operating in his county at Maanzoni lodge. Dr. Mutua, who termed himself as a capitalist with social leanings, pledged to facilitate investors in the region by bringing down the cost of doing business and working on the infrastructure. He also stated that his achievements would be measured by the success of the business community. “The time for failure is past, we do not have time for experimenting anymore,” the former government spokesman said.

During the meeting various stakeholders were able to raise their issues with the governor and the Kenya Association Manufacturers had the opportunity to present to the governor a memorandum of issues pertinent to members from the area. Among the concerns raised were questions about power surges and interruptions and infrastructure problems such as the repair of access roads linking highways and the factories. Land grabbing and encroachment problems, sanitation, drainage, effluent disposal mechanisms and water shortage problems also featured.

To raise money for projects, members also called for Public Private Partnerships in infrastructure projects where the cost is amortised and also municipal or county bonds.

Governor Mutua promised to look into the problems and said he had set aside Ksh100 million in his budget to buy graders and other road equipment and close to Ksh 1 billion shillings to repair  roads. He said that the work is supposed to begin this July. He also spelt out his plans to increase security in the County. Close to 300 million has been set aside to build houses for the police officers and for the allocation of emergency and rescue services. An ambulance, fire engine, and policemen will be stationed at intervals everywhere in the area. Dr. Mutua also called for a partnership of vigilance between manufacturers and the county government to ensure security in the area. The electricity problem will also be resolved by putting up power substations in the county to deal with the fluctuations. The cost of business will be reduced because the country plans to set up a one stop shop with no fees, no taxes or no special permits. There are also plans to construct a dam so that water can be tapped and for modern sewage systems in Mavoko.

The Kenya Association of Manufacturers will be holding their 9th annual Energy Management Awards on Friday, May 31st 2013 at Intercontinental Hotel 6:30 pm - 10:00 pm

To book your seat please contact:

Beatrice Kithinji or Anne Kariuki

Tel: 3741634/4886/6005-7 and 3753204

Mobile: 0734-646005, 0722-201368

Email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Individual tickets are Kshs 4,000

A Corporate Table is Kshs 32,000

Dress Code: Black tie

Which financial statement is more important for a business? The profit and loss statement or the balance sheet?

This was the question posed to the participants of a half day seminar titled “unlock your financial blind spots” held on May 6, 2013 at Tribe hotel in Nairobi. According to financial expert, Alan Miltz, both are equally important, because as your profit grows, your balance sheet grows. What is important is that the profit grows faster than the balance sheet.

Participants were able to see to the discrepancies that exists between what firms consider important in financial statements and what information banks look for in financial statements. Mr. Miltz further stated that companies speak Spanish and banks speak Portuguese to depict the situation where companies give utmost importance to profit growth while banks are interested in the liquidity of the firm. It is all about understanding cash flow in the business. By looking at the cash flow, banks are able to tell whether a company is in the red even though the accounts show a profit. This is because cash flow is used to measure the capacity of a business to service its loans.

A case study was used showing the accounts of a fictitious company making profits while in reality there is no growth. Many businessmen assume that negative cash flow is a tolerable side effect of doing business. In reality, cash flow is the most critical factor in a business because it is as a result of growth and good management. The financial controller's job is to measure growth in the business which he does by looking at 4 things: profitability, working capital management non current assets and cash flow. Many African firms focus too much on profitability and ignore working capital. By getting clients to pay on time, they would increase their cash flow.

One must also determine the quality of that cash flow. Once this has been established in the firm, it is easier to negotiate for lower interest rates with the bank.

Participants, who were mostly drawn from the manufacturing sector, also learnt about key financial indicators that they can use to know if their strategy is working. Business should be market driven and should possess a sustainable competitive advantage so as to grow.

To participant in a similar event in future kindly Contact Lilian in This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Kenyan companies trading in Britain, with British companies or employing British nationals need to be aware of the implications the UK Bribery Act (UKBA) in case of transgressions.

