KAM Annual Report 2013 by Kenya Association of Manufactures

Cover KAM annreport.pdf 1 6/18/2014 9:47:06 AM

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Contents

PAGES

Chairman’s Statement

Board of Directors

Chief Executive’s Report

Leadership Team

Policy, Research and Advocacy

KAM Consulting

Membership Recruitment and Development

Communication

Finance, Administration and Projects

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Chairman’s Statement The elections ushered in a new National Government and 47 County Governments all keen to implement their programmes. The Association had to readjust its strategy to streamline it with the changes in the structures brought about by the implementation of the new constitution. We especially welcome the focus of the Jubilee Government on the issues that matter to business and especially manufacturing. We note with excitement the focus on energy security, improvement of logistics and market development. It was also pleasing to note that the Jubilee manifesto had plans geared towards resparking a manufacturing revolution which resonate well with the Industrial Business Agenda which KAM was pursuing in the year 2013. Plans for sparking an industrial revolution in the Jubilee Manifesto were focused on the following nine thematic areas: • Improvement of energy infrastructure and promotion of alternative energy sources. • Improvement of other infrastructure services for business, such as roads, rail and water supply. • Enactment of new Public Private Partnership (PPP) legislation. • Establishment of a Kenya Development Bank. • Help Kenya’s business sector become as competitive as possible by reducing business taxation, removing unnecessary regulation and encouraging competition through new enterprise zones in each County. • Introduction of tax incentives to encourage investment and growth in the manufacturing and service sectors, to enable creation of 1 million new jobs. • Pursuit of exchange rate stabilization, policy and monetary policy that will lower interest rates. • Bolstering funding for the Anti-Counterfeit Agency to fight counterfeiting. • Provision of loans and grants to new small businesses through the new development agency – Biashara Kenya.

Polycarp Igathe, KAM Chairman

Dear fellow members, Welcome to the 2014 Kenya Association of Manufacturers (KAM) Annual General Meeting. The year 2013 represents positive growth for the Association as well as the manufacturing sector in Kenya. The manufacturing sector grew by 4.8% in 2013, underpinned by single digit inflation and a stable foreign exchange rate. Congratulations to Government for macroeconomic stability. The growth of the economy, especially in the manufacturing sector, is quite welcome as we had all expected some contraction due to the elections at the beginning of last year - a fear that did not materialise.

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Chairman’s Statement (Cont’d) Betty Maina and the team at the Secretariat have been outstanding and I can bear testimony that it has been a pleasure watching the secretariat team pull together and redefining advocacy work in Kenya.

On energy matters Government has made huge strides and industry is optimistic that when the planned 5000 MW power plants are commissioned they will be a game changer for an industrial revolution in Kenya. Security remains a major concern for industry and Government has to keep us assured of good security in order not to dampen investor confidence in Kenya.

Future Prospects I am optimistic of the future of the manufacturing sector. Key fundamentals including security, policy stability, education to ensure that the skills churned out of universities match the requirements of industry will be crucial for the success of the sector. Standard Gauge Railway will bring in a lot of efficiency in the transport system. Government’s ambition to create more jobs in the country can easily be achieved if an enabling environment is created for industries at County level. Improvements in infrastructure and delivery of an additional 5000 MW of power at cheaper rates bode well for the development of the manufacturing sector. It has been an honour for me to serve the manufacturing sector in Kenya. I have no doubt that I served in an entity which is undoubtedly the best manufacturing business membership organisation in East Africa.

The Government promised to encourage everyday goods to be produced in Kenya. To this end, KAM had a good working relationship with Government through the Cabinet Secretary for Industrialization & Enterprise Development, Mr Adan Mohamed, in promoting the Buy Kenya Build Kenya campaign. It is still work in progress. In the tax regime, unintended consequences of VAT negatively affected some industries. We have seen some reversals with the recently passed VAT Ammendment Act of 2014 but there are still some anomalies that we expect Government to correct soon. The Association will continue to push for reversal of some of the policies that make the tax policy unfavorable for local manufacturers and emphasise a tax policy that promotes production.

