Tobias Alando, who is a month old as the chief executive officer of the Kenya Association of Manufacturers (KAM), faces the daunting task of turning around the fortunes of an economic sector in dire straits.
The latest data by the Kenya National Bureau of Statistics (KNBS) shows that the sector growth slowed to 2.3 percent in the quarter to September 2024, down from 2.8 percent the previous year. Industrialists cite the recent wave of punitive tax measures and high costs of production for the dismal performance.
He spoke on the issues affecting the sector and highlighted what should be done to course-correct.
It’s not been blissful because the issues raised keep evolving yet we need to support the manufacturing sector. So, I deal with them as they come.
CBK surveys point to weak demand in the sector. What could be the issue?
Our Quarter 4 Barometer study indeed confirms that there is a low demand for all products because the buying power of the consumer has generally reduced, probably attributable to the tax burden.
If, for instance, you look at the December statistics on how people purchased and consumed items, the volume has reduced compared to the previous year. It shows that people do not have cash to purchase what they normally purchase.’
What are the sentiments of your members (manufacturers)?
Apart from the unpredictable regulatory and tax policy environment, there is also the general issue of uncompetitiveness given the fact that we are competing against cheap imports.
The consumers' preference changes based on cost, often favouring what is cheaper. So, being an open market economy, we are competing against imports from countries such as China and India where the cost is low.
In such context, it is not surprising that we are losing our market share to imports and that is why we are having talks with the government and saying, why don’t you impose import duties on certain items that can be produced locally.
By doing that, the government will create employment here and sustain the manufacturing sector, ultimately generating more revenue.
Even with imposed taxes on imports, purchasing power may still remain low as people insist that there is still no money in their pockets. What say you?
The way to go about it is through a two-front perspective; you of course protect the local manufacturer when imposing duty on imports, but at the same time ensure that the production cost is reduced through a predictable tax environment and true reduction in power cost.
Kenya is about 70 percent more expensive in terms of power cost compared to South Africa, Uganda and Tanzania. Our power may be more reliable but it is still expensive.
This two-front perspective will ensure that we are creating jobs in the country and also paying local taxes. It is a win for the government and a win for the citizens.
KAM has been trying to have a conversation with the government about a stimulus programme. What is the status of the talks?
We looked at the business environment as a whole and realised that there are too many policies, regulations, and charges by the ministry departments and agencies.
The government does not have a cockpit view of all the fees and charges that are imposed on businesses and that means there is no clear understanding.
We are doing a review and assessment in the manufacturing sector to establish all the charges and whether they are necessary. Based on the study, we will get a document that we can present to the government and tell them ‘you are charging us all these duplicated fees and charges that are not necessary.
If we compare with our counterparts in Uganda and Tanzania, they do not have all these charges, yet we are competing in the same market.’
We are addressing the issues around regulations, taxes, and policies. We are not saying that we do not want to pay taxes, we just want to pay the right taxes, in comparison with our counterparts and remain competitive, not to close our industries.
The study report should be out in a month. It will be presented to the government and all other stakeholders.
What would you say is the 2025 outlook for the sector?
From where I stand, if we agree that we need to address some of those challenges to remain competitive, I’m seeing a very positive outlook in terms of the growth of the manufacturing sector.
Remember two years ago we met the President and said that we want to increase the gross domestic product (GDP) contribution of the manufacturing sector from the current 7.6 percent to 20 percent by 2030. It’s an ambitious dream but we need to start somewhere.
