Kenya Association of Manufacturers




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Africa Industrialization Day

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Statement by Betty Maina, KAM CEO- Africa Industrialization Day 

As the continent observes Africa Industrialization Day today, KAM joins the rest of the African Union in its drive towards industrial growth and economic transformation in Africa.

Manufacturers in Kenya appreciate the good work that the Government is doing in creating an enabling environment in Kenya and I believe that we can work together to create employment and reduce the cost of doing business in the country through partnerships between the public and private sector.

In this industrialization journey, we are going to ensure that we leave no one behind and include, especially, the small and medium enterprises (SME). KAM will be rolling out programmes in the coming year targeted at developing the SME sector.

Manufacturers are keen, to tap into the immense opportunities that are on the African continent. This can only be done if we address economic fundamentals which are key to ensuring that we attract both local and international investors to expand their operations in Kenya and export to the African continent and beyond.

We are grateful that our Government has embarked on an initiative to open new markets in Africa and we are hopeful that as we open the markets and sign the trade agreements these will be followed up by quick implementation that ensures that trade commences to the mutual benefit of all stakeholders.

As we intensify our efforts to create more jobs and improve efficiency in the manufacturing sector we are pleased that we have started making headway with Government on the Buy-Kenya Build Kenya initiative. We also look forward to enhancement of the policy on local content for the Buy Kenyan- Build Kenya to increase patronage of locally produced goods and services. Multinationals in the manufacturing community are also discussing a common policy on how to increase uptake of locally produced products and services in their value chains.

Manufacturers continue to support productivity based wages, increased trade on the African continent, human capital development, reducing the cost of doing business, market access issues in the East African Community and trade with European countries; continuous engagement with the manufacturing sector and promotion of small scale enterprises.

The manufacturing sector currently employs over a million people directly and millions more in downstream activities. There is a drive by the manufacturing sector to create more jobs and reduce the number of jobless people in Kenya. This is in line with the Government’s quest to create 1 million jobs in the next three years.

We may not be where we want to be as a country but we applaud efforts that we are seeing towards achieving our goals as a nation. We as industry would like to empower our local talent and are pleased that there are positive developments in the education sector where Government is aligning the education curriculum to ensure that the skills from Universities and Vocational Training Centres match industry requirements.

 KAM represents a constituency that contributes to wealth creation by value addition through the manufacture of goods that are sold in local and international markets. The over 850 companies which are members of Kenya Association of Manufacturers (KAM) are  keen on spurring economic growth and I must say that we have done the best we can to export despite the challenges that we have in the operating environment.

KAM applauds the Government in its efforts to reduce the cost of doing business. We remain grateful to Government for efforts towards reduction in the cost of power and would like to see the charges going down to below USD 0.10 per kilowatt hour as promised.

 As a country we pride ourselves with a lot of products which by quality and standards can compete anywhere in the world. There is need to protect the local industries from intellectual property right thefts and trade in counterfeit goods which has led to the closure of some industries. Manufacturers would want to see the current investments protected and also attract more investment to complement the already existing industries. To this end we urge Government to maintain policy stability to ensure that investors are not subjected to sudden policy changes.

The African market continues to be the largest destination of Kenyan goods and there is need to guard this market jealously.

Manufacturers do not want to rest on their laurels because of the huge market share that we have in these markets because we are witnessing that the competitiveness of our products is largely being threatened by the high cost of doing business in Kenya.

 As  KAM we believe in inspiring global competitiveness because we believe that for us to tap into the global markets our products need to be able to compete with our competitors from all over the world.

Industrialization will play a crucial role in increasing our exports to the global market.  It is without any doubt that countries that have placed great emphasis on industrialization the world over have done well. No country in the world has achieved prosperity without a vibrant industrial sector. This growth will have to be underpinned by a growth strategy which promotes increased resource-based product range, moving up the ladder in agro-processing and expanding exports of resource-based commodities within regional markets.