Financial Performance

Fellow members as I pass on the baton to the incoming chairman, allow me to thank you all for your support during my term of office. The manufacturing agenda in Kenya is complex and we would not have managed to make the strides we did without your full support. It was a pleasure serving you all for the last two years. Indeed we have made progress in our advocacy initiatives and I call upon all of you to offer the same support to the next chairman of our great organisation.

Turnover rose by 75% to Kshs 375, 751, 626.00 in 2013. Profit grew by 60% to Ksh.36, 338, 856.00 from Ksh.21, 397, 357.00 in 2012. This was mainly due to the increased level of subscriptions received and advocacy related projects that the Association executed and support from grants. The future of the bottom line of the Association looks bright as we complete our new building where the rent will supplement the income of the organisation.

As my two year term comes to an end, I would like to thank you all for the opportunity and confidence bestowed upon me to serve as KAM chairman for the last two years. May the KAM spirit of inspiring global competitiveness live on as we spark a manufacturing revolution in Kenya and beyond.

On this note I would like to commend the secretariat, who under the leadership of the Financial Management and Projects Committee of the Board, supervised the construction of the building and saved the Association Kshs.35 million out of the initial cost estimates in the construction of the new KAM house.

Appreciation My job would not have been easy without the remarkable support that I received from the volunteer board at KAM. We bid farewell to Vimal Shah and Yaw Nsarkoh from the Board and welcomed Helen Kimani and Rajan Shah.

Polycarp Igathe Chairman

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Board of Directors

Polycarp Igathe, KAM Chairman, Vivo Energy

1. 2. 3. 4. 5. 6. 7. 8.

Mrs Flora Mutahi, Melvin Marsh International Mrs Tabitha Karanja, Keroche Breweries (until May, 2014) Mr Bharat Shah, Kenafric Industries Mr Sachen Gudka, Skanem Interlabels Mr Mahul Shah, Spinknit Limited Mr Palu Dhanani, Universal Corporation Limited Mr Bimal Kantaria, Elgon Kenya Mr Yaw Nsarkoh, Unilever (Until December 2013)

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Board of Directors (Contâ&#x20AC;&#x2122;d)

12.

15.

9. 10. 11. 12. 13. 14. 15 16.

10.

11.

13.

14.

16.

Mr Joseph Lithimbi, Associated Vehicle Assemblers Limited Mr Lutaf Kassam, Industrial Promotion Services (IPS) Limited Mr Kaushik Shah, Mabati Rolling Mills Mr Stephen Brooks, Homa Lime Company Limited Mr Muhoho Kenyatta, Brookside Dairy Mrs Helen Kimani, Kevian Kenya Mr Rajan Shah, Capwell Industries Mr Jas Bedi, Bedi Investments- ex officio

Pradeep Paunrana, KAM Vice Chairman, Athi River Mining

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Chief Executive’s Report Growing the manufacturing sector In 2013 the Association redefined its strategy with a view to position itself as a strong voice for the manufacturing sector in light of the new dispensation. It was the same year that KAM concluded work on its 3-year strategic plan for the period 2011 to 2013. A new Business Development Plan which took into consideration the changes that came in with the new constitution which had an effect on the modus operandi of the Association was developed. The Business Development Plan which was developed for the next three years focuses on transforming the Association into an inclusive, member focused and sustainable business membership organisation that delivers to an engaged constituency; substantially resparking and transforming Kenya’s manufacturing sector by growing/nurturing manufacturers’ competitiveness, doubling share of intra-Africa trade and increasing the sector’s growth domestic product contribution.

Betty Maina, MBS Chief Executive 2013 was a transformative year which tested the resilience and commitment of Kenyan manufacturers towards achieving the goals of Vision 2030 and spurring economic growth. It was an election year where generally business slows down but that was not the case for Kenya as industry kept its wheels in motion, championed a message of peace and propelled productivity amidst a mixed bag of reactions.

