Ten-point agenda to increase Jobs...pg 16

Industrialisation is the Future of Africa...pg 27

TodayA Magazine of the Kenya Association of Manufacturers

Stamping Out the Menace

October-November Issue

EDITORIAL

3Today

The narrative about counterfeits has for years been about big industries losing markets, millions of shillings and jobs to rogue manufacturers and their local agents.

On the food chain are corrupt customs offi-cials, policemen and other Government officials. East Africans are used to watching, with quiet amusement, as containers full of fake batteries, biro pens and beauty products seized at the Port of Mombasa are displayed on prime time television.

But the menace goes deeper; experts tell IN-DUSTRYToday that about the 50 per cent of the medicines we take could be counterfeits and the spare parts fitted in our cars could be fake. The menace of counterfeits then becomes a chilling reality to us all.

If the medicines we take poison us and the parts we fit in our cars lead to accidents, obvi-ously then, the threat of counterfeits is no longer a problem just for governments and big busi-nesses; it affect us all.

Yet the menace grows by the day, which begs the question; what are the Government agen-cies mandated to tackle the vice doing about it? Is it not ironic that most of the fake goods on supermarket shelves have the Kenya Bureau of Standards quality mark stamped on them?

Manufacturers in Kenya appear more vigilant in protecting their investments and brands, but the sprawling Eastleigh business district in Nairobi has the dubious distinction of being the capital of counterfeits in the region.

And the numbers in the trade in fakes and pi-rated goods are frightening. Business in counter-feits is today a multi-million dollar industry and growing. Last year it was estimated at KSh70 billion, though industry experts say the figure is on the conservative side. It now rivals tourism, tea and horticulture and has fuelled fears that it could be underwriting terrorism.

The Anti-Counterfeits Agency says that the most pirated items are medicinal drugs, elec-tronics, CDs, software, alcoholic drinks, mobile phones and farm inputs. But the message of the Agency’s Chief Executive Officer Stephen Mal-lowah is even more chilling; counterfeits could be funding organised crime worldwide.

Yet the art and science of counterfeiting is not that complicated. There are three major types of counterfeiting; the first and most common is piracy of genuine brand names, especially those that have established a reputation: Van Heusen

shirts passed off as Vun Huesen, any sparkling wine branded ‘champagne’, Panasonic pirated as Pansonic and Philips as Bilips. It even gets comical when cheap imitations of the respected Nokia brand are sold as Nookia.

The second form of counterfeiting is ‘country of origin labelling’, where fake goods are shown as having been made in a country known for its manufacturing excellence and stringent quality controls. Kenyan supermarkets are full of fake electrical appliances labelled Made in England, for example.

The third and most dangerous category is that of ‘grey goods’ that these carry all man-ner of labels but do not show where they were manufactured.

Then there is the issue of discarded goods be-ing re-labelled and put back on the shelves.

Debate on the vexing questions of counter-feits has always pointed a finger at liberalisation. But are the General Agreement on Trade and Tariffs (GATT) and its successor World Trade Organisation (WTO), which were meant to facilitate unencumbered trade across and among countries really to blame?

We think not and this is why. Liberalisation is well regulated and structured, and provides for patent protection, quality standards, sanitary and phyto-sanitary control, national security, and human health.

This is where our governments have failed us. The protection of industries in vulnerable areas is provided for in the WTO system. So why are governments in East Africa not applying the WTO-approved regulatory controls to ensure that only quality goods enter our market?

Unless this is done, corrupt government of-ficials in the customs and security departments will always turn a blind eye as our manufactur-ing base is eroded by the influx of counterfeits.

This means that the punishment regimes also need to be reviewed. The anti-counterfeit law provides that first time offenders serve prison terms of up to five years and a fine not less than three times the retail value of the fake goods on a first conviction. But is that deterrent enough?

Obviously not. The starting point is to make it expensive and painful for retailers, suppliers and importers of counterfeit goods. Only then will we have started the long and difficult jour-ney of fighting pirates and counterfeiters. For now, anything else is an affectation

Counterfeits Kill Us All INDUSTRYToday is the official Magazine for the Kenya Association of Manufacturers MAIL: P.O.Box 30225 - 00100 Nairobi, Kenya.Tel: 0722 201 368Email: editor@kam.co.keWebsite: www.kam.co.ke

PUBLISHER: Global Village Publishers

EDITORIAL DIRECTOR:Kwendo Opanga

EDITOR:Mohammed Warsama

EDITORIAL CO-ORDINATOR:Carol KiiruPaida Nyamakanga

EDITORIAL TEAM:John NyogotAnne Ndung’uJudy KunyihaBella Akinyi

CONTRIBUTORS:Richard MunangSusan GitauRobert JumaAnita RweyaDavid WaweruErick Ochieng’

DESIGN AND LAYOUT:Raphael Mokora

COMMERCIAL DIRECTOR:Simon Mugo

BUSINESS DEVELOPMENT MANAGER:Derrick Wanjawa

SALES TEAM LEADER:Titus Omondi

BUSINESS EXECUTIVES:Joseph Ngina

SALES AND MARKETING MANAGER:James Ombima

PHOTOGRAPHY:Yahya Mohamed

CIRCULATION AND SUBSCRIPTION:Charles Kimakwa

ADMINISTRATION:Josephine WambuiChristine Gichuki

INDUSTRYToday MAGAZINE is published six times a year by Global Village Publishers (EA)

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TodayA Magazine of the Kenya Association of Manufacturers

All correspondence to the editor is assumed to be intended for publication

INDUSTRYToday admits no liability for unsolicited articles or pictures, which must be accompanied by a stamped envelope. The views expressed in this publication are those of the authors and are not necessarily shared by KAM.

Linking Industrialisation to Food Security43

TodayA Magazine of the Kenya Association of Manufacturers

INDUSTRY NEWS

CONTENTS

Stamping out the Menace of Counterfeits in Kenya18Bringing Down the Illicit Trade

COVER STORY

22

Panasonic Holds ‘Systems Solutions’ Exhibition in Africa 14

‘Making a Case for Green Energy’ 12

Industrialisation is the Future of Africa27Lessons from the Ethiopian Commodity Exchange (ECX)

REGIONAL NEWS§

29

36AGRICULTURE

45Outdoor Catering in the Park

AT KAM

Mega-Power Plant for Kisumu31

Cnr. Parklands Road & Msapo Close ParklandsP.O.Box 66807 - 00800, NairobiTel: (+254 20) 36 88 000Fax: (+254 20) 3748823Email: admin@southernsun.co.kewww.southernsun.co.ke

FOREWORD

Consumers have been grappling with the in-creased cost of basic commodities following the introduction of the VAT Act. It is true that prod-ucts such as bread and milk are exempt from VAT. However, the reason why the price will go

up is not because the manufacturer has increased the prices. It is because, if you look at the inputs that result in the total package, such as the cover of packaging; those do attract VAT and will result in an increase in the cost of the final product.

Other inputs such as the cost of electricity have also gone up as a result of the introduction of the VAT law. Electricity cost used to attract a tax of 12 per cent and because of VAT the tax has gone up to 16 per cent which therefore means that the price of the final product may go up.

Therefore the price increases that may be experienced in some sectors are just a once off measure to cushion suppliers against the increases as a result of the implementation of the new law.

Manufacturers are, however, upbeat that in as much as there may be a shakeup in the price of basic commodities temporarily there will soon be a reduction in prices if all the grand plans by government to reduce the cost of doing busi-ness are implemented.

What both consumers and business alike should under-stand is that the country has good development plans and for these to be realised there is need to collect revenue inland without incurring huge debts and all citizens have to play a role in the development of the country.

There are plans to build more power plants which will greatly reduce the cost of electricity to about USD 0.09 from the current exorbitant USD 0.18, which will result in a mas-sive reduction of prices. For the development journey to be successful money has to come from somewhere and VAT is one noble avenue of collecting revenue.

Economists argue that there is merit in subsidising produc-tion as opposed to subsidising consumption. VAT for manu-facturers makes the collection of revenue much easier and removes bottlenecks in the revenue collection system.

It is a no brainer that there are no policies that are a one-size fits all. There are obviously cases that will have to be consid-ered in isolation like the case for the pharmaceutical sector which has been negatively affected by the implementation of the new law.

Medicines are exempt from paying VAT however the in-puts that go into making the products are subject to VAT which increases the prices of medicaments. The downside of this is that the local pharmaceutical manufacturing sector becomes uncompetitive on both the local and international scenes.

Kenya’s pharmaceutical sector is the largest in the Com-mon Market for East and Southern African (COMESA) re-gion and as the country intensifies its market penetration into the African market it is important to address the concerns of this sector.

The local pharmaceutical sector manufactures generic medicines and medications that are priced very competitively and are used by 400 million people in the COMESA market.

The generic market excels in high volumes and very low margins hence local pharmaceutical manufacturers are very sensitive to any cost increases and face a market where they cannot increase prices.

Previously, manufacturers of pharmaceuticals were on the zero rated categories of goods and were able to claim back their VAT paid on input. This put them on parity with im-ported generics from India or China.

However, in the new VAT Act manufacturers of pharma-ceuticals are now on the exempt list where they cannot claim this input VAT. The implication of this change is very grave as VAT will now apply for their inputs and they will be forced to increase their final price. Unfortunately, this increased price will be higher than the imported finished good. It is impor-tant to note that the imported pharmaceuticals, especially from India and China, are already subsidised in their respec-tive countries. The cost of production in these countries is also much lower than that of Kenya.

The bright side of the VAT Act for Kenya is that there has been a shift from subsidising consumption to subsidising production which is good in promoting global competitive-ness of locally manufactured goods. On another note, KAM stands with the families who lost their loved ones in the West-gate attack and wishes those who were injured a speedy re-covery.

Happy reading!

Betty Maina CEO, Kenya Association of Manufacturers

How does the Price of Bread Go Up with VAT?

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INDUSTRY NEWS

milestone in this journey is the rolling out of the KShs 6 billion Uwezo Fund which seeks to enable the youth create their own jobs by setting up businesses. The other mark is the issuance of title deeds at the Coast. These two steps are laudable. On one hand, the youth will have to capitalise on this opportunity, in-vest and generate revenue while, on the other, land owners can now lease their land to for-eign investors.

However, all is not done yet. On industrial-isation and with the recent discovery of crude oil in North Eastern region, the Government will need to look into improving the country’s energy infrastructure and promote alternative energy sources to create an energy supply that is reliable. Additionally, part of the Govern-

How to Create One Million Jobs a YearThe Jubilee Government has been in office for about six months; how has it fared in the manufacturing sector

By Robin Obino

JUBILEE GOVERNMENT MANIFESTO

and enhancing food security. The Gov-ernment intended to achieve all these through encouraging foreign investment in new factories and giving tax-breaks, grants and loans to young people. It also proposed extending the state-run elec-tricity grid system and promoting re-newable energy to enable private sector companies to plan and invest for growth. The Government sought to implement a “Buy Kenya” policy for ministries and parastatals which would ensure that lo-cal products and services got the first pri-ority in the market.

How is the scorecard like with the first half of their first year in office ending? Perhaps, the most recent and remarkable

The Kenyan manufacturing sector has been fairly pro-tected. It has been subject to heavy regulation. Conversely, this sector has been underde-

veloped and manufacturing of, in partic-ular, labour-intensive goods has declined leading to the current slow pace of creat-ing jobs. This leaves the future of this sec-tor solely dependent on how well the big firms can deal with the dynamics of their business operations.

Before coming into power, the Jubilee Coalition, among other things, pledged to empower the youth by creating jobs, enhancing the manufacturing sector, creating a reliable energy infrastructure,

Industrial Promotion Services (Kenya) Ltd. IPS Building, Kimathi Street, Nairobi.P.O.Box 30500 - 00100, Nairobi, Kenya. Tel: (+254) 20 3280000, 2228026/7/8

Industrial Promotion Services (IPS) is dedicated to promoting private sector entrepreneurship and building economically sound enterprises in the developing world. IPS invests in projects within East Africa across a wide range of sectors, including: Food & Agro Processing, Printing and Packaging, Textiles, Leather Tanneries, Pharmaceuticals, Power and Telecommunications.

INDUSTRY NEWS

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ment’s agenda included the reduction of busi-ness taxes, removal of unnecessary regulation and enforcement of competition through new enterprise zones in the country.