 

It is important to mention that EAC with 136 million people, COMESA with 433 million people and USA under AGOA with 400 million people and Europe with 400 million people will continue being important markets for Kenya.

 

We need to maximize our existing market access which we have already created either through entering free trade areas like COMESA or East African Community and the EAC-EU Economic Partnership Agreement- whose negotiations have been concluded and Kenya we are glad that Kenya will be back on the EU Market Access regulations with effect from January 1, 2015 although we had hoped that negotiations would have been concluded sooner.

 

For Kenya to forge ahead in increasing export trade, export diversification will be quite necessary and will require to be sustained by appropriate and coherent policies. This requires a stable macro-economic environment, provision of correct incentives for promotion of primary commodity processing and resource-based manufacturing activities and complementary policies for attracting investments.

On the EAC front, there is need to fast-track, at high level with other EAC Partner States, the realization of  a full East African Common Market or a single market and urge the Partner States to encourage free movement of  goods, services and  persons.

We still call upon the Kenyan Government to consider recapitalization of the Industrial Development Bank or another investment vehicle for financing industrialization projects in the country.

As we seek to expand the manufacturing sector, we continue to plead for a conducive operating environment. We can only be the industrial giants that we dream to be if the operating environment is friendly to our businesses.

We remain committed to working with all stakeholders  to realize a double digit growth in the economy and this calls for removing obstacles in the way which are slowing down growth and industrialization.

In conclusion, it would be a great joy for industry if a percentage of the country’s GDP could be channelled towards industrialization.  We believe that a country is as good as its industry and we can make a difference in this generation for posterity. The main message from manufacturers is that we support Industrialization and would like to continue working with all stakeholders to make Kenya an indomitable industrialized nation in Africa. 

May Africa continue to works towards industrialization!


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

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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. 

KAM hosts the KMJA Annual Conference and unveils Illicit Trade Manual

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KAM hosts the KMJA Annual Conference and unveils Illicit Trade Manual 

Kenya Association of Manufacturers (KAM) partnered with the Kenya Magistrates and Judges Association (KMJA) to host the Annual General Conference 2014 from 6th - 9th November 2014 with the theme: Securing Justice for the Economy: Implication of Judgments. 

The Chief Justice, Dr Willy Mutunga opened the conference and unveiled the 'Enforcement Manual to Combat Illicit Trade in Kenya' which will be launched by the end of the Month. “Illicit trade is very harmful to our economy. Indeed, it is a threat to our democracy as well because it tends to finance retrogressive candidates in our elections and compromise our institutions of governance and accountability–counterfeit goods such as medicine compromise our health,” said Mutunga and called for tougher measures to combat the menace. 

Ms Betty Maina, CEO of the Kenya Association of Manufacturers asked courts to be more innovative and hasten the course of justice so as to reduce the cost of doing business. "A well-functioning court system is crucial for economic growth. Well-designed laws and regulations cannot on their own ensure business rights without an institution that will, through dependable interpretation, enforce those rights and settle disputes," she said. 

There is a strong consensus that the courts have a role to play in the development of economies as the enforcer of business rights. For a country to be successful in playing its part in the global economy, it must have a credible and effective legal system made up of a comprehensive and enforceable commercial code and an independent and experienced judiciary. 

“Delays in the judicial process costs the economy heavily—delayed justice is very expensive it leads to greater costs of litigation, this fictitious litigants are known, and I think the courts should find a way of really handling them because if you look at Kenya today, a lot of things are not moving forward jst because of people who are used to litigation,” said Kenya National Chamber of Commerce and Industry Chairman Kiprono Kittony. 

Independent, fair and efficient courts are an important cornerstone for economic growth. The mission of the Kenyan Judiciary is to‘deliver justice fairly, impartially and expeditiously, promote equal access to justice, and advance local jurisprudence by upholding the rule of law.’

