The manufacturing sector recorded a slow growth in 2016 as industries struggled to cope in a tough business environment characterised by massive layoffs and closure of some businesses, the Kenya Association of Manufacturers has said. KAM has noted companies continue to grapple with high cost of energy at Sh11 per kilowatt hour, compared to Ethiopia, where factories are enjoying lower tariffs of between four and five cents per kilowatt hour. Threats from illicit trade are also a major concern for manufacturers as the year comes to an end. It is estimated that Kenyan manufacturers are losing at least 40 per cent of their market share to counterfeiters, KAM CEO Phyllis Wakiaga said, which has “unfairly” reduced the industry’s earnings. This, coupled with frequent power outages, congested industrial zones, high labour input costs, increasing overall production costs and a huge import bill are denying the manufacturing sector an opportunity to thrive, the association pointed out. “We currently have a structure that supports imports and not local manufacturing where finished products and raw materials attract the same Value Added Tax rates. Corruption is also hindering the industry’s growth,” Wakiaga said. She said the harsh environment is to blame for the closure of industries, the most recent one being tyre manufacturer Sameer Africa, which announced it would shut down its Mombasa road manufacturing plant on September 30. The company’s managing director Allan Walmsley blamed the closure on competition from cheap and subsidised tyre imports mainly from China that enter the Kenyan market. “The...

Economists predict a gloomy year ahead as the private sec-tor continues to shrink due to austerity measures by President John Magufuli’s government, which is keen on procuring goods and services locally. Prof Honest Ngowi, an econo-mist at Mzumbe University, says Tanzanians should expect high tax rates, increased nuisance tax and declining lending by banks.The government has already barred its institutions from de-positing their funds in commer-cial banks, with Tsh500 billion ($231.5 million) already with-drawn from 54 banks and depos-ited in the central bank. Prof Ngowi told The EastAfri-can that the current cash crunch will continue to bite.“The government is the big-gest buyer of goods and services, and the directive to trade locally will continue to bite as long as it stands,” he said. Recently, the Magufuli admin-istration issued a directive to all central government and local government authorities, public institutions and statutory corpo-rations to engage in government-to-government business dealings, a move analysts say could nega-tively affect private sector com-panies. According to guidelines for the preparation of the government budget for the year 2017/18, is-sued by the Ministry of Finance and Planning, accounting officers of all public entities are to stop buying goods and services from private firms and instead deal with state-owned enterprises. Prof Ngowi cited poor rains, which will hurt food security and accessibility of energy as hydro-power generation dams are likely to experience a decline in water levels — as another danger sign.“The weatherman’s warn-ing on low rains next year is of concern because it will not only...

The Ngong tunnel on the Nairobi-Naivasha standard gauge railway. Large infrastructure projects have resulted in weak domestic savings. FILE PHOTO | SALATON NJAU |   NATION MEDIA GROUP IN SUMMARY Although government data has painted a rosy picture of the economic performance over the  nine months to September 2016,  the International Monetary Fund and the World Bank are  cautious about the  country’s growth prospects  as banks  shun  lending to the private sector  in  a controlled  interest rate environment. The  fragile economic outlook has been further dampened by reduced credit to the productive sectors of the economy  and the spiralling public  debt burden, which  currently stands  at over Ksh3.6 trillion ($36 billion). Kenya’s economic growth prospects have been dimmed by uncertainties related to this year’s general election, interest rate controls, shortfalls in revenue collection,  and a ballooning public debt. Although government data has painted a rosy picture of the economic performance over the  nine months to September 2016,  the International Monetary Fund and the World Bank are  cautious about the  country’s growth prospects  as banks  shun  lending to the private sector  in  a controlled  interest rate environment. According to the World Bank, increased government spending during an electioneering period may crowd out private sector investment and lead to overheating of the economy, resulting in inflation. “On the external front, challenges include weaker than expected growth in the global economy, volatility in global financial markets and a spike in oil prices,” the World Bank said. The Central Bank of Kenya confirmed that credit to the private sector...

