INDUSTRIAL GROWTH

The year that was in the manufacturing sector

Industries have been affected by the pandemic since last year.

In Summary

•The Kenya Association of Manufacturers remains keen on the growth of the sector post-Covid.

•Manufacturing is among the pillars of President Uhuru’s Big 4 Agenda.

Kenya Association of Manufacturers CEO Phyllis Wakiaga during an interview with The Star at the association's offices in Nairobi/DOUGLAS OKIDDY
Kenya Association of Manufacturers CEO Phyllis Wakiaga during an interview with The Star at the association's offices in Nairobi/DOUGLAS OKIDDY

After a shut down of economies in 2020 due to the Covid-19 pandemic, this year gave hope to Kenya among countries that had a positive growth projection. Manufacturing, one of the pillars of the ‘Big Four Agenda’ is among sectors slowly recovering from the impact of the pandemic. The Star’s Martin Mwita Spoke to the Kenya Association of Manufacturers CEO Phyllis Wakiaga on the year 2021 and prospects of 2022. 

How would you define the year 2021?

2021 was a recovery year after a challenging 2020 when the Covid-19 pandemic affected economies across the globe. We did see with the vaccine coming into place, some of the activities resume, we saw the curfews being lifted, the movement was restored so 2021 was more of a recovery year. The industry started to pick up from the slowdown that we had experienced last year.

What are some of the biggest challenges you faced this year?

The biggest challenge this year has been the supply-chain constraints, which still continues to be a challenge because a lot of the shipping lines prefer to ship to other economies where they are making higher returns. There are delays in the shipment of raw materials and exports. The cost of shipping has also gone up, production costs and eventually the prices of goods to factor in the costs. The other thing is the tax policy changes. At the onset of the pandemic, the government announced a number of tax measures that cushioned the economy but these were done away with by end of 2020. This year, business continued operating within the pandemic challenges without any relief. There was also the introduction of certain taxes such as excise on some goods that affected costs and prices. The regulatory environment has also been a challenge. There is also duplication of taxes, fees, and levies by the national and county governments. 

Did Covid bring any changes in terms of priorities for industries?

The focus of the industry has had to shift. Before the focus was on growth, the opening of new markets but during the Covid period, we saw industries focusing on managing their cash-flows, ensuring they do their best to retain employees, and prioritizing the health of emp0loyees to ensure the working places are in line with the Covid protocols.

What are some of the opportunities that came with Covid? 

One of the opportunities is the manufacturing of PPEs. We have almost 100 companies manufacturing either hygiene products, masks or other PPEs with the demand still high. Another sector is furniture. A lot of people would import fittings from abroad but this is now being sourced locally as a result of the disruption on the global supply chain. This is something we expect to continue.

What is the state of manufacturing in other major towns/counties away from Nairobi?

If you look at all 47 counties, each of them has a product that they are producing or can produce or even add value. This gives room for value addition and growth of manufacturing in counties. There is a lot of activities in Kiambu, Kajiado, Machakos, Kilifi, Murang’a, Nakuru, Kisumu, Kisii , Kakamega and Mombasa. The main thing is how do we create an attractive environment for industries to set up in the counties, such as simplifying levies and giving incentives like setting aside serviced land to attract investments. We have seven regional offices and our ambition is to see that we stimulate the growth of industries beyond Nairobi. 

What is your take on the cost of power, noting the government has in recent months been keen on the reduction of tariffs?

The cost of power is one of the enablers of the manufacturing sector. When the PPA task force report came out, the President did commit to a reduction of 33 percent of the current tariff. That is something we are still looking forward to. It will see a reduction in the cost of production and will attract sectors that are high consumers of electricity such as steel. We are keen to see the government get to the levels it has committed to.

Has the lifting of the curfew had any impact on the sector? 

Yes, the easing of protocols has had an impact because last year a number of sectors that take up manufactured goods were affected by Covid-19. In the education sector for example schools were closed for some time which affected people who produce uniforms, stationery, and other products. Food supply to these institutions was also affected. The other industry is hospitality where travel restrictions affected the tourism industry which is a big consumer of manufactured goods. The re-opening of the economy, schools going back, hotels re-opening, and other services have increased the uptake of manufactured goods.

Lessons learned during the pandemic?

What we have learned as businesses is that we have to be resilient and flexible to change because the reality is, things will keep on changing and our business models should be such that they are able to absorb different types of shocks. Covid is one of them but there are many other challenges and changes that require flexibility. We have also learned the need to embrace technology. Before March 2020, many of us had never done a zoom meeting or had a webinar but Covid saw almost everyone embrace these platforms for continuity. 

Disruption of international trade created an opportunity for intra-EAC trade. Are there any challenges? 

Yes. We still have Non-Tariff Barriers where we have agreed on positions as EAC but some states fail to implement. An example is the failure to recognise standardization marks by the Partner States. Some states also have issues with the rule of origin which has seen them deny products from the region preferential treatment.

Going into 2022, what is your expectation?

It is an election year and our expectation is we hold a peaceful election even as we have dialogue around the election; we have it in a cordial manner and maintain the temperatures during the period. Our ambition is to see that we don’t slow down every five years because of elections. We have already slowed down in the past two years because of Covid. We are really urging all political players, institutions mandated to manage the election process to do it in a transparent manner, follow the law so that we have a free and fair election. In the end of it, we have to continue growing the economy.