There are areas where the Government has registered remarkable achievements. These include foreign policy, education and security. On foreign policy, for instance, Government had promised to engage the old economic powers such as the US, Britain and other Euro-pean nations as well as emerging nations such as Russia and China, which has been done. But the major drive has been towards the East, and China in particular.

The slow rate of job creation has been linked to, among other factors, the strate-gies that firms are employing to cut costs in difficult economic times. Most big firms, for instance, opt to engage in aggressive market expansion as opposed to staff training and technology improvement. This, therefore, means that a firm will outsource a marketing agency to carry out some duties as opposed to hiring or spending resources on training staff on the same. This leaves those already trained and qualified for such positions jobless. Other strategies are integration of more resources to meet service delivery, market repositioning of products and sourcing of cheaper raw materi-als.

According to a recent research by Pricewa-terhouseCoopers, improvement in informa-

tion systems was used to a great extent, so were short term and long term borrowing, research and development, retrenchment and retraining. The study also revealed that with the integration process, many manufacturing firms are struggling to compete in the turbu-lent business environment.

From the study, challenges faced in the implementation of these strategies were iden-tified as lack of adequate finance, high rate of brain drain due to the better opportunities offered by multinationals, changing of the ex-ternal environment, conflict in strategies and poor timing of strategy implementation. Man-ufacturing firms, therefore, need to implement strategies to respond to opportunities and threats of regional integration.

Additionally, the levels of poverty togeth-er with the general state of the economy has continued to slow down the pace of the job creation agenda by affecting the demand of locally manufactured goods, as the market continues to shift more in favour of relatively cheaper imported items. Here, too, most peo-ple who would have otherwise been middle-men, salespersons or marketers are denied jobs. KAM, however, believes that manufac-turers can create jobs if accorded a conducive operating environment. In the textile industry, for example, an estimated 500,000 jobs can be created if the Africa Growth Opportunity Act is extended by 15 years

The slow rate of job creation has been linked to, among other factors, the strategies that firms are employing to curb operational responses in line with the turbulent marketing environments

Bamburi Cement Limited is a subsidiary of Lafarge, the world leader in building materials. La-farge, which employs 65,000 people in 64 countries posted

sales of €15.8 billion in 2012. As a top-ranking player in its cement, aggregates and concrete businesses, it contributes to the construction of cities around the world, through its innovative solutions providing them with more housing and making them more compact, durable, beautiful and bet-ter connected. In Africa, Lafarge has 23 ce-ment production sites, 24 aggregate quar-ries and 106 ready mix plants with 7,745 employees in the region.

Bamburi Cement was founded in 1951 and soon thereafter commenced construc-tion of its first plant and by 1954 the com-

pany began manufacturing and selling cement serving both local and export mar-kets.

The Bamburi Cement Group has since grown to be the industry captain and lead-er with a bold vision for the future - ‘To be a World Class Producer that provides construc-tion solutions to their customers across Eastern Africa, with a commitment to sustainability’. The company is managed as one enterprise driven to deliver value to its customers, consumers, shareholders and local com-munities with an agenda to bring world class products with world class expertise to the region.

Through its own operations and those of its subsidiaries specifically Hima Cement and Bamburi Special Products, the Group provides a wide range of cement and con-

crete solutions making it the only integrat-ed one-stop shop provider of these solu-tions. The tailor made solutions cater for all segments from individual home build-ers, private developers, small contractors, large local and international contractors; and been used to build most structures, homes and infrastructure projects region-ally, thus contributing significantly to East Africa’s economic development through the construction sector.

A commitment to consistent excellence has been a key ingredient in Bamburi Ce-ment’s success, it’s no surprise that the Bamburi brand is renowned not only for its quality and expertise but also for its in-novation across the region.

Ingrained in Bamburi Cements’ value system is the long-standing commitment to make a positive, tangible and sustain-able difference among the communities it operates in and serves, through various programmes in education, health, infra-structure and environment management and conservation.

Through its subsidiary Lafarge Eco Sys-tems, whose mandate is conservation and environmental rehabilitation, the company pioneered quarry rehabilitation in the re-gion and boasts having developed one of the country’s most renowned destinations - the Haller Park, which has received rec-ognition from various international bodies. Today, this world class nature and environ-mental park stands as a beacon on success-ful decentralisation of environmental man-agement to regional and local levels and adaptation of social responsibility.

The future business growth of the con-struction sector is very strong due to long-term trends such as urbanisation, demo-graphic growth and infrastructure needs in the wider East Africa region. Bamburi Ce-ment Group is poised to take advantage of this growth and commits to building better cities for the country and indeed the region by focusing on its priority pillars of safety and health culture, developing people, su-perior customer service and excellence in industrial performance while being a re-sponsible corporate citizen.

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INDUSTRY NEWS

BUILDING MATERIALS

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INDUSTRY NEWS

ECONOMIC GROWTH

Making a Case for Green EnergyHigh oil prices, persistent droughts and unrivalled demand from unprecedented population growth is a contributory factor to the energy crisis in AfricaBY JUDY KUNYIHA

The Kenya Vision 2030 has iden-tified energy as a key founda-tion, and one of the infrastruc-tural enablers upon which the economic, social and political

pillars of this long-term development strat-egy will be built.

The successful implementation of the flagship projects highlighted in the Vision will greatly depend on supply of adequate, reliable, clean and affordable energy.

In particular, the demand for electricity will increase since it is a prime mover of the commercial sector of the economy. The level and intensity of commercial energy use in the country is a key indicator of the degree of economic growth and develop-ment.

The energy sector is, therefore, expected to remain a key player in tackling such challenges as reduction of poverty by half by 2015 in accordance with the Millennium Development Goals (MDGs) and overall improvement in the general welfare of the

population. The most important determi-nant in making the transition to a Green Economy from the wasteful, polluting and ultimately unsustainable brown economy is energy. Where we find it, how we use it, how we recycle it, is all that matters.

The world, as a whole, needs to be more

efficient in its use of energy and needs to develop new, renewable sources if we are to lessen excessive dependence on fos-sil fuels - oil, gas and coal. Expanded use of geothermal power could be one major advancement combining economic, social and environmental benefits needed for

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INDUSTRY NEWS

true sustainable development.The energy sector in most parts of Africa is

characterised by an acute energy crisis due to high oil prices, persistent droughts and unri-valled demand from unprecedented popula-tion growth.

To ensure consistency in energy production in Kenya, there is need to develop renewable energy systems that will help create energy independence and even a new source of rev-enue. This can be done by utilising a unique combination of solar panels, “biogas” genera-tors, natural wastewater treatment plants, and wind turbines.

It is equally important to create a thriving renewable energy sector that is self-sustaining and abundantly beneficial for the local econo-my, the environment, and the public.

Guided by its Vision of “Affordable quality Energy for all Kenyans” and while realising its Mission “ to facilitate provision of clean, sus-tainable, affordable, reliable and secure energy services at least cost while protecting the envi-ronment, the Ministry of Energy will play its contributory role towards the achievement of

Vision 2030. It will have to enhance power gen-eration capacity, increasing access to electricity, develop new and renewable sources of energy and ensure security of fossil fuel resources; and build capacity for the energy sector.

The biggest challenge facing the sub sector includes reducing the overall cost of electric-ity delivered to customers. This stems from the over-reliance on thermal generation and emer-gency power that point to inefficient long term planning and little investment in renewable al-ternative and sustainable power sources such as wind and geothermal. This, therefore, calls for the use of new technologies such as smart metering to improve billing and collection, increasing the generation capacity to ensure there is adequate spare capacity and reducing technical and commercial power losses – that currently stand at about 17-18 per cent.

Cooperative Bank is one of the financial in-stitutions that have played a key role in energy efficiency in Kenya. It scooped an award at the recent annual Energy Management Awards for being the best local bank participating in Re-newable Energy and Energy Efficiency.

The Energy Management Awards pro-gramme, which is coordinated by the Kenya Association of Manufactures, has grown over the last nine years due to the need to encour-age businesses to implement strategies that use energy more efficiently.

INDUSTRYToday spoke to Co-operative Bank Chief Manager Marketing, Ngumo Kah-iga, who told us that the bank finances renew-able energy projects that produce energy and power without any fossil fuels. These projects include hydroelectricity, wind power, bio-mass/biogas, solar energy and sea energy.

Energy efficiency investments include proj-ects that allow energy consumers to utilise less power to achieve the same level of service. For example, most processing plants in the coun-try use old technology which consumes a lot of energy.

Coop Bank begun financing such projects due to the rise in demand for fuel in Kenya as population grows leading to depletion of resources through deforestation and high de-pendency on imported crude oil and petro-leum products to meet the 88 per cent of the commercial energy demand.

Among the main reasons why Coop Bank won the award was its willingness to take risks in the new area of financing (Green Energy Banking), its active role in promoting green energy among clients as well as its fastest turn-around time for renewable energy efficiency financing for SMEs and large enterprises

Cooperative bank is one of the financial institutions that have played a key role when it comes to Energy Efficiency in Kenya

INDUSTRY NEWS

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Asia Pacific said, “Africa is an emerging market and the widespread reform across the country has resulted in an ever-improv-ing business environment and this together with other factors such as increased infra-structure investment and commodities boom have contributed to the doubling of the economy over the past decade. We as Panasonic are committed to being part of this development process that the country is witnessing and this exhibition is part of one such effort to reiterate our commitment to the African markets”.

As a company, Panasonic offers a wide range of products from home appliances to beauty care products, to eco solutions and audio video products and automotive and industrial systems. The interesting line-up of business solutions showcased at the exhibition reiterates Panasonic’s strength and commitment in the region moving for-ward.

Through our “Made for Africa” project, we are committed and focused on increas-ing our footprint across the African conti-nent by providing access to our technologi-cally superior and advanced products. Our product marketing strategy has been to un-derstand, implement and develop products that our African consumers actually prefer.

“Our business model will have a hands-on approach and will directly engage with the consumers. As a brand our commit-ment is to be ALWAYS FOR YOU. Service is integral to our success and we are de-termined to add value to customers’ lives wherever they are with a 24x7 support”, said Mr Masao Motoki Managing Direc-tor Panasonic Marketing Middle East & Africa.

Currently, Panasonic is aggressively

Panasonic Holds ‘Systems Solutions’ Exhibition in AfricaOn show were a huge range of products catering to diverse industry verticals across the African continentBY JUDY KUNYIHA

MADE FOR AFRICA

Panasonic Marketing Middle East & Africa – the regional headquarters for Panasonic in the region, showcased its com-prehensive line-up of industry

leading total business solutions at its first ever Systems Solutions Exhibition in Afri-ca. The event witnessed Panasonic’s high-end industry solutions tailored specifically to meet the needs of the regional business-es and will also serve as an ideal choice for the diverse industry verticals across the Af-rican continent.

Held at the scenic and beautiful Safari Park Hotel in Nairobi, Kenya, the event was attended by Panasonic’s key business partners across the African continent along with its representatives from the region and globally comprising Mr Yorihisa Shiokawa, Managing Director, Panasonic Asia Pacific

and Mr Masao Motoki, Managing Direc-tor, Panasonic Marketing Middle East & Africa.

Products showcased at the exhibition comprised Panasonic’s business solutions such as telephones, faxes, office automa-tion solutions, educational solutions like pan boards, high definition communi-cation solutions, network and analogue products, home security products, batter-ies and lamps, air conditioners and last but not least eco solutions like ventilating fan, ceiling fan and air purifiers.

Panasonic plans to actively promote and create new business-to-business (B2B) and business-to-government (B2G) opportuni-ties in Africa, while continuing to sustain its products in the traditional B2C sphere.

Speaking at the exhibition Mr Yorihisa Shiokawa Managing Director Panasonic

working towards expanding its rich and en-hancing customer touch points across the Middle East & Africa. As part of providing a direct service network, Panasonic has already established representative offices across Africa, including Kenya, Angola, Nigeria, Egypt and South Africa.

In parallel to the representative offices, Pana-sonic is also planning to open signature stores like the Panasonic Plazas across the continent. The Panasonic Plazas are set to serve as a one-stop destination for all consumers. Currently, Panasonic Plaza is already operational in Ke-nya and Nigeria.

Panasonic plans to add 100 more service centres to the already existing 597 across the Middle East & Africa by March 2015.

