Last year, the Export Processing Zones contributed up to Sh40 billion in exports earning to Kenya. This may not match up to tea, coffee or tourism earnings but it made up to 10 per cent of the country's total exports. The zones, which have been in existence since 1990, have grown to 47 zones with 91 operational enterprises employing up to 36,000 people.
CYRILLE NABUTOLA, CEO of the Export Processing Zones Authority has been at the helm of the parastatal since November last year. He says aggressive plans are on to push the performance.
In an interview with the Star he details on how they plan to achieve this.
The EPZ program last year contributed 10 per cent of Kenya's exports? Is this meeting the original purpose of the Act? Can the performance be improved?
Absolutely, in terms of achievements,the EPZs have done extremely well. The targeting that you do year to year have to be ambitious. I know since 1990 we have an average good employment levels of between 35 000 to 40 000, which is good. We have contributed up to 12 per cent of the total per exports, contributed to up to 2-3 per cent of the GDP of the country.
We need to decide that EPZs are a focal point of development and everybody will be driven by that. Mauritius, China, Korea, Dubai have all done that.
What are specific targets do you plan to meet in the shot term?
First, we want to Find out from all enterprises that are here what we can do for them to accelerate their employment levels, their production levels etc. Our role will be to ensure that we deliver those expectations. If that is going to give us double, triple or four times the numbers they can employ we shall be achieving something. The Cabinet Secretary himself has said we at least try and achieve 500,000 jobs in the next 24 months. I agree with the CS on that ambitious target.
So the next stage is to identify who are going to attract to invest here on a larger scale to produce that number.
What is included in the EPZA 5 year strategic plan?
We are just about to go in to strategic planning session for the next 5 years. During this we will consider things such as what sort of technologies we need to bring to accelerate efficiency in the zones.
How to go on with the devolution of our country. We aim to find out the competitive advantages each of the counties have and we take advantage.
For example we hear of goat meat and honey production in Baringo, why can't that be packaged and exported, the market in the world for honey cannot be exhausted. We have all these energy problems yet we hear of coal energy somewhere in Kitui, what is it that we can do in terms of encouraging people to take advantage of the cheap energy there.
We need to think outside the box for us to take advantage of the competitive edge of each of those counties and make a difference to the people there by offering an opportunity for investment and creating the necessary market links.
The firms in EPZ have been aggressively pushing for a review of the law that only allows them to sell only 20 per cent of their produce in the domestic market. Why is this?
The law as it stands allow the 20 per cent to be sold in domestic market, of course upon payment of relevant taxes and duties.
But most of the products that are produced in the EPZs are very unique. So we have been having instances where Kenyans go overseas and find these 'made in Kenya' premium products , so they come back and complain that they are not allowed to enjoy the same kind of products. So this is mostly driven by demand from consumers. This is why we are hoping for this increased flexibility so we can sell domestically where the market allow.
But isn't this going to give EPZ firms an unfair advantage over other manufacturers who do not enjoy similar incentives?
We are actually not in competition with the local manufacturers. Most of the products here are not similar to what the other manufacturers are producing and selling in the market.
There have been reports of some EPZ operators passing their goods illegally in to the domestic market. What is your comment of this? Have you dealt with such cases?
There was an isolated case where a truck on its way to the port was hijacked and the goods found their way to the local market. But looking at the kind of production here, most of the enterprises make goods on per-orders. Some of them are private labels. Sometimes the producers are often so pressured that they cannot afford to sell anything to the local market. So I do not know where these reports come from.
How will the EAC market integration impact on the operations of EPZs?
There are companies that came to Kenya even before the regional integration started and they came knowing they are exporting to Tanzania, Uganda, Burundi, Rwanda markets. But then along the way, the Common Market protocol was signed which states that the integrated area is one domestic market. So what you are telling that investor is that they can only sell to this region only 20 per cent of the produce yet they have already invested billions to service these export markets.
The region has also expanded so much, initially it was only Uganda and Tanzania but now Sudan, Somalia, DRC, Ethiopia, Djibouti want to join alongside Rwanda and Burundi. The domestic market is growing bigger and bigger and export market diminishing. So investors may get discouraged and go to elsewhere. So it goes back to the request to allow special economic zones to be allowed to sell more than 20 per cent to the domestic market.
The cost of doing business in Kenya has been rated too high. What have been your worst nightmare?
The key problem has been energy. We are looking at solutions for that. Government is very determined to bringing the energy costs down, that is why it is looking in to oil, geothermal, coal, wind and all these options. Here at the zones, we are looking at how to have our own production of energy through solar to supply our own enterprises with a little cheaper energy and if we get some surplus of that then we can put it in the national grid and earn some money.
The board has already approved the policy, we looking at a few people to invest, we have already interviewed them, we are looking at the possibility of how they can come and look at the place to understand the technical details.
Has the recent labour unrests in the country affected firms operating in the special zones? And how do you think this can be resolved?
The matter investors raise here is that maybe labour costs is a relative term. We look at how productivity could be increased with more considerations of how to get these individuals trained better- to enhance their skill levels. For instance an worker in another country could be producing 100 pieces and a worker here only does 6 pieces. So we need to look at why our productivity is low. We are surveying various industries to understand whether what we pay for in terms of the labour cost is equal to the productivity. And if we find that there is a gap, then we do not say we are underpaying, we say that we are not producing enough to fit that cost.
Where does the EPZs stand on the AGOA partnership?
We (African countries) are supposed to get together from tomorrow (Aug 9) for a review of whether we have achieved the expectations. If we have met the expectations, most likely they will renew it for the longer term, if we haven't then we are supposed to find out ways we can address those drawbacks to be able to fit in the AGOA program.
About the two year review intervals, my view is, the moment you talk to people about terms such as two or three years, it puts a strain on the people that plan. Planning is supposed to be longterm, when you talk about short term measures like that people do not invest in huge capital investment and then expect the return in three years. You ought to talk to them about long sustainable periods like 10,15 or even a longer term. I know that may create an opportunity for people to be lazy, but that will certainly not be the case with us. Certainty is important in investment. The moment an investor is not sure, it creates the situation where some start then after a short period stop.
Is the government funding for EPZs sufficient?
Government has always funded us, but sometimes we may emphasize on development and then the funding does not go with that plan. But as we make our strategic plan we are thinking how do we use our assets so that we become self sustained. For me that is the challenge, not so much crying about government allocation. What do we do to become independent and in fact end up in a position where we give the exchequer a cheque.