Local firms yet to enjoy supply rule in spite of Uhuru’s orders

President Uhuru Kenyatta with First Lady Margaret Kenyatta during Madaraka Day celebrations at Nyayo Stadium on June 1, 2015. Mr Kenyatta announced during the 2015 Madaraka Day celebrations a government policy to prioritise Kenyan manufactured goods over cheap imports but the policy has yet to be effected a year later. PHOTO | BILLY MUTAI | NATION MEDIA GROUP 

In Summary

• Presidents pronouncement made last year yet to be implemented due to lack of policy guidelines.
• The legal lacuna has left local manufacturers battling an influx of cheap imports mainly from China and India.
• Policies needed to operationalise this “Buy Kenya, Build Kenya” directive are yet to be finalised.

By EDWIN OKOTH
More by this Author

The excitement caused by President Uhuru Kenyatta’s declaration that the government would prioritise locally manufactured goods to boost productivity has faded, just one year after.

The June 1, 2015 Madaraka Day pronouncement seemed like a holiday gift to a sector subdued by cheap imports, but it is yet to be implemented due to lack of policy guidelines.

“To secure opportunity and productivity, we will enforce policies to ensure that we increase consumption of goods and services produced locally. In the new financial year, we shall strictly ensure that, as a minimum, 40 per cent of all goods and services procured by the government at all levels are locally produced,” he said.

The legal lacuna has left local manufacturers battling an influx of cheap imports mainly from China and India.

Indeed, even public entities put on notice by Treasury Cabinet Secretary Henry Rotich in his 2015/2016 budget proposals to immediately comply with the 40 per cent rule are still not obliged to do so.

POLICY GUIDANCE

Policies needed to operationalise this “Buy Kenya, Build Kenya” directive are yet to be finalised.

Kenya Association of Manufacturers chief executive Phyllis Wakiaga said that, unlike the order setting aside tenders for the youth and women, this one is yet to get policy guidance and monitoring formula to track its practicality.

“The directive was made in good faith by the President, but without policies to enforce it and a monitoring framework, government departments have not been compelled to follow it. The draft policy done by the Industrialisation Ministry was to be presented to the Cabinet last year.

Turnkey tenders are still being awarded to contractors who are not obliged to procure locally, while external manufacturers are preferred over local industries for international tenders,” Ms Wakiaga said.

Efforts to get a response on the matter from Industrialisation Cabinet Secretary Adan Mohamed were unsuccessful.

But the CS had admitted in July that more than 60 per cent of materials used in the multi-billion-shilling Standard Gauge Railway project were imported, citing failure by local firms to meet the set standards.

“We have not met the minimum 40 per cent threshold. We expect this to come gradually as we proceed with the project,” Mr Mohamed said after meeting SGR stakeholders.

'LOW QUALITY'

But Ms Wakiaga contested the “low quality” accusation in a telephone interview on Friday, saying Kenyan firms have proved their ability to meet prescribed standards, as was the case with cement supply to the SGR project.

She said the government should involve local manufacturers at the onset of each mega project to agree on the opportunities available and the required standard.

China, which is engaged in many projects in Kenya, will continue to enjoy both service provision and material supply as long as these shortfalls are not addressed.

A World Bank Policy Research Working paper titled Deal or no Deal; Strictly Business for China in Kenya? released on Thursday said Kenya, which has largely contracted Chinese firms for infrastructure projects, will continue to face an influx of imports.

“Chinese firms import 59 per cent of goods from their home country and an additional seven per cent indirectly from Kenyan suppliers. Chinese goods are much cheaper than local goods, and firms find it more profitable to import the inputs,” the report noted.

According to East African Cables CEO Peter Arina, local firms have benefited only marginally from development projects, contributing less than 10 per cent of the local demand. This has made them operate below capacity and minimise job openings.

Kenya’s manufacturing sector accounts for 10 per cent of GDP, half of what the government wants to meet in the Vision 2030 programme.

The World Bank says Kenya will need to promote more foreign direct investment (FDI) in manufacturing, improve labour productivity and infrastructure, lower transport costs, and lighten the regulatory burden of trade to boost exports.

Cheap Chinese commodities continue to dominate business segments in Kenya, including second-hand clothing and shoe markets, and are a threat to the country’s industrialisation plan.