Mr Motoki further added: ‘’We will continue to invest in the region, bringing in new tech-nology and products, we want to innovate and bring about a reformation with our products, we want to explore various industry segments, identify their needs and tailor make products specifically to meet the needs of the regional businesses. Our strong focus is on Africa, with the company looking to establish regional of-fices in most parts of the continent by the end of the year.’’

Panasonic is planning to expand aggres-sively in Africa and the exhibition is a major milestone in its drive to gain major in-roads in to the highly potential African market

Currently, Panasonic is aggressively working towards expanding its rich and enhancing customer touch points across the Middle East & Africa

INDUSTRY NEWS

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Panasonic’s Padma Venu hosted the event

A few samples of Pana-sonic Africa goods dis-played at the exhibition

Ten-point Agenda to Increase Jobs BY PAIDA NYAMAKANGA

The Ministry of Industrialisation and Enterprise Development and manufacturers have agreed on a 10-point agenda aimed at boosting industrial growth and

increasing the number of jobs in the coun-try, Ms Betty Maina, Kenya Association

of Manufacturers (KAM) Chief Executive says.

The agenda which includes Buy Ke-nyan- build Kenya campaign, productiv-ity based wages, increased trade on the African continent, human capital develop-ment, reducing the cost of doing business,

market access issues in the East African Community and trade with European countries; continuous engagement with the manufacturing sector; promotion of small scale enterprises was discussed at a meeting held between the Cabinet Secretary of Industrialisation, Mr Adan

INDUSTRY NEWS

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INDUSTRIALISATION

The Ministry announced that Government is working on modalities to offer incentives to companies for promoting SMEs to shore up growth of infant industries

Mohamed and KAM in Nairobi recently. The meeting was called as part of the monthly meetings which the Cabinet Secretary holds with manufacturers to discuss ways in which the Government can work with industries to inspire global competitiveness.

The manufacturing sector currently employs over 1 million people directly and millions more in downstream activi-ties. There is a drive by the manufactur-ing sector to create more jobs and reduce the number of jobless people in Kenya. This is in line with the Government’s quest to create 1 million jobs in the next three years.

The ministry announced that the Government is working on modalities of offering incentives to companies for promoting SMEs to shore up growth of infant industries.

“In an effort to create jobs and increase contribution to the Gross Domestic Product by the industry, Government is working on incentives for companies that promote the participation of small to medium enterprises which will be modelled around the Black Economic Empowerment in South Africa,” Mr Mohamed said.

Industrialists reaffirmed their commit-ment to increase jobs in the country. “The cost of doing business in the country has been frustrating growth of industries however manufacturers remain optimis-tic that in working together with Govern-ment there can be mutually beneficial ar-rangements that can be made to promote

an enabling business environment,” said Ms Maina.

In a bid to somewhat cushion manu-facturers from the high cost of doing business, industry giants have called on Government to expedite payment of Value Added Tax (VAT) refunds to boost liquidity of industries.“When VAT was introduced there was an agreement that there would be a green channel, orange channel and red channel for refunds. The green channel would serve the large tax payers such as manufacturers and ensure that refunds are expedited,” Ms Maina said.

Mr Mohamed implored manufactur-ers to exploit the trade and investment opportunities that exist on the African market in an endeavour to consolidate Kenya’s market share on the continent.

“Trade on the continent is 15% as compared to other continents like Europe with intra- continent trade of approxi-mately 70%. There is need for African countries to trade more with each other and the manufacturing sector is at the nucleus of making this work,” Mr Mo-hamed said.

Speaking at a meeting held with KAM recently Mr Mohamed said the manu-facturing sector plays a critical role in the growth of the economy and there is need to come up with innovative ideas on how to increase the sector’s contribution to GDP and create jobs. The manufacturing sector currently contributes 14% to the country’s GDP

INDUSTRY NEWS

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Students graduating at a university graduation ceremony

Stamping out Counterfeit Menace in KenyaThe threat and damage to the economy by fake goods can never be overestimated. But is enough being done to eradicate it?

By CAROL KIIRU

COVER STORY

TRADE AND INDUSTRY

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Counterfeits are penetrating the market at an alarming rate in Kenya and the East African region as a whole. Consum-ers’ health and safety is com-

promised while businesses lose billions. It is, therefore, critical that counterfeiters

be identified and brought to book if trade and industry is to survive. Both businesses and consumers suffer great losses with

questions being asked about the effective-ness of bodies such as the Kenya Bureau of Standards (KEBS).

Counterfeit business has grown into a KSh70 billion industry and now rivals tourism, tea and horticulture. The Anti-Counterfeit Agency (ACA) says that the most affected items are medicinal drugs, electronics, CDs and pirated software, al-coholic drinks, mobile phones and farm

inputs. ACA Chief Executive Officer Ste-phen Mallowah says that the tragedy of the counterfeiting story is that it is an under-world crime that leads to crime advance-ment.

It is not all gloomy, though, as the fight against fake goods can indeed be won if all stakeholders work together. According to a report by the Kenya Association of Manu-facturers (KAM) on the counterfeit problem

Pharmacist packs medicine at a hospital facility

The Anti-Counterfeit Agency is the sole and leading government agency in the fight against counterfeiting. In the performance of its functions, the Agency has appointed inspectors duly authorized to exercise the powers conferred on an inspector under the Act.The Agency has learnt that there are persons masquerading as Anti-Counterfeit inspectors and in the process allegedly inspecting premises and extorting money from the business community.

PLEASE NOTE THE FOLLOWING REGARDING GENUINE ACA INSPECTORSEvery Agency inspector is identifiable by a Certificate of Authority or Job Identity Card issued by the Agency under the hand of the Executive Director. Either of the two documents bears the following details:-i) Photograph of the inspectorii) Name of the inspectoriii) Number of the National Identity Card of the inspectoriv) Designation of the inspectorv) Signature of the inspectorvi) Signature of the Executive Directorvii) Certificate Number in case of the Certificate of AuthorityThe Agency wishes to inform the public that only Agency Inspectors are authorized by law to inspect any premises for counterfeit goods and should not allow any person that is not an inspector with proper identification to enter their premises for whatever reason. The Agency also urges members of the public

BEWARE OF IMPOSTORS

Contact us: Executive Director, Anti-Counterfeit Agency,

Kenyatta Avenue, Telposter Towers, 4th Floor, P.O. Box, 47771-00100, Nairobi, Kenya. Hotline: +254 020 2280000 Cell: 0733 951375, 0717 430640, SMS: 21210 Email: info@aca.go.ke Website: http://www.aca.go.ke

not to pay any money to any person claiming or purporting to be acting under the provisions of the Anti-Counterfeit Act 2008.In this regard, the Agency has set up a hotline Number, 020-2280111, that can be called by any person who wishes to confirm the identity of any person desiring to inspect their premises for counterfeit goods. Information may also be given through the short message (SMS) code 21210.Members of the public are urged to remember that it is their right to demand proper identification from any inspector and if in doubt, call the hotline number or the other official Agency lines or the Executive Director for confirmation or clarification of the identity of any person visiting their premises.

YOUR ROLE AS A MANUFACTURER OR INNOVATORProtect your brand by registering your intellectual property (IP) rights with the Kenya Industrial Property Institute (KIPI) and report any cases of infringement of your IP rights to ACA.

CONSUMER ADVICEConsumers are advised to be more vigilant to the products available in the market, and be wary of their outlets, buy from known sources, or manufacturers’ designated outlets.We further urge you to report cases of suspected counterfeiting to the Agency, manufacturers or the Police. We urge you to buy real or genuine products.

in Kenya and the impact of propagation of fake products from other EAC partner states and the Far East countries, it can be eradicated.

The report, supported by Trade Mark East Africa (TMEA), suggests improving enforce-ment, raising public awareness, encouraging company-specific protective measures, prod-uct mechanisms and building stronger ties be-tween stakeholders.

The report estimates that the East Africa re-gion loses about US$500 million per annum on counterfeit goods, and that more than 30 per cent of medicines sold in Kenya are fake. The report further estimates that some companies have lost 70 per cent of their market share in East Africa because of counterfeits. Kenyan manufacturers incur an annual net loss of over KSh30 billion due to counterfeit products while the Government loses KSh6 billion in potential tax revenue to the menace.

The Anti-Counterfeit Act prescribes tough penalties for counterfeits, which include a pris-on term of up to five years and/or a fine not less than three times the value of the prevailing

retail price of the goods in case of a first convic-tion. In case of a second or subsequent convic-tion, the prison term is 15 years and the fine is not less than five times the value of the prevail-ing retail price of the counterfeited goods.

It is worth mentioning that the fine is not pegged on a fixed amount but on the prevail-ing retail value of the legitimate goods. Ten per cent of the fines imposed by the court for of-fences under the Act shall be awarded to the complainant, 40 per cent to the Government and 50 per cent to the agency.

KAM advocates full participation of stake-holders in fighting the vice. “It is critical that we join the Government and Parliament in addressing all these manifestations of the in-fringement of intellectual property. KAM fully supports the Anti-counterfeits 2008 Act and in-vites all other stakeholders to enjoin in efforts to encourage Parliament to fast track its enact-ment,” said Ms Betty Maina, KAM’s Chief Ex-ecutive.

This billion-dollar industry has claimed many businesses and is widespread through-out the world. It is more rampant in develop-ing economies due to factors such as lack of effective legislation and enforcement mecha-nisms, poverty, corruption, ignorance within the consumer circles and globalisation.

The report also says resources for fighting illicit trade crimes are limited given the magni-tude of other crimes such as murder, theft, rape among others, which take an upper slot in re-source allocation. This leaves an ‘open door’, so to speak, for prevalence of counterfeit trade.

“Legal and regulatory framework and en-forcement systems apply to the trademark pro-tection of brands, company names and logos, signs, symbols, colours, sounds and shapes within a defined application area. Almost any distinctive feature attached to a product can be protected as a trademark.” says the report.

“Copyrights exist to encourage the produc-tion of original artistic, literary, and musical creations from books and paintings to movies, recordings and software. Copyright law allows the copyright holder to control certain uses of his work. These include reproducing, distrib-uting, renting, broadcasting, and translating or adapting the work of intellectual property rights,” it adds.

Trademarks, copy rights and patents have to be registered for use with specific goods or services in order to be protected. The damage caused by fake goods are easy to see. Retailers who sell counterfeit products do not pay taxes and importers do not pay a fair amount of duty when they smuggle the goods into the coun-try.

COVER STORY

The Anti-counterfeit 2008 Act penalises counterfeiting and offences under the Act include a prison term of up to five years and/or a fine not less than three times the value of the prevailing retail price of the goods in case of a first conviction

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Display of mobile handsets at a shop in Nairobi

Today, the market is awash with counterfeit spare parts, electrical devices, among others. This spells doom for Kenyans who use these devices daily. This might perhaps, be one of the reasons for the rising number of accidents and fires in the country.

A recent KPMG Fraud Barometer survey found that African countries such as Nigeria, Kenya, Zimbabwe, and South Africa account for 74 per cent of all fraud cases reported on the continent.

Investors lose when they invest in compa-nies that cannot maximise their profit potential because they cannot sell their product for what it is worth. It is difficult to compete with coun-terfeiters because they do not incur the initial cost of bringing a product from inception to market. They devalue the hard work of cre-ative designers and innovative inventors.

The study stated that counterfeit products find their way into the market through small outlets where products such as imported elec-trical and electronics products are sold. Adul-teration of wines and spirits, and other brand-ed soft drinks and mineral water is reported to take place in up market residential areas of Nairobi.

At the firm level, companies apply vari-ous strategies in the fight against counterfeits, based on the market intelligence they gather on their own or receive from investigators and consultancy companies involved in combating the menace.

Of those interviewed during the study, 33 per cent say that they use market intelligence to combat counterfeit activities in their firms. Another 22 per cent said that they use technol-ogy as a counter measure. Interestingly, 22 per cent said that they take no action at all, either because they are not aware of any counterfeit-ing activities or do not have the resources to do so.

According to KAM, whereas consumer infor-mation and education, and counter-measures based on technology are preventive actions taken, collaboration with private investigators and cooperation with enforcement agencies as well as legal actions are more suitable when counterfeits are already present in the market. Stakeholders have proposed several amend-ments to the Anti-Counterfeit Act to strengthen the legal framework for combating counterfeit-ing activities.

The Anti-Counterfeit Act was enacted to prohibit trade in counterfeit goods, to estab-lish the Anti-Counterfeit Agency (ACA) and to network with other relevant bodies and stake-holders.