By Jaswinder (Jas) Bedi, MBS

The decision to increase the minimum wages on May 1 was unfortunate. It maintains an unnecessary tradition of ceremonial wage increases on Labour day which do not take cognizance of the entire production chain and implications for the job expansion.  In addition, this Labour Day speech was at variance with a lot of promises to reduce production cost, increase productivity in an effort to create more jobs in the country whereby he wants to address the costs of living but at the same time giving into social pressures to afford the costs to live. Both issues are 2 different subject matters and give different signals to investors and labour intensive value chains. Perhaps we are just unaware of the strain of manufacturing in Kenya.

Pay increases never raise the standard of living, rather they increase inflation. It is an unending vicious loop that as a country we need to snap away from: If the cost of labour goes up, the cost of goods rises as the increase is factored in into the product price. This has various effects: employers either lay off workers or increase use of machines and other efficiencies to cut down on operating costs while foreign investors look elsewhere for cheaper labour.  Especially the case of labour intensive industries like textile, apparel and agriculture.

The Kenya Association of Manufacturers (KAM) has persistently called for wages to be pegged on productivity. An increase in productivity lowers inflation and increases purchasing power due to lower prices. This can be done through the adoption of piece-rate pay measures where workers are paid per unit to motivate them and boost production. Ceremonial wage increases on Labour Day are disastrous to industry and to the economy as a whole. Unions do not want to admit that the pay rise will lead to layoffs and even plant shutdowns, but that is the reality on the ground.

One of the The hardest hit sector is the textile and apparel industry. A walk down memory lane to the 80s shows a vibrant textile sector. It was the leading manufacturing activity in the country and ranked 5th in foreign exchange earnings. It encompassed all activities in the value addition chain, from cotton growing and ginning, to fabric and apparel manufacture. Liberalisation soon brought all this to a grinding halt due to an influx of second hand clothing, cheap un-customed goods and dumping and that led to the collapse of the industry.

To salvage the sector, the Export Processing Zone (EPZ) was set up in 1990 to attract investors and also because the industry, like agriculture is labour intensive. In 2008, 50,000 people were directly employed in 44 factories and 5 million or 1.1% of the population were indirectly supported as a result of the activities of these companies. But now a repeat collapse of the apparel sector is in the offing. The industry has taken yet another blow while it was still down on its knees recovering from the global economic downturn whereby their customers in the USA crumbled to bankruptcy. According to the latest figures, exports were down 17.9% in the industry in 2009.

The sector is beset by a myriad of problems.  Energy is a hot button issue. In Kenya, 35 percent of total production costs go to energy while in India, that cost is halved at 16 percent. Our energy costs are also higher than any other in the region. In comparison to other African countries, power here at USc 20/kwH costs about 6 times more than in Ethiopia. In Tanzania it is USc 12/kwH and in Uganda it is USc 10/kwH. Need we mention the frequent power blackouts and the quality of power that affects manufacturers with machinery/process breakdowns.

Further, there is stiff competition from Asian markets such as China, Bangladesh and India which have faster turnaround rates. Bangladesh rakes in $23 billion per annum in revenues and currently pays workers less than half of what will be paid to workers here after the pay raise. Bangladesh does not enjoy duty free entry into the USA as our country does for textiles. Kenya’s revenue is only $292 million per annum on duty free entry. This means the unit cost of production is higher in Kenya and for this reason our exports are stagnant with the duty free advantage not realized. Delays in importing inputs also affect the industry due to port congestion and poor infrastructure. Then, there is the import of second hand clothing and uncustomed goods in the domestic market creating a spiral downward effect for survival. An undying gravy train for the textile industry.

This labor day pay rise will be the straw that breaks the camel’s back for the clothing industry. The Jubilee manifesto clearly states the party’s intent to actively grow the manufacturing sector and create one million jobs through tax incentives and by encouraging foreign investment. It recognizes that the industry is hampered by high production costs. Vision 2030 cannot also be achieved without making this industry competitive. Is it not ironic then, that we are not yet 100 days into the new presidency and as we speak 2000 jobs in the clothing industry are already going to fall under the axe while a number of factories have made the decision to shut down and relocate to other countries?  