The key areas of discussion included in the program included the      

 Coordination for efficient administration of economic justice

 Resolution of Labour Disputes, Industrial Disputes and Taxation disputes

 Administrative quick wins for business and long term strategies

 Business ADR pilot findings- Challenges and support required from the judiciary

 Capacity needs for players in the administration of commercial justice

For the coordination for the efficient administration of justice it was proposed that a revised and operational integrated case management system needs to be put in place by the judiciary. There is also need for trainings to the judiciary on new emerging issues to enable them understand the issues e.g cyber crime. Businesses should also participate in Court Users Committees in order to identify, discuss and resolve  the challenges affecting business. 

The Labour Institutions Act, 2007 is under review to establish a Mediation, Conciliation and Arbitration Commission as a semi-autonomous agency under the Labour Ministry for purposes of resolving many of the labour disputes through alternative dispute mechanisms (ADR). There is need for this process to be expedited.

The business community proposed that the economic disputes involving Collective Bargaining Agreements to be assessed by the Economic Planning Unit (EPD) at the Labour Ministry before determination by the Court.
It would be appropriate for all economic disputes involving Collective Bargaining Agreements to be assessed by the Economic Planning Unit (EPD) at the Labour Ministry before determination by the Court. The discussions indicated the need for the awareness creation for business on the Labour Laws to ensure compliance when handling employee issues.

Administrative quick wins for business and long-term strategies
i. Cure case backlog by adhering to Order 17 of the Civil Procedure Act and implement the bring up system in our stations

ii. The Judicial officers should make it a habit to take stock, visit the registries frequently and step in and control the number of cases entering the system in the stations.

iii. Automate, integrate and utilize ICT as well as develop reliable infrastructure to support record keeping in our stations.

iv. The judicial officers need to communicate to the court users by improving on the legal language and the nature of approaching the court in the form of pleadings, petitions, applications and overall interpretations is foreign to the court users. There is need for us to build the capacity of the court users including the lawyers.

v. Review the costs of obtaining justice in Kenya. Case filling costs should not lead to investors shying away from accessing the justice system. 

vi. Screening of cases at the time of registration under the principle of fast track and multi-track as provided for in the Civil Procedure rules. 

vii. Increasing individual responsibility for completing registry tasks and processes

viii. Mandatory compliance with order 11 of CPR.

ix. Establishment of mobile courts particularly in marginalised and other counties for easy access of justice. 

x. Monitoring and tracking file movement.

xi. Record management systems by classifying the registries into the following sub-registries:

 Active case file management

 Semi-active case file management

 Re-engineer and reform execution and enforcement of judgments

 We need a fresh approach and a new way of thinking: - put the public first and collaborate and coordinate with stakeholders.

Some resolutions from the conference: 
KMJA resolved to
1.  Partner with NCAJ and other stakeholders in the process of sensitization and implementation of the Illicit Trade Manual.
2. ›To incorporate the Business Community into the Court Users Committee’s across the Country.
3. To partner with the Business Community to ensure that there is sensitization on the Principle of respect for the rule of law.




Some material from the Conference

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High Fees chasing Investors away, county officials told

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October 14, 2014, Machakos: High County fees and poor revenue collection methods are keeping investors away from the counties, county trade executives and finance managers were told in a two-day forum held by the Commission for Revenue Allocation (CRA) in Machakos today.  The officials were drawn from over 30 counties and are responsible for drawing up county finance bills. CRA Chairman, Mr. Micah Cheserem, called for transparency and accountability. ”Can you demonstrate the services you are giving for this taxes?” he asked the participants and also urged them to find a forum where they harmonise some of the common charges to business.

Article 209(5) of the constitution which covers taxation and other revenue raising powers of a county states that this power should not be exercised in a way that prejudices the national economic policies or economic activities across county boundaries and international mobility of good services and labour. But there seems to be confusion in the counties regarding trade licences, single business permits and cess taxes. Trade officials were asked to use the model finance law which exists and covers all revenue raising mechanisms in counties and only allows collection of fees for services not taxes. They were also encouraged to create policies that create a conducive working environment for private sector.

