High production costs dampen efforts to realise Big Four Agenda

Trade PS Chris Kiptoo with KAM chairman Sachen Gudka, January 17,2019.Photo/Enos Teche
Trade PS Chris Kiptoo with KAM chairman Sachen Gudka, January 17,2019.Photo/Enos Teche

Government’s Big Four Agenda will remain a pipe dream if the cost of doing business and increased cases of corruption are not dealt with.

“If we are not competitive in our manufacturing agenda, the pillars of the Big Four Agenda begin to crumble so we must address competitiveness to experience economic transformation,” KAM Chairman Sachen Gudka said.

Gudka was speaking during the launch of the manufacturer’s Super sale festival scheduled for next month at Kasarani stadium.

He observed the need for the government to effect incentives in the sector as there is no time left to achieve its target contribution to the Gross Domestic Product. The Association has pumped Sh100 million to rally locals to adopt consumption of made in Kenya products with an aim to grow the sector.

Manufacturing contribution to the GDP has been on a declining trend from 11.8 per cent to 8.4 per cent last year. A pillar under the Big Four Agenda, the sector aims to grow its contribution to 15 per cent by 2022. This means it should grow at almost 36 per cent compounded annual growth.

According to KAM CEO Phyllis Wakiaga, the growth is impossible if foreign goods land in the country and sell at a cheaper rate due to high cost of production.

“Looking at our inbound and outbound logistics we have identified that we are 13-15 per cent above our global competitors, this should be revised to reduce the difference in competitiveness,” Wakiaga said.

Some of the logistics in question include Import Declaration Fee, the Railway Development Fee which amounts to three per cent. Others are Increased cost of transport due to the delay of containers at Inland Container Depots and distortion in the cost of raw and finished materials that make Kenya rank at a 15 per cent disadvantage compared to other players.

Last year, the Shippers Council of Eastern Africa, reported that importers have reported losses in hundreds of millions in demurrage charges as a result of delays to transport empty containers back to Mombasa.

Brand Kenya chairperson Linus Gitahi pointed out increased corruption cases are a threat to the achievement of the Big Four Agenda.

This even as Gudka revealed that flagging down graft cases, especially on illicit trade had seen the edible oils sector increase by 62 per cent.

In 2014, eight top cooking oil manufacturers raised concerns over 6,500 tonnes of substandard oils released into the market without the Kenya Bureau of Standards Certification.