In addition to this, the new Business Development Plan is aimed at retaining manufacturing purity while engaging and growing KAM’s constituency to a level where KAM represents at least 75% of active Kenya manufacturers. Furthermore, the Secretariat will actively grow KAM sectors and chapters to represent the voice of Kenyan manufacturers.

It is the same year when the new constitution was implemented and as Counties tried to get on their feet some pounced heavy blows on business by increasing taxes to raise revenue. Challenges metamorphosed and took new shapes with the new dispensation.

International Advocacy KAM added its voice on the international arena where global decisions were made that affect the survival of the manufacturing sector in Kenya. Contributions were made at regional and global forums such as the East African Community, Common Market for East and Southern Africa, African Union, United Nations Industrial Development Organisation , OECD and the United Nations. Most of the engagements yielded positive developments for the local manufacturing industry as the Association proved its prowess in local and international advocacy.

The Association proved its advocacy prowess by quickly adapting to the changes brought about by the new constitution and engaged the different structures to advance the manufacturers’ advocacy issues. Some challenges appeared insidious but the Secretariat was up to the task. The Association followed up on the promises that had been made by the substantive office bearers in the new Government during the campaign period where the Industrial Business Agenda was shared. KAM spearheaded Governors’ Roundtables in various Counties around the country and following the success of the pilot engagements the meetings will be held in all the Counties in the country.

Partnerships We continue to be grateful to all our partners who have assisted the Secretariat in delivering its work through the extension of funds and technical expertise to successfully deliver our mandate for industry. We could have not been

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Chief Executive’s Report (Cont’d) Outlook

able to deliver most of our projects without the support of Danish International Development Agency (DANIDA), Agence France de Developpement (CIPE) (AFD), British High Commission, Business Advocacy Fund (BAF), Centre for International Private Enterprises, Government of Kenya and Department for International Development (DFID).

As the world focus turns to Africa for opportunities there is a major industrialization drive taking place. It is believed that manufacturing will be a key driver for economic growth. The mandate of the Association remains relevant in championing the interests of manufacturing sector.

We also worked closely with other business membership organisations for the delivery of some projects which are cross cutting such as the Governor’s Roundtables and engagements in the counties. KAM cannot be everywhere and coalitions offer opportunities for increasing influence as we join hands with other like minded institutions. Business coalitions were formed to spearhead engagements with Governments in the devolved system and the coalitions have delivered good results for industry.

Betty Maina, MBS Chief Executive

If you want to go quickly, go alone. If you want to go far, go together. ~

I would like to pay special tribute to the hardworking and professional members of staff of the Secretariat who continue to serve members’ interests. The dedication and commitment of KAM staff in delivering unparalleled service to the manufacturing sector is highly commendable.

African proverb

Betty Maina greets the President of Mexico at a high level meeting of Global Partnership for Economic Development Cooperation in Mexio City.

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Leadership Team

Ms Betty Maina, MBS. Chief Executive

1. 2. 3. 4. 5. 6.

Mr Kennedy Mohochi, Chief Operations Officer Mrs Paida Nyamakanga - Head of Communication Ms Zipporah Maina - Head of Finance Mr Tobias Alando - Head of Membership Services Mrs Phyllis Wakiaga - Head of Policy, Research & Advocacy Mr Francis Kodhiambo - Head of KAM Consulting

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Organisational Structure

Annual General Meeting (AGM)

Executive Committee

14 Industrial Sectors 7 Regional Chapters 8 Working Committees

Secretariat

CEO

Policy Research and Advocacy

Trade

KAM Consulting

Operations

Projects

Communication

Membership

Finance & Admin

Legal and Regulatory

Chapter Secretariats

Energy services

Tax

Ethical Business

Manufacturing Academy

Business Facilitation Services

SME

Standards

Business Information Services

Infrastructure

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Policy, Research and Advocacy Industrial Business Agenda The Association continued to lobby for issues which were contained in the Industrial Business Agenda (IBA) in an effort to create an enabling business environment for the Kenyan manufacturing sector. The IBA identified 15 key issues for the new Government to address as priority challenges for the manufacturing sector. The priority challenges were as follows:

• • • • • •

• •

Phyllis Wakiaga, Head of Policy Research and Advocacy

• • •

Pillar 1:

•

The main objective of the unit is to provide proactive, fact based and results focused policy advocacy for members.