To improve the business and investment cli-

mate in the region, the East African Commu-nity (EAC) partner states have identified, as a priority, the need to prohibit and control trade in counterfeit and pirated goods. The EAC Sec-retariat is working on a draft EAC Law to com-bat counterfeiting, piracy and other intellectual property rights violations.

ACA has identified various methods by which counterfeit products are made including labelling, packaging, adulterations, direct im-ports, transit goods, and even locally manufac-tured counterfeit wares.

Counterfeit trade is driven by the market forces of demand and supply. On the supply side, it is driven by market characteristics, production processes and the institutional en-vironment where it operates, for example, the ease with which the counterfeiters can contin-ue to operate without being detected. On the demand side, product characteristics and con-sumer behaviour are the main drivers. The key players in counterfeit trade are the trademark owner, manufacturers of counterfeit products, the illicit distributors, outsourced manufactur-ers, the illicit distributors, customs authorities and other Government agencies. Each of these actors is affected differently.

Lax inspection has been blamed as one of the reasons why counterfeit goods are easy to smuggle into the country. Importers have been using the Port of Mombasa as a point of entry for distribution of these products from Asian markets into neighbouring landlocked states such as Uganda, Rwanda and the DR Congo.

According to United Nations statistics, about 46 per cent of Kenya’s 33 million people live in poverty and this is the group targeted by the distributors of fake products who price them to fit into the pockets of the poor

Counterfeit trade is driven by the market forces of demand and supply

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Some of the products prone to counterfeit manace

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Laws of Kenya. The institute is in charge of implementing two Acts the Industrial Property Act and the Trademarks Act Cap 506, which deals with registration of trade and service marks.

Q: What is your mandate and how do you expedite this mandate?

A: As Managing Director of the institute, I am charge of the day-to-day management of the institute. I am responsible for the per-formance of the institute because I oversee the implementation of our overall strategy as directed by the board of directors.

For a smooth, effective and efficient per-formance of the institute, I, working closely with my experienced and dedicated staff, execute the tasks stipulated in our strategic plan in a cost-effective manner as we dis-charge our mandate.

I have been able to ensure that we im-plement our systems and processes in a speedy manner by delegating duties to my able senior management team and em-powering our staff through training and mentoring. This means that they are able to discharge their duties with minimal su-pervision.

Q: Kindly share with us your vision and mission. Have you been able to achieve this and how have you done it?

A: Our vision is to be a leader in the pro-motion of industrial property for wealth creation and our mission, to grant industri-al property rights and promote innovation for social and economic development.

We, as the institute, have made great strides in promoting industrial property rights in the country and the region by working with various stakeholders-our customers, our ministry and the Govern-ment, the legal fraternity and the general

COUNTERING FAKES

Bringing Down the Illicit TradeIn the fight against counterfeit trade major steps are being made with the assistance of key players in the industry. It is a trade that has stolen billions of shillings from industries within the country. Kenya Industrial Property Institute (KIPI) Director Dr Henry K Mutai explains what is being done to counter the menace

Industry Today: Kindly tell us about KIPI and its history.

Dr Henry K Mutai: Kenya In-dustrial Property Institute (KIPI) is the State corporation under the

Ministry of Industrialisation and Enter-prise Development, which is mandated to administer and promote industrial prop-

erty rights –patents, trademarks, industrial designs and utility models -in Kenya.

The institute was established on May 2, 2002 upon the coming into force of the Industrial Property Act of 2001. Previously the institute existed as Kenya Industrial Property Office (KIPO), which was estab-lished in February 1990 after enactment of the Industrial Property Act CAP 509 of the

Dr Henry Mutai (Left), Kenya Industrial Property Institute Managing Director, exchanges documents with Mr Simon Anderson, First Secretary, Australian High Commission, after signing MoU with IP Australia early in the year.The MoU allows KIPI to benefit from IP Australia’s Regional Patent Examination Training (RPET) Programme as part of the Institute’s human resource capacity building strategy to support entrepreneurs and researchers to fully exploit their IP assets potential.

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public.But we feel that we can do better. That is why

I wish to inform you that from July 1, 2013, we started implementing our new Strategic Plan 2013-2017, which takes into account our long-term objectives and priorities as approved by the board.

To ensure that whatever we do is sustain-able, we have put in place adequate operation-al planning and financial control systems while opening a two-way channel of communication about our operating objectives and standards of performance so that they are not only under-stood, but also owned by the management and other employees.

Backed by an effective monitoring and evaluation process and a strong performance-based appraisal system, we are assured that our plans are implemented according to plan, within a set time and in line with our budget-ary guidelines.Q: What services do you render to your cli-ents?A: As indicated above, we administer indus-trial property rights; patents, utility models, in-dustrial designs and technovations, as well as trade and service marks. We also provide tech-nological information to the public, promote inventiveness and innovativeness in Kenya, provide training on industrial property and we screen technology transfer agreements and licenses.

Q: How do you protect industrial property rights? A: Besides discharging our mandate we pro-mote public industrial property awareness through media campaigns, exhibitions, semi-nars and workshops in the industry, we have also partnered with schools and run science congresses where even as we aim to raise tech-nology innovation we help them understand the role of KIPI in ensuring that this innova-tions do not fall prey to counterfeit trade.

We also distribute publications and collabo-rate with other institutions whose policies are collateral to building a strong intellectual prop-erty system plus direct engagement with indi-vidual members of the public.

Q: Products that do not meet required stan-dard or counterfeit have infiltrated the mar-ket. Has this affected your organisation and how? A: The vice does not affect us directly. Howev-

er, it has affected us indirectly because some of our clients who have registered their IP rights with us in form of patents, trademarks, indus-trial designs and utility models have had their industrial property rights infringed.

We strive to protect these rights and have partnered with relevant authorities to work on how to end this menace. It is indeed not any-thing to be achieved over night but eventually the struggle will be won.

Q: What are some of the factors that you feel have contributed to counterfeiting?A: Much of it is driven by a desire to earn quick money by unscrupulous traders who take ad-vantage of members of the public who may not be aware of the dangers of counterfeit goods by offering their illegal products at a lower price compared to the original products.

Q: Counterfeit products have flooded the Ke-nyan market and disrupted manufacturing companies in product sales. In your opinion is there a proper policy level intervention to this?A: Yes we now have a robust policy framework to tackle the menace and our sister organisa-tion, the Anti-Counterfeit Agency is doing a good job in spearheading the fight against it. It is indeed a very tasking endeavour and re-quires every stakeholder’s role to end it.

Q: Is there support from all sectors that have been affected by this menace in fighting coun-terfeits?A: Yes there is not only support, but also co-operation amongst the various stakeholders. For your information, the Anti-Counterfeit Agency is working with us, Kenya Copyright Board, other public and private sector players and State security agencies in, among others, public awareness and enforcement activities. I assure you that we are making great gains in fighting the crime.

Q: In your own words tell us a solution that you feel can work to counter the adverse ef-fects of counterfeit.A: We are on the right track. All we need to do is to sustain increased surveillance, awareness creation and enforcement through prosecution of those found promoting counterfeiting to keep up the fight

we administer industrial property rights; Patents, Utility Models, Industrial Designs and Technovations, as well as trade and service marks

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Freeing African markets to trade with the rest of the world has been one of the dominant is-sues on the table over the past decade by policy makers. Many

high-level meetings have been conducted seeking to liberalise the movement of goods between Africa and the rest of the world. The ultimate goal has been eradication of trade barriers, prudent handling of subsi-dies and clearing or lowering of red tape.

But underneath this “barrierless” trade regime lurks the danger of fake goods trade. The thriving and cropping up of the counterfeit goods trade might undo the hard-won gains over the past two decades if not dealt with urgently.

According to the study of Counter-feiting Intelligence Bureau (CIB) of the International Chamber of Commerce (ICC), counterfeit goods make up 5 to 7% of World Trade. An analysis carried out by the Organisation for Economic

Co-operation and Development (OECD, 2007 indicates that international trade in counterfeit and pirated products contrib-uted up to USD 200 billion in 2005.

This total does not include domesti-cally produced and consumed counterfeit and pirated products and the significant volume of pirated digital products being distributed via the Internet. If these items were added, the total magnitude of coun-terfeiting and piracy worldwide could well be several hundred billion dollars more. The tragedy is that global statistics indicate that counterfeiting has been on the rise over the years. This figure went up to USD 250 billion in 2007 based on the growth and changing composition of trade between 2005 and 2007.

Regionally, the increased proliferation of fake goods is hurting local industries. Manufacturers are incurring huge losses due to these counterfeit goods. Kenya, Uganda, Rwanda, Burundi and Tanzania combined lose over $600 million per year

on counterfeit goods. This has tilted the balance of trade in favour of counterfeit-ers. According to the Kenyan Economic Survey of 2008, Kenya’s manufacturing sector reported only a growth rate of 3.8% in real value that year, which was down from 6.5% in 2007. According to the survey, one of the reasons for the drop in growth included stiff competition from counterfeits.

In addition, estimates of losses by Ke-nyan manufacturers and genuine business chains are to the tune of KSh50 billion in sales due to counterfeit goods in the market. This is on top of KSh19 billion of losses in tax revenue the Government in-curs due to sleazy routes associated with the sale of counterfeits in the country.

Foreign Direct Investors A key factor in Kenya’s future eco-

nomic growth will be attracting significant international investment into the country. There has been considerable success in

FORGED

Set to Strangulate the Trade in Counterfeit GoodsIs liberalisation of trade markets, the devil incarnate in the war against Counterfeits?

BY STAFF WRITER

Stephen Mallowah Executive Director Kenya Anti-Counterfeit Agency

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25Today

this aspect however international investor’s perspective on Kenya’s ability to protect Intel-lectual Property rights (IPR) on other sectors of the economy will play a key role towards realisation of middle level economy by 2030. How we handle investor sentiment on IPR must be addressed if we hope to attract them into the country.

IPR is an issue of high importance and an increasing priority for the Government. It will promote innovation and growth on one hand and increase awareness and concern on the adverse effects that counterfeiting and piracy on our economy on the other.

Milestones against CounterfeitingUnder the stewardship of the Chief Execu-

tive Mr Stephen Mallowah, the agency has heightened the war against counterfeits. The agency has taken measures to counter the ef-forts maximized in counterfeit trade.

‘We have looked at the bigger picture in our approach towards eradicating this menace. We have embarked on a country wide enforce-ment and entry point surveillance especially by opening up our Mombasa office. The agency has instituted both civil and criminal enforcement measures on matters reported to it to make counterfeiting very unattractive to counterfeiters. We have also increased our international cooperation with enforcement agencies and right holders thereby receiving a lot of forehand intelligence at the international scope.’

Notable milestones in ACA’s three years of existence are the public awareness cam-paigns among relevant government agencies and ministries and the general public. This is premised on the understanding that, beyond enforcement of the Act there is dire need to en-lighten the public on counterfeits, and to have all in government bear an obligation to ensure that the anti-counterfeit law is adhered to in the course of their driving mandates. Many people affected by counterfeiting, including manufacturers and consumers, are unaware of the true scope and scourges of this issue. The need to educate public procurement officers is very important since the Government is the biggest consumer.

The agency has held stakeholder sensitisa-tion forums across the country and given case studies, statistics and simple steps on how to reduce the presence of counterfeit products. A notable achievement on this front is the “Fagia Bandia” (Kiswahili word for clean or brush away) campaigns which targeted learning institutions, consumers, enforcement agen-cies and community leaders at the grassroots.

Some areas covered are Mombasa, Busia, Malaba, Kisumu, Kitale, Eldoret and Nakuru among others, and soon embarking on the Mt Kenya Region.

At the enforcement front, ACA has con-ducted successful investigations, raids and prosecutions. In enforcing the anti-counterfeit law, the agency has so far received 350 complaints and successfully prosecuted and won 70 cases of counterfeit goods worth over KShs700 million. The most affected goods include electrical goods, hardware goods, food items, cosmetics, vehicle spare parts, comput-er accessories, clothing and footwear, human medicines and agricultural inputs like seeds and fertilizers. This is a substantial prevention of theft of intellectual property and is expected to increase following the capacity building measures we are undertaking for judicial staff and enforcement officers across the country.

It is important to note that through in-creased public awareness, our enforcement efforts have borne fruit. There is increased reporting and intelligence gathering on sus-pected counterfeit goods in the market from informed manufacturers and consumers via the hotline and website feedback portal.