Ms. Betty Maina, CEO of the Kenya Association of Manufacturers, asked participants to improve the methods of revenue collection as it was becoming harmful to business. “We would like to repair this adversarial relationship as a result of your revenue raising measures. If you open a truck carrying flowers to count the number of boxes for revenues collection purposes, you have destroyed that whole consignment because these trucks are not meant to be opened. Revenue collection has to be done in a manner that does not hurt business,” she said.

She also called for a reduction in the multiple costs to business raised by devolution. “The annual tax bill of a local company has risen from Kshs. 5 million to 50 million if the company factors in 2014 county charges,” she added.

Counties were also asked to improve public participation by involving the business community right from the start of drawing up the finance bills and posting the bills in good time on their websites so that people have time to read and respond.


 

CRA holds Doing Business Forum for County Trade and Finance leaders

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CRA holds Doing Business Forum for County Trade and Finance leaders

CRA CEO Mr. Micah Cheserem yesterday called on county governments to be transparent and show how they were using fees to serve the Business community "Can you demonstrate the services you are giving for these taxes?" he asked the County Executives for Trade and Finance Leaders drawn from the 30 counties present for a 2 day forum held at Maanzoni Lodge which ends today (14 Oct).

 

Kilifi public rejects draft Finance Bill

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Kilifi county on September 4th called for a public consultative meeting to get endorsement of the public on the draft finance bill. The meeting started at 10.30am and the attendance was impressive with close to 300 people comprising of mainly BMOs and farmer organisations from Mtwapa, Majengo and Kikambala. Self representation from locally practicing doctors, religious leaders and also well-informed youth attended. Interestingly no political representative attended. Kilifi County Government was represented by Ms. Martha from the Kilifi Revenue Collection office and her counterparts from Mtwapa office. She briefly explained the role of the Finance Bill in project funding and the importance of public consultations. The County Government of Kilifi had earlier on sought public views on the prioritization of development projects and those views were recorded in the County Development Integrated Development Plan (CIDP) available on the County website. By referring to this document, the county government had taken up specific development projects in the past financial year but the Constitution required them to consult with the public every year prior to allocating funds for different projects. 

The County had delayed in submitting their budget proposal to Central Government but were allowed an extra 90 days which expires today on 30th of September. They therefore required public endorsement so as to submit the budget within the period. 

Public Response/ Request

Different members of public made the following requests/observations;

1. Why wasn't the draft Finance Bill circulated/ posted on website/ distributed to the public 14 days prior to consultations as per the constitution of Kenya?
2. Why was the invite to the public forum published on the Saturday Nation (30th August 2014) and announced through the public system to limited areas only hours prior to the forum?
3. Seeing as the Bill consisted of 42 printed pages, how was the public supposed to review such a document and ratify within 8 hours?
4. Where were the previous years accounts on revenue collected for accountability and transparency?
5. What services had the county government offered to the community to warrant introduction of such fees as bus park/stadium/toilet fees which do not exist in Mtwapa?
6. How come the draft Finance Bill lacked a comparative column showing current fees charged against proposed fees as is the norm?

Having noted the above the county representatives were asked to step out of the hall for a short while to allow the public to consult and agree on the way forward. 

During the Community meeting, it emerged that;

1. The Chief Revenue Officer of Kilifi had met 35 ward representatives two days earlier hoping to get a buy in from them for the draft Bill to sail through the public forums.
2. The 35 ward representatives however requested the harmonization of the current charges and  the proposed ones be done based on the average charges of all wards in the county as a condition for endorsing the draft.
3. The Mtwapa business community had presented a three page memorandum to H. E. the governor of Kilifi on how to improve service delivery and the governor requested for 14 days to respond the the memorandum. How then would he expect the public to read and ratify a 42 page document in eight hours.
4. There are no social amenities in some towns in Kilifi County yet the county government has been charging fees on the same.
5. Prior to ratifying the circulated draft, the county government should have provided accounts for collections made in the last financial year so as to ensure transparency since there is no need for 80 per cent seepage of revenue due to corrupt officers which is an additional cost to the business community.
6. A strategic plan on revenue collection utilization is yet to be presented to the community for scrutiny.  Why should they pay more to a bottomless pit, so to speak.

