Companies

PS terms Cadbury, Eveready closures a wake-up call

songa

Industrialisation principal secretary Wilson Songa has described factory closures by Eveready East Africa and Cadbury Kenya as worrying, saying they should serve as a wake-up call to the government. FILE PHOTO | DIANA NGILA |

Industrialisation principal secretary Wilson Songa has described factory closures by Eveready East Africa and Cadbury Kenya as worrying, saying they should serve as a wake-up call to the government.

The PS said in an interview Thursday that the State would accelerate investments in cheaper power and reinforcement of the anti-counterfeit unit to forestall similar closures.

Chocolate maker Cadbury announced on Tuesday it would cease local manufacturing by November, retaining only its marketing and distribution arms that will rely on supplies from Egypt.

READ: Cadbury to shut Nairobi factory at end of month

Battery maker Eveready on Monday announced that low sales due to illegal and cheap battery imports had forced it to shut its Nakuru plant, again in favour of importing products from Energizer Egypt.

READ: Eveready opts for Egypt imports as high costs bite

“It is really unfortunate that the two companies had to shut down their factories,” Mr Songa, who is in Naivasha holding talks with Chinese investors, told the Business Daily on phone.

“We have taken note of their grievances through their associations and the government is addressing them.”

Cadbury and Energizer join a growing list of international firms that have in recent years called time on their Kenyan factories mainly due to high operating costs.

Multinationals like Reckitt Benckiser, Procter and Gamble and Colgate Palmolive are among companies that have closed their plants, opting to serve the local market by importing from low-cost manufacturing hubs.

Egypt, which spent about Sh1.76 trillion on energy subsidies in the fiscal year that ended on June 30, has emerged as a top source of imports for many of the firms exiting Kenya.

Both Energizer and Cadbury this week selected Egypt as their new source of products, highlighting the growing competition for investments from the northern Africa state.

“Power and labour costs in Egypt still remain way lower than in Kenya,” said Jackson Mutua, the Eveready East Africa managing director.

The factory closures by multinational companies should especially worrying to the government since it comes at a time when it the country has already lost the regional battle for foreign direct investments (FDI).

The United Nations Conference on Trade and Development (UNCTAD) World Investment Report 2014 says FDI inflows in 2013 almost doubled to Sh45.18 billion from Sh22.7 billion the previous year.

Tanzania, however, recorded the highest inflows at Sh162.8 billion followed by Uganda at Sh99.7 billion and Ethiopia’s Sh82.9 billion.

“If we are to maintain our competitive edge and attract investors to set up base locally, then we need to improve things like cost of power and improve the infrastructure,” said Mr Songa.

Cadbury, through its US-based parent company Mondelez International, said it will maintain Kenya as its regional hub as it seek to create “a more commercially focused business in East Africa”.

“Mondelez will focus its resources on scale manufacturing facilities where it can generate greater efficiencies, to re-invest in growth,” said Navisha Bechan-Sewkuran, the corporate and government affairs lead for Mondelez in Southern, Central and Eastern Africa.