Kenya has been ranked among the top three markets in Africa for haircare products, amid industry concerns that a new tariff would limit market access.
A report this month by Technavio on the haircare market in Africa projects the haircare market in the continent will increase to Sh118.60 billion ($994.06 million) by 2026 from Sh39.9 billion ($334.5 million) in 2019.
The market is also expected to expand at a compound annual growth rate of 6.35 percent over the period.
Kenya, Nigeria and South Africa are listed among the key markets for haircare driven by rising start-ups by mostly women entrepreneurs.
Haco Industries, a producer of haircare products in Kenya, however, notes that new fees and regulations could hinder this growth and cut competitiveness with imported products as it targets the growing population of the East African Community (EAC) and the African Continental Free Trade Area.
A transition is underway for the registration of Class Two cosmetics products under the Pharmacy and Poisons Board (PPB) instead of the Kenya Bureau of Standards (Kebs).
The directive was set for implementation in June, however, it was delayed after the Kenya Association of Manufacturers opposed the move.
“Through the standards harmonisation process spearheaded by Kebs, products manufactured in Kenya have free access to the entire EAC market. PPB does not have a similar program to allow the free movement of goods within the EAC,” said Haco Industries managing director Marya-Ann Musangi. “The net effect is that Kenyan cosmetics will be locked out of the EAC market.”
The Kebs manages imports through the Pre-Export Verification of Conformity (PVOC) system ensuring all imports meet certain standards.
“Additionally, Kebs is the only regulator with access to the port. PPB does not have an equivalent system. PPB regulating these products will lead to a further influx of imported products because of the reduced barriers to entry,” added Ms Musangi.
She said Keb’s presence at Customs has ensured that imports are regulated at entry, allowing locally made cosmetics to compete fairly at the regional level.
“Regulation by PPB shall impact businesses directly, as there is no common standard unlike the EAC standard recognised through regulation by Kebs. This will also impact the competitiveness of Kenyan cosmetics at the regional level,” she said.
Haco said Kebs has previously regulated the cosmetics sector without a hitch, presenting a quicker turnaround time on tests.
“It has developed standards for Class Two cosmetics, for instance, antibacterial soap standards. PPB, on the other hand, will be required to conduct tests away from their officers, or through contracted services. This may cause a delay in the approval process. Currently, the turnaround time for the registration of pharmaceuticals is one to two years. This is untenable for the fast-moving consumer goods space.”
According to Technavio, the haircare market in Africa is in the fragmentation with few players.
The growth of the haircare market in Kenya has seen Haco Industries move from contract manufacturing with global entities into a fully-fledged local manufacturing company.
Existing global market vendors in Kenya include Amka Products, Johnson and Johnson, L’Oreal SA, Revlon, Estee Lauder, Procter and Gamble Co, and Unilever PLC among others, intensifying competition for local players.
The market growth is expected to change if the market structure changes due to industry consolidation or if some vendors exit the market, said the Technavio report.
The cosmetics, personal care and hygiene sector, however, faced a massive disruption from the pandemic due to supply chain constraints and do-it-yourself (DIY) culture, pushing consumers to tilt towards caring for their hair and transition to natural hair.
The industry has also recorded demand for natural products under changing consumer preferences, however, manufacturers say the Kenyan industry lack standards for regulated use of claims raised in the class two cosmetics proposal.
“Natural cosmetic products are on the increase in the country and globally and largely rely on claims. Developing standards for them will ensure a better-regulated use of claims/promises raised in the class two cosmetics proposal,” Ms Musangi.
“Claims or promises serve to increase innovation in the cosmetic sub-sector. Limiting the use of claims kills innovation among businesses.”
The excise rate increase on cosmetics and beauty products is also expected to impact the cosmetics and personal care sector, rising the costs of the products.
The Finance ministry early this year targeted cosmetic and beauty products as well as jewellery with new taxes, increasing the excise duty to 15 percent from 10 percent currently in a move to raise an additional Sh50.4 billion for the year starting July under Finance Act 2022.