• • •

Ensuring energy security Unblocking the logistics corridor Make it less taxing to pay taxes Achieve meaningful regulation Wage policy that supports employment expansion Making it possible and easier to sell our goods and services Keep the country moving swiftly and safely Need for strong public institutions that support Industrial development Mobilizing resources for industrial investment Ensuring the implementation of the constitution Work towards water security and environmental conservation Set aside dedicated land banks for industrial investors in key towns and locations Support innovation and technology development Improving links between education and market Reduction of corruption in business

Ensuring energy security KAM was successful through the Industrial Business Agenda in lobbying for additional investment in power generation, alternative sources of energy, better energy quality and ensuring financial viability in electricity pricing. Industry applauded the President for rejecting a proposal to increase power tariffs at the beginning of the year. The proposal was however later revised to pave way for the construction of power plants for an additional 5000 MW of power. It was also pleasing to note that more funds were allocated for additional power generation in the budget for the year.

The Policy, Research and advocacy unit is the cornerstone of KAM’s work. The unit is in charge of furthering fact based advocacy for members to relevant stakeholders in order to promote global competitiveness of Kenyan products.

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Policy, Research and Advocacy (Cont’d) The Government roll out plan for additional 5000MW in 40 months is scheduled as follows: NEW CAPACITY ADDITIONS (MW) TIME IN MONTHS

TOTAL

Hydro

Thermal

163

250

Geothermal

176

190

205

150

785

1,646

Wind

300

250

630

Coal

960

1,920

LNG

700

350

1,050

Co-Generation

Total

201

339

228

810

1,815

400

1,745

Cumulative Additions

201

540

768

1,578

3,393

3,793

This should lead to decrease in price of electricity with a target of US$ 0.09

Walter Kamau EO Trade and Policy

Frida Mbugua EO Legal Affairs

Wambui Ndung’u EO Research and Tax Administration

Maria Limo EO Customs & Standards

5,538

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Policy, Research and Advocacy (Cont’d)

Cumulative Installed Capacity

7000

19.78

6000 5000

Industrial/Commercial Tariff (US$cts/kWh)

6762

Domestic Tariff Progression (US$cts/kWh) 17.73 5017

14.14 12.49

4000 3000 2000

Cumulative MW

13.46

15 11.19

11.03 9.03

2342

10.43 10

1664

Tariff Progression

8000

1000 0

Besides increase in capacity and expected reduction The Kenya Power management team led by the Chief in price, we also acknowledge the ongoing work by to Executive met with KAM members in all chapters to improve the quality of supply by Kenya Power. A policy discuss plans made to cushion commercial electricity Besides increase in capacity and expected reduction in price, we also acknowledge the brief on the ongoing work in the power sector has been consumers against frequent blackouts for consistent ongoing work by to improve the quality of supply by Kenya Power. A policy brief on the published by the Association. The special policy brief – and uninterrupted business operations. The meetings ongoing work in the power sector has been published by the Association. The special policy ‘Therebrief – ‘There Shall be Power…..” outlines all the improvements targeted at industrial Shall be Power…..” outlines all the improvements were held in Nakuru, Eldoret, Industrial Area, Mombasa, targeted at industrial customers. Thika and Kisumu and draw members in all the regions customers. adjacent to these centers. The Kenya Power management team led by the CEO met with KAM members in all chapters to discuss plans made to cushion commercial electricity consumers against frequent blackouts for consistent and uninterrupted business operations. The meetings were held in Nakuru, Eldoret, Industrial Area, Mombasa, Thika and Kisumu and draw members in all the regions adjacent to these centers. The Cabinet Secretary for Energy & Petroleum, Mr Davis Chirchir also met with the top 100 customers who consume the largest power in Kenya‐ which are mostly industrialists, to review the plans for improvement and build confidence on delivery of the 5000MW with an end to pursuing increase in consumption. Plans are underway to connect high energy consumers to dedicated lines. Members are optimistic that more similar engagements would go a long way in ensuring smooth business operations.

