Prisons to hog most of State furniture tenders

The government is set to buy the bulk of its furniture from the Prisons Department, locking out importers and raising competition among local dealers angling for a supply contract worth Sh2 billion annually.

The supply of furniture to State offices and parastatals has remained in the hands of importers, which prompted the government in March to review the procurement rules in favour of local dealers in a bid to spur labour-intensive jobs.

But most local dealers are dogged by lack of capacity to make high quality furniture in large volumes, leaving the government with the option of giving a significant part of the contract to the Prisons Department, which earns millions from sale of furniture and vehicle number plates.

“The prison industry should be targeted as a priority because of its unique nature and competency to produce quality standard furniture for the government,” the Furniture Committee at the ministry of Industrialisation SAID in a report seen by Business Daily.

Since convicts virtually work for free, prisons have negligible staff costs while other expenses like utilities are paid for by the government.

The low operational costs will give the prison department greater headroom to offer low prices to the state to which it has been supplying furniture for years before the exotic makes gained ground.

The prison department is said to have all the required capacity in terms of personnel and capital investment. Shimo la Tewa GK Prison in Mombasa, for instance, has 400 skilled and 300 semi-skilled prisoners working in furniture workshops.

The institution has over Sh30 million in capital investment.

A group of 87 furniture manufacturers have qualified for the public sector supply deals that are to start this year.

Out of a total of 130 firms surveyed, the 87 manufacturers were found capable of making high quality furniture pieces and supplying large orders, according to the report.

It is however not clear how soon the chosen firms will start supplying the government and whether they can meet all the immediate demand in the public sector.

Furniture importers may be given some leeway to supply the government in the near term if immediate demand overwhelms local manufacturers.

The report sought to generate a list of local manufacturers from whom all ministries and state agencies will be buying furniture to comply with the new policy, guaranteeing the firms demand from the State — the biggest spender in the economy.

In the approved estimates for the 2009/10 financial year, for instance, the value of furniture and general equipment purchase in the public sector stood at Sh2 billion.

In implementing the policy, the government hopes to boost employment of artisans in labour intensive furniture workshops, making it shun the exotic furniture business that is seen as creating comparatively lesser employment opportunities owing to its thin value chain structure.

Local manufacturing of furniture has been on the decline over the years as imports from Asian countries expand their market share.

Though potential beneficiaries have been identified, the standards required by the government are yet to be crafted, with the Kenya Bureau of Standards set to work on the same.

A number of challenges still beset manufacturers, including lack of formal registration and value-added tax VAT compliance without which a firm cannot qualify for state contracts.

“A special team of the ministry, Kenya Revenue Authority, Registrar of Companies, and City Council Licensing should be formed to organise free registration for local SME furniture manufacturers,” the report recommends.

Access to finance is however the biggest challenge, with a high number of manufacturers incapable of supplying large orders.

But according to Industrialisation Permanent Secretary John Mosonik, the mostly small-scale businesses should use the Sh3.8 billion revolving fund and Sh14.3 billion allocated to the Constituency Development Fund in this year’s budget to boost their production capacities.

“The public sector is huge and diverse; there will be large and small orders from ministries to local authority and provincial administration offices. Manufacturers should be able to find a niche in which they can compete effectively,” he said.