STAGNANT

Poor regulations stunt manufacturing growth

In Summary

• 60 per cent of manufacturers surveyed believe the Kenyan economy stagnated while 21 per cent believed it was growing.

• 19 per cent of surveyed manufacturers believe the economy was declining.

KAM CEO Phyllis Wakiaga
KAM CEO Phyllis Wakiaga
Image: COURTESY

Investment in manufacturing has been on a declining trend over the past two years due to a poor regulatory environment.  

The Manufacturing Barometer by the Kenya Association of Manufacturers for the January-March period shows while the sector is expected to contribute 15 per cent to the GDP by 2022, regulatory headwinds may stunt this growth.

“With the current regulatory environment and uncertainty in the trade environment, shareholders are not willing to invest; investors have been deferring their planned investments over the past two years,” the report stated.

According to the report, there is no systemic structure to encourage Foreign Direct Investment by developing free zones.

Some of the key challenges pointed out by manufacturers include delays in VAT refunds by KRA as well as clearance delays at the port leading to lost sales and high demurrage charges.

Others include high costs of raw materials due to inefficiencies at the Inland Container Depots (ICDN) and the Port as well as regulatory compliance requirements that highly increase complexity and costs as they are not aligned to global benchmarks.

“In January and February, we experienced delays in clearance of our cargo at the port and Inland Container Depot in Nairobi, affecting our production operations,” some of the manufacturers said.

According to manufacturers, the role of counties is not well detailed under the big four agenda and there is a delay in the implementation of local content and the Buy Kenya Build Kenya strategy.

Multiple charges, fees, and levies by county government on cross county trade have also dampened the manufacturing sector.

“Coordination of development strategies is a daunting task especially where implementation and funding is scattered between different Government institutions and agencies,” the report stated.

More than half of manufacturers believe Kenya’s economy stagnated between January and March.

60 per cent of manufacturers surveyed believe the Kenyan economy stagnated while 21 per cent believed it was growing. 19 per cent of surveyed manufacturers believe the economy was declining.

“Rampant corruption and increased bureaucracy in government agencies is hampering Kenya’s growth prospects,” manufacturers said.

The report shows delays in payment of suppliers by the government have created cash flow challenges from the market especially to SMEs, which trickles down to the consumers’ purchasing power.

“Due to the current cash crunch and runaway corruption, the metrics are not looking promising,” the report stated.