Joseph Wairiuko

Patrick Kaleve

Georgina Wachuka

Emmanuel Alenga

Some members are already hooked up to dedicated lines and report improved quality and AEO KAMEA Nairobi EO Regulatory AEO Policy Research AEO IPR & anti reduction in outages. Others will experience relief over the next two months and more by and Advocacy Counterfeits the end of the year. 10

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Policy, Research and Advocacy (Cont’d) Project name Mishomoroni

Scope 33/11KV

Jomvu

33/11KV

Enhanced Supply Reliability - Distribution Projects Coast Budget Areas covered Benefits

Ragati (Upper Hill) 2x45MVA 66/11kV

Eastleigh Ruaraka complex

2X45MVA 66/11KV 66/11 kV, 2X23MVA

Mamlaka Road - UON Nairobi Projects

2X45MVA 66/11KV

Likoni Road GSU Magadi

9 No. (Villa Franca, Lukenya, Rironi, Uplands, Magumu, Githugunri, Lower Kabete, Dagorretti, Likoni Rd 66/ 11KV, 90 MVA (between BAT & House of Manji) 10 MVA, 66/11KV

US$6.19mil

Mainland north, Mishomoroni, Utange, Kisauni & environs Mainland west – Jomvu, Miritini, Chaani and environs Nairobi US$7.72mil around Nairobi’s Upper Hill area and City Centre. Upper Hill, KNH, Nbi Hospital, Government Hill, part of CBD, Nairobi West, Stadium Eastleigh, Dandora, Eastleigh, Kariobangi KShs 560M Ruaraka, Thika & Baba Dogo Rd, Muthaiga, Mathare North, parts of Eastleigh US$6.96mil State House, University of Nairobi US$20.89mil Nairobi peri-urban areas and parts of Machakos, Nyandarua, Kiambu counties

US$3.0mil

2X7.5MVA 33/11KV 1 x 7.5 33/11KV 2 x 45 MVA 66/11KV

Magadi GSU camp and its environs.

US$4mil

5 No. s/s in 33/11KV (Gatundu, JKUAT, Kangema, Tala and Mwea)

US$8.56mil Gatundu, Juja (JKUAT), Kangema, Tala and Mwea West US$4.349 Bahati, Engashura, Kabazi in Nakuru

2X7.5MVA 33/11KV

West Region Projects

8 No. Substations in 33/11KV (Ahero, Chepseon, Elgon View, Kibos, Majengo, Kabarak, Maseno and Kipsaraman) 23MVA 132/33kV

Maungu

Embu town & environs

23MVA, 66/11

Bahati

Loss reduction, capacity enhancement Dec. 2014 and improve reliability Loss reduction, capacity enhancement Dec. 2014 and improve reliability in Capacity enhancement, voltage support and reliability improvement

Capacity enhancement, voltage support and reliability improvement Capacity enhancement, voltage support and reliability improvement Loss reduction, capacity enhancement and improve reliability

April 2014

Complete April 2015 October 2015-April 2016 Dec. 2014 – June 2015 March 2016

Mt. Kenya Ruringu Embu East Makongeni (Thika East) Thika North (Kahaini ) Mt. Kenya Projects

Completion

Makuyu and Thika town & environs

US$10.28

Ahero, Chepseon, Elgon View, Kibos, Majengo, Kabarak, Maseno and Kipsaraman US$7.889Mil Voi Town, Maungu town & environs

Improve supply quality, reach more customers

March 2015

Alternate supply to Embu Town Capacity enhancement and improve reliability Capacity enhancement and improve reliability Capacity enhancement and improve reliability

Completed Completed

Dec. 2014 – June 2015

Capacity enhancement, voltage support reliability Loss reduction, capacity enhancement and improve reliability.