Regionally, the Anti-Counterfeit Agency has established valuable links with national, regional and international organisations. We engage other regulatory, oversight and law enforcement agencies and cooperate across borders in regional and international forums.

The Agency has spearheaded the forma-tion of the Joint Campaign against Counterfeit (JCAC) group. This is an all inclusive and collaborative front formed in conjunction with different government agencies and industry

Many people affected by counterfeiting including manufacturers and consumers, are unaware of the true scope and scourges of this issue

The Cabinet Secretry of Ministry of Industriliasation & Enterprise

Development Mr Adan Mohamed addresses a conference in the

commemoration of World Anti-Counterfeit Day (WACD) in June this

year. The Government of Kenya is committed to the war against

counterfeiting

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players in the private sector to increase the level of awareness in the fight against counter-feits in the country. JCAC is an open member-ship committee to all players in government, private sector and development partners who are involved in the fight against counterfeits.

Current players are the Kenya Association of Manufactures (KAM), Kenya Association of Pharmaceutical Manufacturers (KAPI), Agrochemicals Association of Kenya (AAK), Unilever, East African Cables, British Ameri-can Tobacco (BAT), Toyota East Africa, Braza-fric Enterprises (Kenya), Nokia East Africa, Samsung, HP, Sollatek (Kenya), East African Breweries Limited (EABL), SCJohnsons, among others.

In the East African region, ACA has been involved in the development of the regional Anti-Counterfeiting Bill. In more recent de-velopments, in March, 2013 in Dar es Salaam ACA shared a forum with the five member countries of the East African Community that culminated in the establishment of the African Intellectual Property Group (AIPG). The AIPG is expected to give a voice on IP matters in the continent and ACA is currently providing the interim secretariat.

‘We are open and eager to support stake-holders contribution to policy, advocacy and legislative reforms so as to continuously im-prove and be in tandem with emerging issues in the fight against counterfeits’ Mr Mallowah said.

The adage goes like this: ‘Consumers Live by the Brand; Die by the Brand’. Consum-ers are a gullible lot that goes for the brand

and not the product. Known brands have inculcated a sense of trust and acceptance in consumer minds. The brand and product become completely intertwined to the point where the consumer chooses first the brand, and only second the product. Counterfeiters capitalise on this ubiquity to pass their fakes as the real deal.

To bridge the gap, the agency has called upon manufacturers to partner with other stakeholders towards increasing consumer education so that the intrinsic value and the brand message converge. Experience has been that most manufacturers of known brands are often against this and try everything in their power to stop it since it erodes con-sumer brand loyalty. It is this convergence that guarantees the lasting value of the brand as a barometer for ‘what’s inside the box’. Manufacturers need to increase their brand authentication measures so that the public can make informed choices when purchasing their products.

According to ACA research, 76% of Kenyans purchased counterfeit goods with two-thirds of them doing so knowingly. The propensity of consumers to purchase counter-feit goods increases with education, the sector in which they work in and to some extend their income level. Unfortunately, 67% of con-sumers cannot identify a counterfeit product. This is where there is need to conduct more training and sensitization programs to the public.

Way forward.The major concern is that counterfeits

are no longer just about profit losses for a few companies. It is about one of the largest issues we have to deal with today like trust in brands, public health and safety, and the economy.

The fight against counterfeiting has to be stopped by a concerted effort by all stakehold-ers. We have to nip the bud from all the shoots in the supply chain. The fact that the counter-feiting industry is both demand and supply driven implies there are direct ways for each and every individual to play a part in end-ing counterfeiting. We must stop knowingly manufacturing and buying them

According to ACA research, 76% of Kenyans purchased counterfeit goods with two-thirds of them doing so knowingly

All stakeholders have a role to play in combating counterfeiting as depicted in the cake cut-ting. The sword is ready to cut through the menace. From right: Mr S. O. Mallowah (ED ACA), HE (Amb) Lodweijk Briet (EU), Mr. A. Mohamed (CS MOIED), Ms. B. Maina (CEO KAM), HE (Amb) R. F. Godek (USA), Mr Kuria (CEO, HP)

Industrialisation is the Future of AfricaAfter years of slumber, Africa is awakening. It is no longer the dark continent as the world has become conscious of its great potential, if the arrivals of foreign investors and tourists is anything to go by By Robert Juma

With an estimated popula-tion of 1.1 billion people, projected to shoot to 2.4 billion by 2050, the con-tinent must find a way

to safeguard the livelihoods of its swelling populace. In this regard, there is a high de-mand for industrialisation with greater em-phasis on a diversified production base.

Africa’s share in global trade is an insig-nificant 3 %. Despite the existence of vari-ous regional trading blocs, the intra-Afri-can trade is approximately 10 % against 60 %, 40 % and 30 % currently enjoyed by Europe, North America and the Associa-tion of South East Asian Nations respec-tively.

Carlos Lopes, the UN under-secretary-general and executive secretary of the

Economic Commission for Africa (ECA), based in Addis Ababa believes that Af-rica is likely to command the world’s larg-est workforce by 2040. ECA, whose main mandate is to come up with credible tools to spearhead the continent’s industrialisa-tion process, has called on African leaders to address poverty, inequality and unem-ployment.

The Kenya association of Manufactur-ers’ CEO Ms. Betty Maina urges African countries to utilise the plentiful deposits of natural resources, the soaring international commodity prices and technology-driven global production changes to transform. This is well captured and echoed in the 2013’s Economic Report on Africa (ERA), which pegs hopes for industrialisation on growth, employment and economic trans-

formation. Kenya’s Vision 20130 is the country’s

blue print to economic sustainability by 2030. The only barrier to the realisation of any vision is the strategy and implementa-tion, and Vision 2030 is not an exception. There is need for countries to strengthen coordination and build strong institutions to ensure steady implementation of such policies.

The Role of States States have a tremendous role to play

not only as economic strategists but also as launch pads and instigators. There is need to boost the competitive dimension not only in industrial policies but also in development and improvement of vari-

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REGIONAL NEWS

27Today

Some great African personalities, including KAM’s CEO, Ms Betty Maina, were part of the 26-member High Level Panel of Eminent Person’s on the Post-2015 Development Agenda formed by the UN Secretary General, Ban Ki-Moon

ous regional value chains. They must pioneer grand policies to regain their very important industrial bases. Utilisation of available com-modities will create a competitive environment that will stir the much-needed growth.

Fifty Years of Retarded Growth?It is ironic that the African Union celebrated

50 years of its unity this year, but most of its people still live below the poverty line. Kenya is also commemorating its Jubilee, with much more work that needs to be done for the coun-try to take off.

The failure by the continent to become fully industrialised is attributed to different factors; the sorry state of the infrastructure in most countries, low levels of human capital devel-opment, competition from cheap imports from other countries that pose iniquitous competi-tion to the locally-manufactured goods and what President Kenyatta referred to as “exter-nally imposed reforms,” just to mention a few.

Leadership-oriented DevelopmentIt is commendable that African leaders have

realised that the buck of solving the continent’s challenges stops with them. However, we can-not afford to wholesomely rely on politicians to offer the best solutions; politics sneaks into all-important development policies in Africa. As much as economic development is political in nature, it cannot be realised through hours of

political debates; Africa is not short of profes-sionals to implement set guiding principles.

Some great African personalities, including KAM’s CEO, Ms Betty Maina, were part of the 26-member High Level Panel of Eminent Per-son’s on the Post-2015 Development Agenda formed by the UN Secretary General, Ban Ki-Moon to work on the pos-2015 development agenda. Recently, Dr Mukhisa Kituyi was ap-pointed the Secretary-General of the United Nations Conference on Trade and Develop-ment. Such high-level appointments clearly signify the role Africa and Africans can play in international trade and development.

Africa’s dream to become a global econom-ic super power risks remaining just another dream if countries fail to engineer an economic transformation driven by an aggressive in-dustrialisation process. They need to create an ample environment for businesses to thrive. It is time we believed in Africa if we are to trans-form this continent.

The African Union Action Plan for Acceler-ated Industrial Development of Africa (AIDA) has recommended a number of strategies to-wards an industrialised Africa. AIDA calls for the promotion of production and diversifica-tion, creation of more jobs, enhanced produc-tion of energy for industrial development and strategic transfer of technology.

Industrialisation will not only result in a diversified range of products in international markets, but also enable businesses to earn more. State coffers will never run short of rev-enue; which can be channelled to other devel-opment areas. Carlos Lopes argues that, time is ripe for Africa to shift its focus from exporting soft commodities to industrialisation, which he refers to as “the future of Africa.”

Governments must learn to fund their de-velopment programmes without relying on foreign aid. In 2011, Foreign Direct Invest-ments inflows to Africa had declined to US$ 42.7 billion. This does not mean that they turn to investors by imposing heavy taxes that tre-mendously increase the cost of doing business and prices of manufactured products. It has nothing to do with unrealistic government incentives to encourage foreign investments for the sake of it. Instead, it is about creating an enabling environment for the current busi-nesses to produce more, create more jobs, and make products more competitive globally. The future to a self-reliant Africa lies in industriali-sation

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REGIONAL NEWS

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REGIONAL NEWS

It is one of a kind in Africa, a platform where the forces of demand and sup-ply determine the prices of Ethiopi-an agricultural commodities. Started in 2008, the Ethiopian Commodity

Exchange (ECX) is a government led elec-tronic trading marketplace that currently trades in 5 commodities; coffee, sesame, peas, beans and maize. Due to a transpar-ent cost structure where farmers are able to access the cost of commodities via SMS, the system eliminates pesky intrusive middle-men. The mobile push out system now

has a subscriber base of 800,000 farmers who get daily price updates from the ECX. While it is mandatory for the export orient-ed commodities such as coffee to trade on the ECX, locally traded commodities can use a parallel system. Foreign buyers are not allowed to trade directly on the ECX and have to be represented by local export-ers.

The Ethiopian government in turn has seen tremendous growth in value creation. Due to better pricing, the livelihood of the producers has been lifted and they are mo-tivated to produce high grade products.

In addition the ECX is currently subsi-dising warehousing programme, which it plans outsource. Producers pay for storage and handling fees for loading, unloading and stacking in the warehouse but the ECX pays insurance costs and bears the burden of shrinkage. This has brought down the number of days that produce remains at the warehouse down from 60 to 20.

Kenya can learn a lot from this kind of system. During a recent trade mission to Ethiopia, Kenya Association of Manufac-turers (KAM) members led by the Cabi-net Secretary for East African Community (EAC) Affairs, Commerce and Tourism, Ms Phyllis Kandie visited the ECX and the contrast to the Kenya warehouse receipt-ing programme was startling.

The Kenyan Warehouse Receipting sys-tem was largely private sector led when the country embarked on it in 2008 and so far has not been successful due to a lack of trust between buyers and sellers. Because of the uncertainty of markets and pricing, Kenyan farmers have become speculative, holding on to their products until they can

get the highest price. This is a disadvantage for buyers who are unable to do forward contracts. It would be ideal for buyers to be able to set the price for a product three or more months in advance.

Another challenge is quality standard-ization. End buyers need to be certain about the quality of the product prior to buying. Maize and wheat are grown all over the country. The main issue, however, is lack of sufficient storage capacity and the means to store grains properly while main-taining quality. More modern silos facili-ties are required.

Farmers also lose out in seasons where there is surplus. The National Cereals and Produce Boards’(NCPB’s) current role is to buy grains for strategic grain reserves and for its own commercial stock which it sells to millers in turn. However, the price mechanism is not dictated by market forces but rather by political exigencies.

As it is, large producers talk directly with millers or with NCPB while small producers sell their products to brokers or to the NCPB. Since the bulk of producers are small scale producers, prices would be stabilised if the brokers were removed from the process.

Until recently, the NCPB has not been liquid because its accounts were frozen due to an ongoing investigation into a maize scandal in 2004, leaving farmers in a quandary. Certain Kenyan agricultural products would do well in a commodity exchange system such as maize, wheat and pulses like green grams and kidney beans. Cut flowers would also benefit from such an exchange since exporters are now com-ing to Kenya to buy them locally

TRADE MISSION

Lessons from the Ethiopian Commodity Exchange (ECX)By ANNE NDUNG’U

BRIEFS

30Today

Groundwater Reserves Found in Northern Kenya

Companies Set for Kenya International Trade Exhibition 2013

Kenya Secures funds for US$650m Airport Expansion

The Kenya Airports Authority (KPA) has received funding offers from three banks to build a new terminal and second runway at its main airport that will cost $653 million. The plans to expand the ageing airport, a regional gateway for passengers and cargo, are not new but the authorities have come under pressure to speed up the expansion after the blaze that destroyed the arrivals terminal.

