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Boost for Jua Kali sector as State plans Sh120m manufacturing hub

FINANCIAL STANDARD
By Paul Wafula | December 15th 2015

The Government plans to establish a Sh120 million common manufacturing facility in Nairobi early next year that will enable small-scale manufacturers access equipment in a move expected to turn around the Jua Kali industry.

Nominated Industrialisation Secretary Julius Korir said manufacturers would “buy time” at the plant to be set up in Kariokor — one of country’s capitals for Jua Kali players and other light industries.

“We shall buy equipment and manufacturers will buy time to produce their products in the facility. We expect to have it up and running by March next year,” Mr Korir, who was last week vetted for the job of principal secretary in the Industrialisation and Enterprise Development Ministry, said.

The development promises to give the sector access to better equipment that will boost production, quality and efficiency.

Korir also said the Government would set up 30,000-square-foot warehouses to be offered to investors as work sites.

Factory outlets

But it is the opening up of the Export Processing Zone (EPZ) to enable them sell part of their produce in the country that is set to have far-reaching consequences in the manufacturing sector.

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The Government is now looking at establishing factory outlets to allow companies operating in the EPZ to sell locally in a bid to support the local cotton industry.

This is part of a strategy being used to phase out the industry around second-hand clothes, commonly known as mitumba, by providing cheaper, high-quality alternatives.

The State will also focus on the leather and textile industry, and set up five model ginneries across the country.

“We have looked at all the ginneries in the country, and we have identified the ones in Busia and Kerio Valley as the most viable at the moment, given that their equipment is still in good shape,” Korir said.

He also revealed that Rivatex has agreed to guarantee a market for the finished products.

“Rivatex’s modernised equipment is in the high seas coming.”

Korir added that the Government had intervened on the stalemate between the Chinese company building the standard gauge railway — China Road and Bridge Corporation (CRBC) — and steel industry players.

“We had been told that local steel was not up to standard, so we took samples and tested them, and we found that this was not true. We have steel that meets the standards required and the company has now accepted to buy locally,” he said.

CRBC has been having problems meeting the 40 per cent local content threshold, often giving the excuse that local products are not up to standard.

But Korir said the contract signed by the Government and the Chinese company does not explicitly require the company to buy 40 per cent of its raw materials from local manufacturers, making enforcement of the same difficult.

“The contract does not compel the company to buy the quota from locals, which is why we have resorted to negotiation. But I think we need to put this clause in future contracts for major infrastructure projects,” he said.

10-Year plan

The country recently launched an ambitious 10-year plan to revive the manufacturing and industrial sector and generate one million new jobs.

The blueprint will also see the creation of an industrial development fund, industrial parks along infrastructure corridors and support agro-processing, mining and other sectors.

The plan developed by the Ministry of Industrialisation plans to add between Sh200 billion and Sh300 billion to the economy by 2020.

Industrialisation Cabinet Secretary Adan Mohamed said the country has identified 10 opportunities in key sectors that will increase manufacturing jobs by 150 per cent to 435,000 in the first five years.

The Industrial transformation programme will see the development of a food-processing hub in Mombasa to process imported agro-based products, such as wheat, palm oil and rice.

Agro-processing zones will also be launched in Kisumu, Meru, Galana, Nakuru and Kwale for local commodities, such as avocados, mangoes, cassava, peas, passion fruit and potatoes.

A fishing port and fish processing zone will be established in Lamu, and a textile hub in Naivasha to attract anchor investors. The Government will also launch a leather cluster in Machakos and two other locations to be identified.

The plan includes the setting up of national construction service champions and supporting their participation in mega infrastructure projects. It will also see the development of a low-cost housing ecosystem, with an accessible and affordable environment to support social housing.

The Government will also develop local content requirements to support local manufacturing sectors, such as the steel industry.

Oil and gas

The plan has also set out to attract international oil and gas mining service firms to set up in Kenya and promote a Business Process Outsourcing (BPO) cluster.

To develop the SME sector, the Government will select 50 small and medium enterprises with the highest potential every year in key sectors and support them with credit, training and networking.

There will also be incentives offered for local value addition for multinational companies to create opportunities for SMEs by investing in group packaging. This is expected to attract between Sh20 billion and Sh24 billion in value addition, and create 10,000 jobs.

The transformation programme hopes to increase manufacturing’s contribution to the value of goods and services produced in Kenya to 15 per cent.

It also hopes to increase foreign direct investments five-fold and see the country’s position rise up the Ease of Doing Business index to the top 50 by 2020.

The manufacturing sector has remained flat in the last decade, contributing a static 11 per cent to the GDP, and Kenya is currently 108th in the Doing Business index.

The plan is expected to cash in on the growing middle class that is providing a market for finished goods, with demand largely being met by cheap Chinese products. Kenya’s imports have increased to 40 per cent of GDP, compared to 15 per cent for exports.

The Government also wants to create model factories to impart manufacturing expertise to SMEs and strengthen sub-contracting policies to improve links between big and small players.

The blueprint notes that an industrial development fund would help respond quickly to investment opportunities in priority areas, and accelerate development of required infrastructure for critical projects.

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