October 2015-April 2016 Dec. 2014 – June 2015

De-Link from KPC system, Capacity enhancement, reduce interuptions , alt supply to Voi town Thika Road 2X200MVA, 220/66KV US$28.97mil Nairobi City & Environs, Thika Rd, KU, Capacity enhancement, voltage substation Ruiru, support and reliability improvement Enhanced Supply Reliability - Transmision Projects City Centre (KR – 1No 2X200MVA, 220/66KV GIS s/stn 2 x US$132mil CBD & Nairobi City & Environs. Capacity enhancement, voltage Land-mawe Yard ) 220KV cables from Embakasi, 66KV feed out support and reliability improvement Juja Rd Rehabilitation & upgrading from 235MVA KSh 3.0Bil Nairobi & Machakos counties Improve supply reliability to 360MVA 132/66KV GIS Athi river 220 / 66 KV 2 x 200Mva KSh 248mil Machakos & Kajiado counties Improve supply quality Komarock 220 / 66 KV 2 x 200Mva KSh 285mil Nairobi & Machakos counties Improve supply quality Ngong 220 / 66 KV 2 x 200Mva KSh 249.6 mil Kajiado & Nairobi counties Improve supply quality KETRACO projects 19x132/33 KV & 3x220/33kV Garrissa, Isiolo, Malindi, Garsen, Lamu, Improved quality of supply, increased (22) substations(485MVA) (Malindi, Garsen, Kitale, Ortum & Turkwel, Awendo, capacity for more customers, reduced Lamu, Kitale, Awendo, Mwingi, Garrissa, Homabay, Mwingi, Wote, Kitui, Konza, interuptions Wote, Kitui, Isiolo, Ishiara, Machakos, Konza, Machakos, Ishiara, Kajiado, Namanga, Nyahururu, Kabarnet, Narok, Bomet, Homabay, Ortum & Turkwel) Reactive Power Reactive compensation (capacitors & At Garrissa, Isiolo, Malindi, Garsen, Lamu, Improved quality of supply, increased Compensators for shunt reactors) equipment for substations preliminary Kitale, Ortum & Turkwel, Awendo, capacity for more customers, reduced West Kenya, Coast at: Musaga, Mtito Andei, Meru, Rabai, stage Homabay, Mwingi, Wote, Kitui, Konza, interuptions & Mt Kenya Bamburi, Eldoret, Kisumu, Lanet, Chemosit, Machakos, Ishiara, Kiboko, Kiganjo, Nanyuki, Voi, Kiambere, Kisii

Culled from Kenya Power presentation to the KAM Board.

December 2014

October 2015-April 2016 April 2016 April 2016 July 2016 June 2015 June 2015 June 2015

At preliminary stage

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Policy, Research and Advocacy (Cont’d) Bangladesh and Cambodia whose input costs are much lower.

The Cabinet Secretary for Energy & Petroleum, Mr Davis Chirchir also met with the top 100 customers who consume the largest power in Kenya- which are mostly industrialists, to review the plans for improvement and build confidence on delivery of the 5000MW with an end to pursuing increase in consumption. Plans are underway to connect high energy consumers to dedicated lines. Members are optimistic that more similar engagements would go a long way in ensuring smooth business operations. Some members are already hooked up to dedicated lines and report improved quality and reduction in outages. Others will experience relief over the next two months and more by the end of the year.

Government however listened to the hue and cry of industry and did not announce a ceremonial wage increment for 2014. KAM will continue to lobby for a productivity based wage increment.

Making it possible and easier to sell our goods and services Buy Kenya build Kenya KAM engaged on an aggressive Buy Kenya, build Kenya campaign and worked closely with the Ministry of Industrialization and Enterprise Development and other stakeholders to inculcate a culture of loyalty to locally manufactured goods.