The lenders will not require a Government guarantee, suggesting that they are confident they can recoup their money on the project expected to get under way shortly.

The old arrival hall remains a charred shell and KPA is relying on a makeshift terminal made out of giant tents to handle arriving passengers. Even before the fire, the Jomo Kenyatta International Airport, built in the 1970s to handle 2.5 million passengers annually, was struggling to cope with more than 6 million people a year as its regional importance grew.

The Cabinet Secretary for The National Treasury Mr. Henry Rotich signed a financing agreement of USD13.02 million with TradeMark East Africa (TMEA), to support the implementation of a new Customs Management System (CMS). This is a vibrant and intelligence-based solution that will allow pre-clearance of goods using risk-based approaches. This will ultimately lead to administrative efficiency and speedy cargo clearance, making the cost of doing business in the region more competitive while making goods more affordable.

The formal engagement with TMEA dates back to November 2010 when the Government of Kenya through its Finance and EAC ministries then, signed an MoU with TMEA which set out the latter’s objective of delivery of strategic support in line with Article 87 of the Treaty for the Establishment of the E AC. It is against this backdrop that KRA and TMEA agreed to collaborate to improve trade facilitation as well as enhance the efficiency of regional trade corridors.

Thousands of international companies are expected in Nairobi in October to take part in the 17th Kenya International Trade Exhibition 2013 (KITE 2013).

The event, which will take place at the Kenyatta International Conference Centre for the 17th consecutive year brings together a wide range of multi-sector products, equipment and machinery to the East African market.

There will be more than 150 exhibitors, showcasing more than 10,000 products, in over 3,000 square metres of space at this mega event.

“With thousands of people expected to visit the fair, this gives us a great opportunity to pass on some of our experience to anyone mulling the idea of B2B events and its outcome” said Neville Trindade the Exhibition Manager. KAM will participate at the fair under the East African Business Council umbrella.

Two strategic groundwater reserves were recently discovered in Turkana County in northern Kenya, as a result of an exploration mapping project, GRIDMAP (Groundwater Resources Investigation for Drought Mitigation in Africa Programme), spearheaded by UNESCO in partnership with the Government of Kenya and with the financial support of the government of Japan.

The findings were announced at the opening of an International Water Security Conference in Nairobi on September 11, 2013. The two aquifers -the Lotikipi Basin Aquifer

and the Lodwar Basin Aquifer -were identified using advanced satellite exploration technology.

Their existence was then confirmed by drilling conducted recently by UNESCO, but there is need for further studies to adequately quantify the reserves and to assess the quality of the water. The technology combines remote sensing, seismic and conventional groundwater information to explore and map groundwater occurrence over large areas in short periods of time.

AT KAM

Mega-Power Plant for KisumuBy PAIDA NYAMAKANGA

Energy is vital for any economy given the huge effects of climate change. Therefore, mitigation and adapta-tion methods are in demand as more investments are made in the energy

sector. Speaking at the Governor’s Roundtable hosted by the Kenya Association of Manufac-turers (KAM) Mr Israel Agina, the then KAM Nyanza Western Chapter Chairman lauded the development and called on the county govern-ment to revive closed industries. “Kisumu is an important economic hub in the East African Community region and we need to work on re-viving the industries which have collapsed and nurture and develop those in existence.”

Kisumu Governor Jack Ranguma says plans are underway to construct a mega-power plant and supply enough energy for the county in an effort to shore up investor confidence in the area.

The Governors Roundtable is organised by KAM in partnership with AFPEAK, Kenya Pri-

vate Sector Alliance, Kisumu Central District Business Association, United Business Asso-ciation, Kenya Chamber of Commerce Kisumu Chapter, Kisumu County Small and Micro En-terprise Association, Lake Victoria Tourism As-sociation and Rural Tourism Network.

“Kisumu county has a huge water body and we are going to put up a large power plant and the details will soon be communicated. We es-timate that we can produce over 5 000MW of electricity,” said Mr Ranguma.

He said the county’s priority was to work on food security, promote industrialisation, tourism, information communication technol-ogy and security. The event was attended by over 100 executives of business associations to discuss ways in which the public sector and business in the county can work together to de-velop the economy of the region.

Ms Beth Wagude, the Chief Executive of AFPEAK urged the County government to explore ways of enabling the fish industry in

the area to produce at maximum capacity. “There are five fish com-panies in Kisumu each with a ca-pacity to process 50 tonnes of fish a day and currently are operating at a capacity of 10 tonnes a day.”

The business community called on the County government to address five key issues to attract investment:- clear investment plan based on strategic priorities by sector; establish an industrial park; special economic zones; re-duce bureaucracy and establish a one stop shop facility. The County government has committed to implement the proposals from the business community and carry out monthly reviews

COUNTY ROUNDTABLES

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AT KAM

Mombasa businesses have raised con-cern over the effects of high taxation in the county as a result of the multi-ple levies that are being charged, says, Munir Thabit, the Kenya Association

of Manufacturers (KAM) Coast Chapter Chairman.The sentiments were raised at a Governor’s Round-

table meeting held in Mombasa organised by KAM and other leading business membership associations from the county. In some cases businesses are being charged warehouse rentals based on the number of doors that the warehouse has, which is raising the cost of doing business. The meeting comes against the backdrop of challenges that are besetting the business community in light of the implementation of the de-volved government.

”Devolution plays a critical role in the operation of businesses and there is need to engage the county gov-ernment on how to improve the cost of doing business and improve business conditions in the county.

“The County of Mombasa is a gateway to the East African region because of its geographical location and there is great potential to boost the county’s econ-omy by improving efficiency of the service delivery

The Taxman Causes Misery

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By PAIDA NYAMAKANGA

system,” said Mr Munir.Industrialists raised concerns over eight broad key

issues which include water and environment, roads and infrastructure, security, trade and business levies, health, land and property and education. Businesses were concerned that out of the budget allocated to the county, 70 per cent will go to paying of salaries leav-ing very little for development. The county has been losing out on potential investments as a result of poor planning and zoning.

The health sector in Mombasa is said to be ailing and there is need for the county government to res-cue the situation. Business associations are calling on the county government to introduce weekly mobile health services to the residents to improve the health system in addition to increasing the supplies and staff in available facilities.

Water is poised to be the greatest cause of conflict if its management is not resolved. The County has long been importing water from other counties and thus needs to invest in water purification systems as well as encourage water harvesting.

The County Executive deplored the vandalising of infrastructure and called on all people in Mombasa to desist from the vice. Further, there are developments in the pipeline to upgrade the houses in the county. It has embarked on a slum upgrading project spon-sored by the World Bank. A pilot project for lighting up the informal settlements starting with Bangladesh is upcoming.

Challenges were also raised on the education sys-tem with Reish Arun Parikh, Director of Yaris Insti-tute of Information and Business Studies, calling for an increase in enrolment. Only 37% of the children from primary schools make it to secondary schools, hence the need for sprucing up of the education sys-tem in the county.

The Mombasa County Governor’s Roundtable has been championed by KAM working together with other business members organisations, includ-ing Mombasa Coast Tourism Association, Pubs, En-tertainment and Restaurants Association of Kenya, Kenya Association of Hotelkeepers and Caterers, Ke-nya Association of Tour Operators, Kenya National Chamber of Commerce and Industry, Kenya Trans-porters Association, East Africa Tea Trade Associa-tion, Mombasa County Community Based Organi-sation, Kenya International Freight Forwarders and Warehousing Associations, UJAMAA and Container Freight Station Association

AT KAM

33Today

MOMBASA

The Mombasa business community has for a long time asked the authorities to help ease traffic along the Makupa Causeway ‘Kibarani’ and the Jomvu-Miritini road. Congestion causes a snarl-up resulting

in wastage of business hours. This cry saw the Ke-nya National Highways Authority (KeNHA) finally move in to enforce new traffic laws to ease conges-tion. The enforcement of these laws came through a proposal by the task force housed at the Kenya Ports Authority (KPA).

The task force was formed last year and comprises stakeholders from KAM, KPA, KeNHA, Port Police, Coast Provincial Traffic Commandant, Chief Engi-neer Mombasa Municipal Council and representa-tives from Uganda, DR Congo and Rwanda.

The traffic jam also inconveniences staff of various KAM affiliates who are located along the Mombasa Nairobi Highway. The employees at times report to work as late as 11am after being stuck in the jam for hours. Delivery of goods to and from the Port of Mombasa has also faced huge delays resulting in manufacturers missing their targets, leading to loss of business.

The new rules require heavy commercial vehicles to follow designated routes and give way to private and public service vehicles. Speaking during the of-ficial launch of the traffic laws, the Coast Traffic Com-

mandant Joshua Omukata reiterated the need to ob-serve traffic laws.

“We are working closely with Kenya National Highways Authority to ensure that the heavy com-mercial trucks adhere to the laws. The police have given the truck drivers a seven-day grace period to familiarise themselves with the new rules after which those found flouting them will be charged,” said Mr Omukata

During the forum organised by the Cabinet Sec-retary, Transport and Infrastructure Eng Michael Kamau, KeNHA Director General Meshack Kidande said that no heavy truck will be allowed to use the Changamwe Roundabout to the Moi International Airport road. The heavy goods vehicles will have to cross Airport Road to and from either Bomu Hospital Road or Port Reitz Road.

The new rules will ensure that all heavy commer-cial vehicles headed to Changamwe Roundabout from Mombasa Island only use the left lane and shall not be allowed to overtake while all Nairobi-bound trucks will exit the highway at the Total Petrol Sta-tion junction to the Refinery Road and exit at Jomvu through Magongo Road but will be barred from driv-ing to the Mikindani area. These new traffic laws if fully enforced will be a big relief to residents of Mom-basa Mainland West as well as those who head to the Moi International Airport and to Nairobi

KeNHA Moves in to Ease CongestionBy SUSAN GITAU

Heavy commercial vehicles transport goods along the Mombasa Naorobi highway

AT KAM

MACHAKOS

KAM Chapter’s Humble BeginningsBy DAVID WAWERU

The current Machakos Chapter of the Kenya Association of Manu-facturers (KAM) can be traced back to a small neighbourhood watch group that was formed

by companies in the Mlolongo area. It was established to help KAM members sort out common business issues such as secu-rity and general wellness. With progress, it metamorphosed into the Athi River Chap-ter, comprising all KAM members in the area starting from KAPA Oil refineries to Kitengela. The passing of the new constitu-tion and the subsequent elections saw the KAM Athi River Chapter transform and its mandate widened to cover the whole of Machakos County. It was renamed the Machakos Chapter. Its scope covers Kajia-do, Makueni and Kitui counties.

The five agendas set by members to be achieved by the end of the year include: Engaging with various statutory bodies to ensure that members have reliable power supply, ensure that waste disposal is car-ried out efficiently and at affordable rates,

that infrastructure development, mostly along the highway is continuously im-proved, that members are well informed in order to comply with statutory require-ments and avoid litigation from the au-thorities and finally, that they fully engage the county government. The chapter has consistently engaged with the authorities. Power supply has improved to a great ex-tent. Engagement with local authorities has yielded fruit in that members are no longer harassed as was the case before.

Earlier in the year the chapter faced com-plaints from members about the delay of their cargo at the Mlolongo weighbridge. With delays ranging from between 12 to 24 hours due to the long queues, heavy losses were incurred in terms of time wasted and late deliveries of containers, some headed to the Embakasi Inland Container Depot for onward transmission to Mombasa. The major causes of the delays could be attrib-uted to corrupt officials and poor technol-ogy used at the weighbridge. Further, the argument was that having to weigh each

axle of the trucks as per the law was slow and cumbersome. As KAM continues to engage with the various authorities, it has had some victories; the rule to weigh each axle was relaxed and currently it is the weight of the truck that is taken into con-sideration.

2013 has been an interesting one for the Machakos Chapter in terms of engagement with the county government. KAM started off by attending and engaging with the Machakos Governor, Dr Alfred Mutua at the Machakos County Investment Confer-ence. Since then, county government and KAM have continuously engaged with the various ‘ministries’ of the county.

