The early financing that helped propel Kenya’s industrialisation

In the 1970s, Kenya was in a hurry to develop economically. A decade had passed since African leaders took over power and they were now searching for a quick solution to place the economy in mwananchi’s hands.

One of the vehicles used to hasten economic progress was the strengthening of of Industrial and Commercial Development Corporation (ICDC).

The parastatal would dish out loans to thousands of traders until some were accused of marrying more wives instead of expanding their businesses.

Initially known as Industrial and Development Corporation (IDC), it was formed in 1954 with a focus to mainly finance non-African businesses.

It took over the East African Industrial Management Board to “facilitate the industrial and economic progress of the Colony,” wrote the East African Standard (now the Standard) in November 20, 1954.

After independence, it was reorganised “to reflect the new aspirations and expectations of the majority of the people of Kenya,” as aptly captured in the paper.

In 1963, ICDC was charged with the responsibility of translating into practical reality the government’s vision of placing Kenya’s economy in the hands of locals. ICDC’s Executive Director Matu Wamae would describe it as the biggest transition vehicle being used by government to Africanise the industrial and commercial sectors of the economy.

It also played a crucial role in the formation of industrial estates aimed at small and medium enterprises in Eldoret, Nakuru, Mombasa and Kisumu.

“The programme entails the construction of factory buildings which are rented to African entrepreneurs at reasonable rents with administrative and technical service blocks attached to them,” wrote the East African Standard in March 1970.

Machinery and equipment would be provided to them on a 160 per cent loan basis with the loans to be repaid back over periods ranging from eight to ten years at an interest rate of eight per cent.

Eliminate middlemen

The ICDC also incorporated its subsidiary the Kenya National Trading Corporation which engaged in wholesale trade and the export-import business. It began operating in 1965 aiming to eliminate middlemen who made the final price of goods costly to traders.

ICDC continued to consolidate its place in Kenya’s industrialisation, newspaper headlines described it as a “roaring success” that was making Kenya the “workshop of East Africa.”

In the 1970s, its network of agents across the country included 630 in produce and provisions, 91 in textiles, 100 in hardware, 25 in wines and spirits and 23 in bicycle spare parts.

In 1970, President Jomo Kenyatta ordered non-citizen traders with short-term licences to immediately close their businesses. ICDC was to help potential African businessmen acquire the vacated premises.

It would provide loans of up to 75 per cent of the cost of stock in shops and a ten-year loan of 75 per cent of the cost of buildings, said Mr Wamae.

In the case of the first loan ICDC would require security in the form of land or building for the amount of the loan advanced.

In February that year, Asian traders had also been warned by the corporation’s chair John Keragori against undercutting prices in order to undermine Africans. He said ICDC was fully committed to the rapid Africanisation of commerce in the country.

There was also reluctance to lease premises to Africans and rents were even pushed up so as to turn them away.

Banks were also not loaning many Africans due to the fear that the loans wouldn’t be repaid.

“The main burden of financial assistance has fallen on the shoulders of the ICDC,” said ICDC Chief Manager P.M Waweru. ICDC urged locals to organise themselves into cooperatives or companies and come up with a ‘viable industry’ which the ICDC would help finance. It would finance mainly the manufacture of goods presently imported.

It was hoped that the establishment of small industries in the rural areas would help absorb thousands of school leavers who were migrating in numbers to big towns to seek employment.

President Kenyatta had directed that loans were to be repaid in five years instead of three.

With the help of ICDC, a factory to process wool had been put up in Nakuru while a vegetable one had been set up in Naivasha to cater for small scale agriculturists. In December 1974, ICDC signed a deal with Saltec International from Rome for the establishment of a salt refinery and works in the coast.

In April 1975, the government said it would set up a giant textile mill at Eldoret at a cost of Sh235 million.

This was colossal money by then.  It would be known as Rivatex and would be an undertaking of the ICDC.

By then, government had shares in 32 industrial organisations with the help of the ICDC. It also became the majority shareholder in Kenya Wine Agency Ltd (KWAL) in 1970, a venture that saw it earn Sh860 million in 2014 by selling a 26 per cent stake to Distell Ltd, a South African firm.

By 1976, more than 9,000 Kenyans had received commercial, industrial and property loans amounting to more than Sh500 million since independence.

However, challenges emerged in recovering some of the loans. In 1979, ICDC refused to offer Sh50,000 loan to any trader if the security offered didn’t have a title deed or lease because it became difficult to recover. Outstanding loans stood at Sh94 million.

Loss making projects

By May 1979, the loans given had increased from Sh30 million to Shs330 million in a span of two years. Staff had risen from 50 to 280 while investments had risen from Sh50,0000 to Shs560 million in the same period.

In September 1986, 27 out of 61 ICDC projects performed poorly. It spent Sh27 million in rehabilitating the loss making projects. No dividends were offered to shareholders that year. In the 1980s it was owed Shs237 million in unredeemed loans to 3,449 persons.

Though it is not visible as it was in the formative years of the country, ICDC still fights to be relevant despite government thinking that it should be merged with other State investment arms to address capital challenges. Last year, in November, it slashed its loan interest by three per cent to usher in the era of capped interests. It had been charging 16 per cent and now charges 13 per cent.

On February this year, it financed a Sh650 million real estate project - the 36 three bedroomed furnished Oceania Apartments at the Coast.

It is also involved in other projects such as Runda Paradise, Zumia heights in Mombasa and an industrial park in Eldoret that is projected to cost Sh6 billion. It also has a 23 per cent stake in Centum at Sh462.5 million.