A number of measures could revive the industry if effected quickly.  A tax exemption for the next 10 years to give industries a recovery period from the global recession. This phase will allow the industry to stabilise, break even on the initial investments and build profits. The government should also reduce the work permit fee and allow EPZ to operate as authorized economic operators with a green channel for cargo both inbound and outbound . The industry can be cushioned further by state subsidy in energy costs in the short term to create the much-needed jobs that Kenyan desire.

These are the only measures that can save this sinking ship. It is your call, Mr President?

The writer is the immediate past Chairman of Kenya Association of Manufacturers and can be reached on This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Ceremonial wage increase- bitter pill to swallow for industry

MAY 1, 2013, NAIROBI:  News of another ceremonial wage increase by the President has left a bad taste in the mouth of industries which are already grappling with the high cost of doing business, Mr Polycarp Igathe, Kenya Association of Manufacturers Chairman has said.

President Uhuru Kenyatta announced a minimum wage increment of 14 percent effective immediately and said that this was in aid of ensuring improvement of cost of living.

Industry lobby groups such as KAM have argued that such decisions always bring the country back to a vicious cycle. “Any wage increments that are not based on productivity will always have negative effects on the same people that we will be trying to protect because companies will just increase the cost of the final goods and this also affects the competitiveness of Kenyan goods on the international markets,” said Mr Igathe.

Some companies shut down their operations in Kenya because of the high cost of doing business. “Not so long ago a motor assembly plant relocated to South Africa because of the high cost of doing  business in Kenya, in Eldoret a cornflour manufacturing plant relocated its plant to Zimbabwe all because of the high cost of doing business,” he said.

The textile industry which is also hard hit is likely to see many industries scale down heavily as a result of high labour costs. Said Mr Igathe: “Some textile industries have already said that they have no clue as to how they can run their businesses in Kenya anymore as they continue to face challenges competing with countries such as Bangladesh, Ethiopia, Cambodia and Lesotho whose minimum wage is much less than that of Kenya.”

The minimum wage in Bangladesh is Ksh 5719 (USD 66.5), Lesotho’s minimum wage is Ksh 4758 (USD 55,33) Ethiopia and Cambodia have a minimum wage of about Ksh 6450 (USD 75).

The manufacturing sector has strongly called for consultation with industry before announcements of such a big nature that have a potential to cripple industry are made.

Some companies in the Export Processing Zones (EPZ) have also expressed dismay at the increase. “The invitation to invest in the EPZ was under the pretext that the zone would be governed separately like a separate zone without being affected by unions and ceremonial wage increases,” a director in the textile industry said.

“We have received numerous sentiments from investors who have expressed their dissatisfaction with the Government ceremonial wage increase which renders the Kenyan labour costs highly uncompetitive,” said Mr Igathe.

The manufacturing association said that the industry supports mechanization however there is need for huge capital investment in the sector for this to be achieved. In addition this will also mean laying off some employees which also defeats the idea of creating employment for the jobless populace.

“Industries want to work with Government to provide jobs for the unemployed but at the level at which minimum salaries are currently pegged that may not be tenable. There is an urgent need for Government to meet with the private sector and discuss this further,” said Mr Igathe.

ENDS

ABOUT KAM

KAM represents 750 members in the manufacturing industry and the manufacturers arguably contribute about a quarter of the country’s gross domestic product. Over a million people are employed in the sector and millions others are supported in downstream activities.

The manufacturing sector is the country’s back borne and if this sector is not well supported the country stands to lose a lot of revenue and millions of jobs may also be at stake.

 For more information please contact:

 Paida Nyamakanga, Executive Officer, Corporate Communications. Kenya Association of Manufacturers on 0717112767 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Manufacturers welcome reforms to boost manufacturing sector

April 16, 2013, NAIROBI:  Manufacturers have welcomed the position by government to implement reforms that will boost growth in the manufacturing sector following the speech by the president at the opening of the 11^th Parliament , Ms Betty Maina, Kenya Association of Manufacturers (KAM) Chief Executive has said.

“It is quite pleasing to note that the President structured his speech at the opening of the 11^th Parliament in a way that shows that we are ready for double digit growth in our economy,” she said.

Industry has always called for improvements in the infrastructure as well as sustainable employment creation. “The president has already given us confidence that his administration has the welfare of both the population and industry at heart and this augurs well for investment in the country which is likely to result in increased foreign direct investment,” Ms Maina said.

