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How Kenya can tap into Chinese, Indian billions

BUSINESS
By Mbatau wa Ngai | July 16th 2016
From left)President Uhuru Kenyatta, Indian Prime-Minister Narendra Modi and First Lady Margaret Kenyatta attends a luncheon during Modi's visit to Statehouse Nairobi. This was on 11/07/2016. PHOTO BY PIUS CHERUIYOT

The increased number of world leaders urging their citizens to invest in Kenya is a clear demonstration that the Government’s reform efforts are working.

India Prime Minister Narendra Modi was the latest to not only urge his countrymen to step up their investments in Kenya but also announced a Sh1.5 billion kitty to develop small and medium-size businesses.
Modi’s promise to help set up a drugs manufacturing firm to produce drugs for the local and regional markets is significant because his country is a world leader in the production of quality generic drugs.

This, in turn, leads to a reduction in the cost of treatment for diseases such as AIDS, tuberculosis and malaria. It is these low treatment costs, coupled with appropriately trained medical personnel that have transformed India into a hub for medical services.

To his credit, President Uhuru Kenyatta seems to have persuaded his Indian counter-part to assist Kenya to develop the medical infrastructure that will turn Kenya into a regional and continental medical hub. But perhaps, Kenyan interests may be best served by persuading the Indian manufacturers to join their more than 400 counter-parts already operating locally to produce goods for the regional and the larger African market.

This need not be all that difficult considering that China, India’s arch-rival in its claim for global leadership this century, has already chosen Kenya as its manufacturing hub for Africa. The hope is that the Government will take a more pro-active role in ensuring that the bulk of the raw materials used in the manufacture of goods by these two emerging global giants are sourced locally. The planned aerial surveying of the entire country to determine the presence, volume and value of its mineral resources should make this process that much easier and profitable for all the key players.

In the event that the raw material is not available locally, the country’s interests would be best served if it set up the necessary facilities to import and semi-process the required materials from elsewhere. The aim would be to ensure the country does not turn into a centre for assembling the ready parts in the name of manufacturing as is the norm at the various motor-assembly plants.

To derive maximum benefits, the country has to set up special investment vehicles that would go into partnership with the Indian—and other countries’—companies. Obviously, there is a great need to learn from the number of joint-ventures that have failed in the past including the notorious Pan Paper in Webuye. But the country should not allow itself to be held hostage to the greed of past leaders which led to the signing of lop-sided partnership agreements. A country like Singapore whose economy is driven by major state investments in joint-venture companies would provide invaluable lessons.

Another area worth a second sustained look is the possibility of turning India into a re-export hub for Kenyan agricultural but value-added produce. Kenya policy-makers may be well-advised to use the same lens when looking at both China and India given the fact that the two countries are home to more than a third of the global population. They are also classified as newly-industrialised countries with growing middle-classes.

The two countries’ ambition to grow their economies using raw materials sourced from Africa and selling a sizeable volume of their manufactured goods back to the continent means that Kenya can reap huge benefits provided it implements appropriate policies.

Expatriate chief executives

For starters, reforms at the Kenya Ports Authority should be stepped-up even if some of the required measures go against the wishes of the entrenched special interest groups. This means the port’s operations should be benchmarked with the best in the world. If this means the hiring of expatriate personnel poached from these world-class ports so be it.

Kenya Airports Authority has already demonstrated the political leadership is not afraid to go outside the country to hire the best by hiring a Norwegian as the chief executive officer. Critics of this development need only remember the sterling role played by similar expatriate chief executives at Kenya Commercial Bank and Kenya Airways before the latter was sabotaged by locals.

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