One of the challenges noted is that much as the county officials would like to pro-mote their respective counties and make them more competitive, most of the work-ers were inherited from the Local Govern-ments that were in place earlier. This, to some extent, has devolved corruption, and this, coupled with the lack of legislation to govern the trading environment, has led to some few members being harassed and be-ing asked to pay for multiple licences.

As KAM embarks on the task of working with the elected and other county officials, believes that they will take advantage of the goodwill that they currently enjoy. In-vestors have been invited and offered land in the county and a large number signed MoUs with the Governor.

What does the future hold for Macha-kos? KAM is continuously finding new and creative ways to engage with the coun-ty government. With the intended growth of Machakos into a metropolis, and with investors moving in, KAM expects there to be a boom in the supporting industries around. KAM expects to grow the chapter membership and with this comes the in-teresting bit of setting up goals consistent with the levels of advocacy to engage in

Quote by Gideon, the Chapter Chairman

34Today

AT KAM

KISUMU

Agina added that the county gov-ernment needed to allocate funds to support security. In his remarks, the County Commander who was the guest, Mr. David Ngetich urged the private sector for cooperation, not-ing that this if well done, especially in planning, challenges associated with security would be minimised.

He also urged the private sector to lobby the county government for proper traffic regulation of the informal sector, tuk tuk, boda boda and motorcycle riders. Mr Ngetich also decried the increase in juvenile delinquency and told of talks with the county government to opera-tionalise the stalled juvenile remand

home in Kombewa to ensure underage convicts remain in jail. He called for public private partner-ship in installation of CCTV and also engagement of the Governor in constituting the county policing authority.

The county has plans to construct a mega power plant to produce enough power for the whole coun-try in an effort to shore up investor confidence in the area. The chapter is also working on food security in addition to promoting industrialisa-tion, tourism, information commu-nication, technology and security

Setting the Pace for InvestorsBy ERIC OCHIENG’

Kisumu is a City that has grown significantly in recent years. The county has set plans to see it become a power hub

for the country and an investors’ destination of choice. The Kisumu Chapter of Kenya Association of Manufacturers (KAM) has been working on initiating these processes for business development.

In a recent forum, held in the chapter, businesses were urged to be proactive in their quest for a safe environment. During a joint secu-rity meeting between the private sector and security team, the OCPD Kisumu East Musa Kongoli said that the peace initiatives by the private sector especially the KAM/ Mercy corps led champions of peace had a huge impact in fostering security within the county. He urged the public not to take the law into their own hands by attacking uniformed officers, instead asking them to fol-low due process whenever they have grievances. He called for a wider stakeholder forum to address issues of security by also engaging county reps from known hotspot. He called for a pilot project for community po-licing in the Central Business District.

The Chairman of the private sector subcommittee on security Mr Tobias See said the various challenges the joint patrols were experiencing while noting the poor regulations on con-trolled development was the main cause of runaway crime. Mr. See pointed out the need to have public-private partnerships to introduce more police posts the county.

The then KAM chairman Mr. Israel

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ECONOMY

MANUFACTURING

Promoting Regional and Intra-African TradeKenya has the largest manufacturing sector in the East African region, but what will it take to conquer the rest of Africa?By Robin Obino

The manufacturing sector in Ke-nya is mainly agro based. As such it plays an important role in adding value to agricultural products through the provision

of both forward and backward linkages with the agricultural sector. The sector is also dominated by subsidiaries of multi-national corporations and nationally it

contributes an estimated 15 per cent of the Gross Domestic Product (GDP).

The sector has in recent years record-ed significant improvement in terms of growth. Some of the factors that the growth has been attributed to include im-proved power supply, increased supply of agricultural products for agro processing, favourable tax reforms and tax incentives,

more vigorous export promotion and lib-eral trade incentives. The growth has also been attributed to the expanding African market outlets through the African Growth and Opportunity Act (AGOA), Common Market for Eastern and Southern Africa (COMESA) and East African Community (EAC) arrangements. Consequently, the sector grew by 1.5 per cent in 2010 as com-

37Today

ECONOMY

pared to a 1.2 per cent growth recorded the previous year.

The one factor, however, that has hampered the growth of this sector is the high cost of inputs as a result of poor infrastructure. This has led to high prices of locally manufactured products thereby limiting their competitive-ness in the regional markets and hampering the sector’s real growth. There is, however, a framework that has been set to curb this prob-lem. It is the introduction of the East African Community (EAC) Customs Union. The union provides Kenya’s manufacturing sector, the most developed within the region, a higher chance for growth by capitalising on the en-

larged market size, economies of scale, and increased intraregional trade.

However, this is not all that can be done. En-gaging other partners from African countries can help grow this sector. And if the recent visit by Nigerian President, Goodluck Jonathan is anything to go by, the two countries are set to expand the markets for their local products, and strengthen stock exchanges alongside bi-lateral ties. Two Nigerian banks (UBA and Eco-bank), for instance, have already established branches in Kenya while GTB recently bought 70 per cent of Kenya’s Fina Bank.

According to Kenyas Foreign Affairs Cabi-net Secretary Amina Mohammed, the visit by the Nigerian head of state is significant for both countries. The Nigerian government, for instance, has offered to help Kenya with the management of its newly discovered oil re-sources. And with Kenyan oil reserves estimat-ed at 368 million barrels, a level high enough for commercial exploitation, the focus of the Nigerian leader’s visit was on the co-operation between Nigeria and Kenya.

So far companies that have expressed in-terest in these oil reserves include Africa Oil, a Canadian oil and gas Company and British explorer, Tullow Oil Plc. Additionally, there are other firms which have shown interest in other areas. One such investor is Africa’s richest man Nigerian billionaire Aliko Dangote, who is set to invest $400 million to build a cement plant in Kenya. Dangote, who was part of the busi-ness delegation that accompanied President Jonathan, said that his Lagos-listed cement company, Dangote Cement, would start con-struction of a two million tonne-capacity fac-tory within the next few months.

According to Dangote, any investment in the region, should be brought to Kenya. “We have realised that if we really want to do something big in East Africa, we must operate in Kenya. We believe that in the next two-and-half-years, we will be the dominant player in cement in Kenya,” he said. He added that to promote intra-African trade, which is quite low at present, and to improve the economies of the two countries, “there is need to promote a people-to-people link which is the actual ful-crum of any sustainable relationship. This way we would not need to go to the international stock markets or development partners to get money whenever we need to carry out capital projects.”

Kenya is promoting development of Special Economic Zones (SEZs) and Industrial Parks

According to Dangote, if anything is to be done in the region, it has to be brought to Kenya. “We have realized that if we really want to do something big in East Africa, we must operate in Kenya

38Today

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ECONOMY

Kenya has about 1.6 million registered SMEs that make 60 per cent of all busi-nesses in the country. This year’s Top 100 mid-sized company is Atlas Plumbers & Builders (K) Ltd. The company was

named the winner at an award gala held at the Car-nivore Restaurant.

In attendance was the Principle Secretary in the Ministry of Roads Michael Kamau who urged SMEs to form a lobby group through which to engage with the Government. The construction company cruised over 600 firms participating in the survey done by Ipsos Synovate and audited by KPMG, to take the top honours. Tropikal and Keppel Investments took second and third places respectively.

A survey released showed that majority of small and medium sized firms in Kenya rely on loans for capital expansion. However, the number of SMEs that sought lenders for credit and overdrafts de-clined from the 72 per cent posted last year to 57 per cent this year.

The Top 100 survey was established in 2008 in Kenya, Uganda (2009) and Tanzania (2010) by KPMG East Africa and Nation Media Group’s Busi-ness Daily and targets companies with a turnover of

Manufacturers Scoop Top Positions

between Sh70 million and Sh1 billion.A service firm won this year’s survey of the

fastest-growing medium-sized companies in Kenya as manufacturers dominated the top ten lists of the 100 firms profiled.

Lean Energy Solutions, a company founded in 2007, was announced the winner of the survey cov-ering firms with sales of between KShS 70 million and KShs 1 billion.

Lean Energy emerged top, riding on a green tech-nology that has won it major clients and sparked a change in established manufacturing processes. The company uses remnants of sugarcane, also known as bargasse, to power boilers in factories producing fast moving consumer goods.

The bargasse is compacted to create flammable blocks or briquettes that cost less and have a lower carbon footprint compared to diesel-fired boilers. The boilers generate steam used in manufacturing processes.

“This technology is much cheaper compared to fossil fuels; it also creates more jobs and emits less greenhouse gases. We are therefore offering triple benefits with this solution,” said Dinesh Tembhekar, the Managing Director.

Lean Energy was also named the best company in the professional services category of the Top 100 Survey, which was first launched to recognise the companies that employ over 70 per cent of working Kenyans.

KPMG East Africa CEO Josphat Mwaura called on business leaders to hold the Government to ac-count, noting that a conducive investment climate is critical in supporting business growth.

“It is the business of Government to create an enabling environment for businesses which create jobs and fund the State through tax and other contri-butions,” he said.

The survey showed that SMEs have stepped up their hiring, with 50 per cent of the firms employing over 50 staff on permanent terms compared to 39 per cent in 2010. The number of staff has continued to grow by a tenth since 2011 to 189 in 2012

GROWTH IN KENYA

MD Lean Energy Solutions Mr Dinesh Tembhekar with the overall winner award

LAND INVESTMENT

What does Article 65 of the Constitution Portend for Businesses?By Anne Ndung’u

AGRICULTURE

When the National Land Commission (NLC) placed an advert in the newspapers in June call-ing on all foreigners to

surrender copies of their title deeds to the commission within 60 days there were jit-ters among land owners and investors. The NLC is an independent Government body set up to manage public land issues. It plays the role of advising both county and local governments on land policies and issues in Kenya. It consists of nine commissioners

and is currently in the process of carrying out reforms that will guide Parliament in enacting a law on land as required by the constitution.

Kenya has not had a definite land policy since independence and until the constitu-tion was promulgated in August, 2010, a number of foreigners and foreign-owned companies held land on a freehold basis for 999 years. Due to this, there has been a large group of foreigners who own land in the country.

Article 65 of the constitution changes all

that. It limits non-citizens or companies, partially owned by Kenyans, to leasehold tenure not exceeding 99 years and further clarifies that a company must be fully owned by one or two citizens to qualify for freehold ownership. In the case of land held in trust, the constitution considers it as owned by a citizen only if all of the ben-eficial interest goes to citizens.

Land is an important factor of produc-tion and a number of companies halted their process of listing on the Nairobi Stock Exchange (NSE) upon reading the notice.

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Barren land to be converted for industrialisation

AGRICULTURE

40Today

It limits non-citizens or companies, partially owned by Kenyans, to leasehold tenure not exceeding 99 years and further clarifies that a company must be fully owned by one or two citizens to qualify for freehold ownership

The Chairman of the NLC, Mr. Mohammed Swazuri, was at pains to quell fears sparked by the announcement in a meeting held with the Kenyan Association of Manufacturers (KAM), where a number of issues were brought to the notice of the commissioners.

Section 8 of the sixth schedule which stipu-lates that freehold land held by non citizens will revert back to the Republic of Kenya and the State shall grant the owner a lease capped at 99 years raised a number of questions about future property transactions. This raised ques-tions such as what will happen to the old 999 year leases held by Kenyans, foreigners and foreigner owned companies? What procedure will be used to transmute these leases to 99 year old leases and will these be an automatic procedure? How are transfers going to be car-ried out by land registrars handling these is-

sues? But even more significantly, is when the article take effect?

The commission will have to look at the practical aspects when drawing up regulations related to article 65 since many Kenyan com-panies are still dependent on foreign investors. Things get murky in situations where a local company partners with a foreign company or where multinationals partner with smaller companies or SMEs on procurement projects. The NLC will be charged with stipulating how such situations will be handled by the new reg-ulations and what will happen to the title deeds which are normally used to source for capital. The implications of this clause for companies seeking to be listed on Nairobi Stock Exchange (NSE) will require further thought since shares can be bought by foreigners. Two thirds of the NSE listed companies are KAM members

Aerial view of land cultivated to generate business

ADVERTORIAL

INNOVATION

Efficiency in production key for DevelopmentIn the present competitive era, the cost of production plays a vital role in industry. As the price of liquid fuels, especially furnace oil, gets steeper than solid fuel price, its substitution by solid briquette is one of the alternative available.