For many years, farmers have pushed in vain for their milk to be paid based on quality as opposed to quantity. Well, while a majority of the processors are reluctant to implement the model, one has taken the new path, heralding good times for farmers in the New Year and beyond. Happy Cow, a milk processing firm in Nakuru, is pioneering a system that is paying farmers based on quality, rather than quantity for every produce delivered.The company is working with two smallholder dairy cooperatives, namely the New Ngorika Milk Producers Limited and Olenguruone Dairy Farmers Coop-erative Society, which collect the milk from farmers at Sh37 per litre. Producing high quality milk is earning the farmers more as the company uses a system called Quality Based Milk Pay-ment (QBMP) to reward them. How the system works Quality of milk delivered is tracked from the 50-litre can delivered to indi-vidual farmers (5 to 7) based on results of a laboratory analysis. The lab results are used by the firm to plan targeted extension services that the farmer needs to improve and maintain quality. Farmers participating in the sys-tem have to label and own their cans. The can number is used to track quality and trace the source of the milk. Cans qualify for bonus every month and to continually be awarded the bonus is an important mission that requires a lot of attention and effort by both the farmers and the extension team. Happy Cow is working closely with SNV Kenya,...

Tanzania's President John Magufuli (left) and his Rwandan counterpart Paul Kagame jointly opened the Rusumo one-stop-border- post on April 6, 2016 to improve trade between the two countries. PHOTO | CYRIL NDEGEYA  The East African Community is working with agencies such as TradeMark Africa to ease the movement of labour and capital and cross-border business. The Community has initiated projects focused on creating market access, enhanced trade environment and competitiveness. In 2016, 10 of the 13 one-stop border posts were completed and are operational under the integrated border management arrangement. These are the Holili-Taveta, Mirama Hills-Kagitumba, Kobero-Kabanga, Busia-Busia, and Mutukula-Mutukula posts. According to the TMA, the OSBPs have significantly reduced the time spent at the borders. “There has also been efficient movement of goods on the Northern Corridor and linkages to the Mirama Hills-Kagitumba OSBP with construction of the Ntungamo and Port Reitz roads,” said TMA chief executive officer Frank Matsaert. There was a 50 per cent reduction in Customs transaction time as a result of the upgraded Automated System For Customs Data,  the electronic cargo tracking system and the Authorised Economic Operator Scheme, and the electronic single window system. This reduction translates into reduced cost of doing business. For Rwanda, the electronic single window saw clearance times fall from 11 days to one day 10 hours, saving businesses $6.8 million in 2013 alone. Uganda Revenue Authority’s Electronic Cargo Tracking & Customs Management System saw a 75 per cent reduction in transit and clearance times, saving traders $56 million annually. The EAC Single Customs Territory also improved transit times to...

According to energy cabinet secretary Charles Keter, The first export of oil from Kenya through the port of Mombasa is now expected for April 2017. Source: KTN

The Kenya TradeNetwork System for application of local marine cargo insur-ance is up and running, the Kenya Trade Network Agency has said. The state agency mandated to facilitate the new government initiative yesterday said importers and insurance firms can now process marine covers online, under the government’s new policy for mandatory local underwriting for all imports. e new law, which came into effect on January 1, requires imports to be covered locally, under section 20 of the Insurance Act, Cap 487.“ e KenTrade system is up and running,” head of corporate communi-cations Ann Odero said yesterday. She said KenTrade is working with other industry stakeholders including State department for Maritime and Ship-ping Aff airs, Kenya Revenue Authority and the Association of Kenya Insurers to implement the rule.Marine Cargo Insurance policy pro-vides indemnity against loss or damage for goods being transported by sea or air and incidental land transportationFirst time users of the system are required to get access credentials by contacting KenTrade to procure the marine cover insurance certifi cate from their preferred Insurance Company. is process will be done outside the National Electronic Single Window System, KenTrade said yesterday.“ Upon issuance of the MCI ,the trader, insurance company will be required to submit to KRA and any other partner government agencies the certificate through the Kenya TradeNet System,” Odero said. e application through KenTrade is intended to allow KRA and other government agencies to view the marine cargo insurance certificate electronically in the course of cargo clearance. The Shippers...