CONCLUSION

The county representatives were called into the Hall and informed as follows;
1. The community shall not accept any presentation or discussion from the county representatives regarding the draft Bill since they had not read it.
2. The community through their leaders shall present a memorandum to the Governor through his representatives at the same Makio Hall on Wednesday 10th September 2014 at 9 am.
3. Before Wednesday, the correct (with a comparison column) draft bill should be posted online and distributed to the Kilifi South community for review,    otherwise a memo shall be written to the Treasury citing a lack of consultations hence non-endorsement of the draft Bill.
4. A final warning was given to the county government of Kilifi with regards to mediocre presentation to the people of Kilifi South. Acceptable timelines should be observed when consultations are done otherwise stern action shall be taken by them.

Though heated, the power of an informed representation from the community was felt and the county representatives apologized to them. 

It was agreed that the meeting shall take place on Wednesday, 10th September 2014. The Salt Sub-sector requested 14 days to present their memorandum to the county government which was approved. 

There being no further consultations the forum ended.

CS Ngilu assures investors that the Law will protect their land interests in the country

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CS Ngilu assures investors that the Law will protect their land interests in the country

September 29, 2014, Nairobi : The Cabinet Secretary for the Ministry of Lands, Urban Housing and Urban Development  today (September 29) assured foreign investors in the country that Article 65 of the Constitution will not impact negatively on their land ownership once their leases run out, a top official of Kenya Association of Manufacturers has said.  There had been a concern  by the investors has been the stipulation that non citizens can only hold land leases with tenure of 99 year. The assurance came during a meeting held today after the Kenya Association of Manufacturers (KAM) paid her a courtesy call. are therefore concerned whether these parcels of land qualify for automatic renewal after expiry.


Section 13 of the Land Act 2012, states that upon expiry of the lease land shall be offered to the immediate past holder if the land is not required by the national or county government. Mrs. Ngilu explained that land should not be held for speculation purposes and would only be  repossessed if it was not being put to use. She also clarified that the Chief Land Registrar will now sign leases and that the County government cannot register titles, they can only give land for use implying that the national government would have a role to play in the transfer of land upon the expiry of a lease. She further promised to safeguard the interests of investors with regard to land.  “We are going through some changes and will work on amendments to the laws which are inconsistent with the Constitution.  They were passed in a hurry because there was a deadline but we have now put a team together to do these amendments,” she said.


The Cabinet Secretary also said that the ministry had developed an automated system of printing leases and they are currently keying them in into the system and verifying their authenticity.. About 17,000 leases are pending and should be done within the next 3 months. Companies that have done subdivisions and developed properties that they now want to dispose will soon be able to do this as the process is almost complete. The ministry has also put in place a system to allow Kenyans to do a search online.  

The manufacturers also asked her to look into the system of paying land raters as they are not able to get confirmations of payment and also to look into the problem of zoning as there were difficulties. “Conflict is arising from a lack of respect of zoning and there are many invasions of land originally set aside for manufacturing purposes,” said Ms. Betty Maina, the CEO of KAM calling for a solution that would not force evictions.

She cited quarry factories off mlolongo that had to be relocated due to residential settlements which conflict with quarrying activities and factories in Athi River area which spill over to Kitengela, a densely populated residential area. Similar situations exist at the coast and especially where there are salt mining activities.  

Mrs. Ngilu called for proper physical planning and said that there was need for the ministry to identify and designate land which can be used for manufacturing and other important sectors in order to be in a  position to advise government at all levels. Banks which had been set aside has been depleted since the 1990s and current land banks are being converted for other purposes through the change of user process.


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