KAM also said that industry expects Government to desist from ceremonial wage increments on Labour Day. Said she:  “Government is on the right path in terms of keeping the wage bill in check and all hopes are that we will start seeing a new direction in terms of remuneration whereby wages will be based on productivity and not the perennial ceremonial wage increases.”

Ms Maina added that education remains a key priority in supporting industry growth and capacity utilization for improved production. “It will be important that the education system in the country is revised to align with industry needs so that we can have graduates who will be able to deliver,” she said.

Industry will always have a keen interest in the operation of the devolved government system. “Industry has had many concerns over the administration of the devolved government system and it is delighting to note that devolution is also at the centre of government,” Ms Maina said.

ENDS

ABOUT KAM

KAM represents 70 members in the manufacturing industry and the manufacturers arguably contribute about a quarter of the country’s gross domestic product. Over a million people are employed in the sector and millions others are supported in downstream activities.

The manufacturing sector is the country’s back borne and if this sector is not well supported the country stands to lose a lot of revenue and millions of jobs may also be at stake.

 For more information  please contact:

Paida Nyamakanga, Executive Officer, Corporate Communications. Kenya Association of Manufacturers on 0717112767 or email  This e-mail address is being protected from spambots. You need JavaScript enabled to view it .ke

Job well done President Kibaki

 By Betty Maina

In all fairness, as President Uhuru Kenyatta takes over leadership of the country, it is only noble to say thank you to President Mwai Kibaki for a job well done in steering the ship for the last 10 years.

As the President Kenyatta takes over the mantle he should just know that he has big shoes to fit in and industry is expecting the incumbent to hit the ground running and keep up the momentum from where President Kibaki left. During President Kibaki’s tenure there was remarkable growth in turnover for the country, precisely three fold growth from Ksh 1 trillion to Ksh 3.2 trillion. Industry expects the next president to surpass the record that has already been set.

Kenya currently has a health system that it can boast of despite the few hiccups that the sector faces from time to time. As the silicon savanna, President Kibaki created an enabling environment for innovation and creativity to flow resulting in the country pioneering a first in the world in mobile money transfers and access to money for the unbanked in the whole country.

There has been a diversification of markets for Kenyan products from a heavy reliance on European markets to increased trade among African countries owing to the various trade agreements that were championed by President Kibaki’s regime. This has enabled Kenya to export three times more than the country did 10 years ago. The nation also increased value addition of its products which are exported to new markets compared to the raw products that we traditionally sold.

Infrastructure has been vastly improved with the rehabilitation of major roads such as the Thika Super Highway.

Major strides have also been registered in the agriculture system.  Kenyan tea and coffee exports soared in the last 10 years under President Kibaki’s administration. To top it up President Kibaki ends his tenure with a single digit figure for inflation and a somewhat stable rate for the shilling.

For the incoming President, the populace at large expects a lot because from President Kibaki’s reign we have witnessed that it is possible to have a better economy in Kenya. The country is endowed with a lot of resources and Kenya needs to fully exploit these. Oil discovered in  Kenya could bring a lot of good fortunes for the country but if mismanaged it could turn into a curse. The country cannot afford to have a good resource turn to bad omen.

The devolved system is here with us as well and there is no reverse gear for implementation of any part of our constitution. So Kenya has to prove its prowess in managing the various structures of government.

There are a lot of challenges that have not been resolved such as non tariff barriers to trade, improved security, environmental conservation, support for innovation and technology development, reduction of corruption fight against corruption, improvement of the transport system, energy supply, employment and regulation that promote increased production.

President Kibaki has bequeathed Kenyans with a legacy which may be passed on from generation to generation. As all eyes are set on the new Government, industry is ready to celebrate the milestone achievement of a peaceful election held after the promulgation of the new constitution by boosting productivity. It is imperative for leaders to know that with each vote comes a lot of responsibility and the nation will expect the incoming Government to deliver exceptional results.

The writer is the chief executive of Kenya Association of Manufacturers and can be reached on This e-mail address is being protected from spambots. You need JavaScript enabled to view it