Kg/m3, due to which 14 tonnes of bri-quettes can be loaded in single truck. Being cellulosic in nature briquettes can be easily burnt in boilers without clinker for-mation.

Briquette is an alternative fuel source that utilises organic materials made into pel-lets that is used as a fuel source. It has been found to generate heat equivalent to other forms of fuel, yet results in lower emis-sions and residues.

As the cost of fossil fuels continues to in-crease, the need for low cost alternatives is always increasing. Although the heating in-dustry has been dominated for the past five decades by gas, oil, and electric models, the growing trend for “green” alternatives is boosting sales in the biomass business providing many with a new view of op-tions available in the market today.

ProfileLean Energy Solutions Ltd. was incor-

porated in Kenya in 2007 with the mis-sion of enhancing clients’ competitiveness through provision of consultancy services in energy management, Kaizen, and proj-ect management.

Over time, the company has expanded its product portfolio to include manufac-turing Lean Briqs (Briquettes from sug-arcane bagasse). Other services that the company offers include energy audits, con-sultancy in Kaizen and technical training. It has a tie up with top notch international consultants and this has given it a competi-tive edge in the market.

Based on these energy audit findings,

Furnace oil used in boiler or ther-mal oil heater can be fully sub-stituted by briquette with an equivalent ratio of 3: 1 Kg/lit on the basis of calorific value. This

usually results in a saving of more than 25 per cent in operating cost and will have an attractive payback period of four to six months.

Surprised?Boilers are rarely fired at full load. Sim-

ple conversion via internal grate or exter-nal grate, which requires only removal of

its existing burner-blower assembly, add-ing a grate to burn the briquette in same combustion chamber and installation of an ID fan. Adiabatic flame temperature with solid fuel is lesser by 200ºC to 3000ºC. Thus in spite of addition of extra furnace usually up to 60 per cent capacity can be achieved.

Availability Briquettes are manufactured from ba-

gasse, which is a residue of sugar cane after extraction of sugar. The bagasse is dried in the sun and extruded. The compaction gives bulk density of 800

41Today

AGRICULTURE

Our key customer groups include manufacturing companies, hotels, hospitals, educational institutions to name just but a few

the company realised that there is a need for an alternative energy product that can help manufacturing organisations save energy costs and reduce their greenhouse emissions. This is what informed the company’s decision to go into Lean Briq (briquette) manufacturing.

Briquettes produced from briquetting of biomass are a fairly good substitute for coal, lignite, firewood and offer numerous advan-tages.

Lean Briqs [Briquettes] are cheaper than furnace oil, industrial diesel oil, LPG etc. in ad-dition to economic savings, briquettes have a positive effect on the enviroment but oil, coal or lignite once used cannot be replaced. High sulphur content of oil and coal when burnt pol-lutes the environment.

There is no sulphur in briquettes. Biomass briquettes have a higher practical thermal val-ue of 3,800 to 4,200 Kcal/Kg and much lower ash content of about 6% as compared to 20-40% in coal).

There is no fly ash when burning briquettes. When burning with well supplied air and tur-bulence, it burns with a temperature of up to 900°C.

Briquettes have consistent quality, high burning efficiency, and are ideally sized for complete combustion. Combustion is more uniform compared to firewood and boiler re-sponse to changes in steam requirements is faster due to higher quantity of volatile mat-ter in briquettes. In addition, production of 1 tonne of Lean briqs generates 12 man-day em-ployment opportunity.

FinancingThe company’s differentiation strategy in

boiler/furnace conversion is a BOOT (Build, Own, Operate, Transfer) concept. This is whereby Lean Energy signs a 7- year-contract with client for provision of steam at a saving of up to 25 per cent. It does all the investment like installation of Lean Briq fired furnace or boiler, supplies Lean Briqs and sells to clients steam at a saving relative to fuel oil cost of steam. At the end of the contract period, the company shall have recovered its investments and made its margins and the client will be at liberty to renew the contract or purchase energy efficien-cy equipment at mutually agreed terms. This ensures customer loyalty and is not easily imi-tated by competitors.

Lean Energy’s key customer groups include manufacturing companies, hotels, hospitals, educational institutions to just but a few.

Since its inception, the company has under-taken several energy saving projects. These have enabled clients to make savings of up to 25 per cent depending on the type of fuel they prefer.

How The client only parts with a security deposit.

The payback period for this deposit is three to five months. The client will be required to pro-vide civil foundation work for the equipment, space and shade for lean briqs.

In case of non-availability of Lean Briqs, the conversion does not interfere with the existing system. In case of an emergency, the client can revert to fossil fuel firing by removing the duct and putting back the burner of the original equipment. This change over cannot take more than three to four hours

43Today

AGRICULTURE

CLIMATE CHANGE

Linking Industrialisation to Food SecurityCan industrialisation help get Africa out of the food insecure pack under the changing climate? Within the next 50 years, food prices will rise dramatically and coming at a time when the global population is projected to reach 9.6 billion by 2050, huge demand will be placed on states and the environment to provide sufficient food

Food insecurity, malnutrition, cli-mate change, rural poverty and environmental degradation are among the list of challenges for which the world is searching so-

lutions. Africa is particularly vulnerable to these threats because both supply-side and demand-side challenges are putting addi-tional pressure on an already fragile food production system.

Current systems of production will only be able to meet 13 per cent of the conti-

nent’s food needs by 2050, while three out of every four people added to the planet between now and 2100 will be born in the region.

The First Africa Food Security and Ad-aptation conference hosted by UNEP in collaboration with FAO brought together experts, practitioners, private sector, CSOs, NGOs and policy makers from around Africa and the globe to discuss how the next iteration of development goals fol-lowing the Millennium Development

Goals (MDGs) can respond to this set of challenges especially climate change and food insecurity, as part of the so-called “post-2015” Sustainable Development Goals agenda.

Old approachesMany countries in Africa have pursued

industrialisation vigorously as part of their developmental plans over the decades. This has given rise to a lot of commercial

By Dr RICHARD MUNANG

agriculture where agro-industries are con-cerned. As a result, larger arable lands have been dedicated to industries. The question that behoves us all is: Will Africa export food whereas over 200 million people of its peo-ple are chronically undernourished? Africa spends over $18 billion on food importation; this means, greater percentage of the monies derived from Africa’s food exports are used to buy food into Africa again, sometimes with costs higher than what it earns during export.

It is imperative to change course and look at solutions that work with nature not against nature. The negative externalities of industrialisation are many. Current prac-tices emit enormous amounts of greenhouse gases because they utilise huge quantities of oil powering machinery and manufacturing fertilizer. The chemicals used disrupt and discourage natural soil processes and even add to global climate change.

Agricultural growth for Africa Agricultural growth is more important

for Africa than for any other continent. Af-ricans depend on agriculture and non-farm rural enterprises for their livelihoods, yet they are also unable to meet their basic food needs due to population pressure, the effects of climate change and land degradation. Ac-cording to the New Partnership for Africa’s Development, nutrient depletion in Africa represents a significant loss of natural capi-tal valued at an estimated one to three bil-lion dollars per year. If most of the nearly 70 million smallholder families in sub-Saharan Africa fail within the next decade to adopt sustainable land and water management practices on their farms, long-term food se-curity, productivity and income will be jeop-ardised. With industrialisation approaches promoting large scale farming and geared towards more cash crops, there is also a risk that cash crops like tea, coffee, tobacco and flowers will become more attractive to small-holder producers than staples, which could damage efforts to make Africa more food se-cure and might become vulnerable to revolt as experienced in Tunisia in 2011.

Working with Nature The planet needs an approach that im-

proves the local environment. In this con-text, building resilient and highly produc-tive food systems in agriculture-dominated landscapes is imperative. Achieving food se-curity in the context of Africa is unimagina-

ble without climate change adaptation and practices that not only support food produc-tion to meet people’s nutritional needs, but that also prevent soil erosion, conserve and provide clean water, recycle nutrients, and support the pollinators and biodiversity that underpin agricultural productivity. This calls for solutions based on ecological foundations and approaches. This Ecosystem based Ad-aptation (EbA) approach, which makes use of ecosystem services to help people adapt to climate change can also help tackle issues such as resource scarcity and ecological deg-radation. EbA approaches eschews applying chemical fertilizers to soil; rather, it favours compost and manure, which increase the soil’s fertility and ability to retain water—key advantages against hot, dry weather. In fact, many of the ecosystem based practices and technologies we need are already in use in the Africa continent and elsewhere. What is needed is to bring these isolated success stories to scale, to make them the rule rath-er than the exception. In Uganda, a project promoting agro-forestry and conservation agriculture resulted in more fertile soils and increased yields. This in turn reduced time and cost in preparing land for farming, leav-ing more time available for diversification, for instance, into livestock rearing. The proj-ect also resulted in less use of agrochemicals and improved biodiversity. About 75,000 people benefited from the project; 31,000 tree seedlings have been planted to harness the ecosystem and boost household investment in the short and medium term. Encourage-ment of chili (capsicum annum) production, earns poor households about $60 per week during the off-peak season and about $240 per week in the peak season. The ability to generate surplus incomes from their agricul-tural practices has dramatically contributed to the food security of these households, while improving efficiency and encouraging better agroforestry practices

Despite promising results, many examples of ecosystem based adaptation approaches in Africa are small in scale and scope, and geographically isolated. What we need now is to link, combine and take to scale proven technologies, processes and systems, while investing in new solutions for the future. EbA is justifiably the optimal approach that Africa has to climate change thus far

Dr. Richard Munang is UNEP’s Africa Re-gional Climate Change Head & Co-ordinator. He tweets as @MTingem.

44Today

AGRICULTURE

In Uganda, a project promoting agro-forestry and conservation agriculture resulted in more fertile soils and increased yields

ADVERTORIAL

45Today

With the magnificent al-lure of waking up to the sight of zebras, gazelles and ostriches grazing right outside your win-

dow, Ole-Sereni has stepped up again to introduce outdoor catering services. The

forte to this is that it includes the National Park.

This came when they realised the gap in the market in catering. Park catering came into being due to the close relation-ship between the hotel and the Kenya Wildlife Service (KWS) given the proxim-

inty of the hotel to the park. ‘It has been baby step for us to intro-

duce our service in this market and the competition has been very stiff. Trying to make a name for Ole-Sereni has not been easy but our services and handling of food is exceptional. Our foods are fresh

Outdoor Catering in the ParkOutdoor catering has slowly become the next big thing from hotels across kenya. Ole-Sereni has introduced outdoor catering with an exciting niche not seen in many other outdoor catering service providersBY CAROL KIIRU

OLE SERENI

ADVERTORIAL

46Today

and locally produced giving the kitchen sector a very fine cut and fresh products to work with,” says Ghulam Samdani, the General Manager of the hotel.

The beauty with the hotel is its location. Ole Sereni provides an ambience and a place that offers serenity away from the hustle of the city, that most hotels struggle with. With that stated its outdoor catering service comes at a time when ‘out of the box’ thinking is required.

Ole Sereni has most definitely set a high standard ever since inception and even though these are baby steps in yet another venture, it promises to deleiver. Food han-dling especially in the park is a very vital affair, thus being strict is a prominent trait.

“Having invested in a state of the art cater-ing truck built for outdoor events, one can prepare both hot and cold foods. Once the truck is out it is for outdoor catering only.”

The hotel has partnered with Kenya Inter-national Conference Centre (KICC) to provide outdoor catering services during their events. Given their excellent record, this partnership

can only mean greatness from both ends. They have also introduced packed lunches for clients within a 3km radius which has been a great segment. The feedback has been phenomenal, reinforcing the statement by Ghulam that they dont compromise on what they buy.

“We have catered for our in-house guests, companies and organisations, weddings and launches in the park something that has brought back clients to the hotel. On Christ-mas day we offer a bush breakfast that has seen the hotel record huge numbers of visitors from the city year in and out.“

Of course, with a very competitive market the hotel has had to make huge bargains in this service which, according to Ghulam, has been a bit demanding. “We have invested in marketing strategies which include billboards, e-mails to organisations and companies,” television, screens and recently our in-house publication that is due by the end of the year.’

“Trying to make a name for your hotel takes a lot of investing from every staff member.”

Ole Sereni has most definitely set a high standard ever since inception and even though these are baby steps in yet another venture it promises to deleiver

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