The proposed reduction of the Tourism ministry budget by Treasury will hurt the country’s tourism sector which is on a recovery path, CS Najib Balala has warned. Treasury CS Henry Rotich in a mini budget tabled at the National Assembly in December 2016, has proposed a cut on the tourism promotion budget by Sh1.5 billion, as he seeks to reduce the government’s expenditure for the financial year 2016/17 by Sh181 billion. Balala has however retaliated saying the reduction will hard hit structures set for recovery, which include marketing campaigns by the Kenya Tourism Board in the international markets. “The proposed budget cuts will drastically affect the tourism industry but like most sectors affected, we have to go back to the drawing board and re-strategise in order to reverse the effects,” Balala said in an interview with the Star. Rotich allocated Sh4.5 billion for tourism promotion activities in the current financial year which ends in June. Also to be affected, Balala said the Sh1.2 billion charter incentive programme launched in December 2015. “We will definitely need to review the allocation for the charter incentive programme,” Balala said. The Treasury is seeking to cut development spending by Sh213.5 billion for the current financial year. Balala said there is a need to open skies to low cost airlines in both Nairobi and Mombasa, as the charter incentive programme may have to be prolonged to 2018, owing to the budget cuts. “Charter airlines which comprise two per cent of the airline business are not...

Kenya’s exports to the region dropped by the largest margin in three years in the third quarter of last year, to $275.7 million from $380.3 million in the first nine months of 2015, new data shows.All countries in the region, with the exception of the Democratic Republic of Congo, cut their uptake of imports from Kenya, according to a report from the Kenya National Bureau of Statistics. While the drop in exports has been attributed to encroachment in key market segments by Chinese products, local factors like taxation, new competing industries in export markets and instability in South Sudan have contributed to the trade down turn. Goods from China, some of dubious quality, have flooded the market, making the Asian giant the biggest exporter to the region.Kenya relies on Africa to absorb more than 40 per cent of its manufactured exports. The data shows a 30 per cent drop in exports to Uganda to $152.1 million in the period under review, from $228.18 million over the same period in 2015. “Africa remained the leading destination of the country’s exports, accounting for 40.6 per cent of the total during the review period. Within Africa, Uganda was the largest market for Kenya’s exports, accounting for 11.3 per cent of total export earnings, followed by Tanzania, which accounted for 5 per cent of total export earnings in the third quarter of 2016,” the report notes.Tanzania’s imports from Kenya dropped to $67.5 million in the third quarter of last year, from $78.2 million over...

Kenya’s exports to the region dropped by the largest margin in three years in the third quarter of last year, to $275.7 million from $380.3 million in the first nine months of 2015, new data shows.All countries in the region, with the exception of the Democratic Republic of Congo, cut their uptake of imports from Kenya, according to a report from the Kenya National Bureau of Statistics. While the drop in exports has been attributed to encroachment in key market segments by Chinese products, local factors like taxation, new competing industries in export markets and instability in South Sudan have contributed to the trade down turn. Goods from China, some of dubious quality, have flooded the market, making the Asian giant the biggest exporter to the region. Kenya relies on Africa to absorb more than 40 per cent of its manufactured exports. The data shows a 30 per cent drop in exports to Uganda to $152.1 million in the period under review, from $228.18 million over the same period in 2015. “Africa remained the leading destination of the country’s exports, accounting for 40.6 per cent of the total during the review period. Within Africa, Uganda was the largest market for Kenya’s exports, accounting for 11.3 per cent of total export earnings, followed by Tanzania, which accounted for 5 per cent of total export earnings in the third quarter of 2016,” the report notes. Tanzania’s imports from Kenya dropped to $67.5 million in the third quarter of last year, from $78.2...