Make it less taxing to pay taxes The Government has moved to streamline tax payments to reduce the administrative burdens. Plans have been finalized to harmonize payments of payroll taxes – PAYE, NHIF and NSSF in combined manner and centrally through KRA. Besides this, the ongoing automation processes including I-Tax are expected to ease the administrative challenges associated with payment of taxes.

KAM participated in the review of the Public Procurement and Disposal (Preference and Reservations) Regulations, 2011 which granted exclusive preference to local contractors offering motor vehicles, plant and equipment, furniture, textiles and foodstuffs.

In addition to administrative burdens, KAM advocates for changes in the Common External Tariff (CET) to support local industries. In 2013 there were significant gains in rationalization of the CET to eliminate negative distortions that had arisen and affected Kenya’s paper converters negatively with the correct classification and application of 10% for the intermediate goods down from 25%. This has now been finalized in. Besides paper, KAM successfully persuaded government to adopt 60% of our proposals on the CET in 2013 and 2014 budgets.

Local firms were also allowed to engage foreign firms under joint venture agreements as long as foreign firms’ stake does not exceed 30%. Though directives have been given by the Presidency and in several instances regulations changed, we are still pursuing procurement entities to ensure they comply with the directives. Exports to EAC region drop The East African Region is Kenya’s largest market. However it is under threat from administrative restrictions through (NTBs) and reintroduction of tarrifs. Kenya’s exports to East African Community have reduced by a total of 7.4 % from about Kshs. 134 billion in 2012 to 124 billion in 2013. At the same time, Kenya’s exports to Tanzania reduced from Ksh46 billion to Ksh40 billion in 2013 while exports to Uganda reduced from Ksh67 billion to Ksh65 billion and to Rwanda from Ksh16 billion to Ksh13 billion. This is believed to have come about because of continued existence of restrictions of market access by partner states through imposition of non-tariff barriers such as lack of recognition of the EAC rules of origin certified by KRA, restrictive trade requirements by regulatory bodies like TFDA, numerous levies and charges including discriminatory excise duties and red tape at border points and other deliberate technical barriers to trade. This is one of the factors for reduced contribution by Kenya’s manufacturing sector to the GDP of 8.9 per cent in 2013. The value of Kenya’s exports to EAC market is illustrated over leaf.

While KAM supported the principles behind the reform of the VAT law and regime and the promise of elimination of long backlogs of refunds, the introduction of the VAT Act 2013 came with significant challenges for some sectors of the industry such as the pharmaceutical sector and net exporters. KAM continued to engage the National Treasury and Parliament on the VAT Act. Some amendments were adopted in the VAT Amendment Act, 2014. We shall continue engaging Treasury and Parliament on other necessary amendments. Amendments are expected to be enforced in the 2014 budget cycle. Wage policy that supports employment expansion Manufacturers have for a long time been advocating for a productivity based wage increment. In 2013 industry was dealt a heavy blow when Government announced a ceremonial wage increment of 10%. The textile industry was hardest hit because products from Kenya became non competitively priced compared to countries such as

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Value of Exports by Destination in Kshs. Million COUNTRY

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Rwanda

6011

6190

7282

4765

5801

8953

9536

10535

13554

16151

Tanzania

14588

17921

19953

18288

22326

29224

30087

33211

41743

46036

Uganda

30668

37059

42679

27812

33571

42285

46240

52108

75954

67450

Burundi

2752

2971

3714

2184

2424

3479

4597

5458

5904

5309

TOTAL

54019

64142

73630

53050

64122

83941

90460

101312

137155

134946

*Provisional

Source: Kenya National Bureau of Statistics/ Kenya Revenue Authority

Kenya continues to have an open policy for imports from other EAC Partner States including the imports which have benefited from various incentive schemes such as goods coming from EPZs and duty draw back schemes from United Republic of Tanzania (URT) and goods benefiting from fiscal incentives under industrial Parks in Uganda. Kenyan companies who use duty remission scheme to manufacture finished goods for export outside the EAC are still being penalized when exporting into EAC on grounds that their names appear in the EAC Duty Remission Gazette Notice. This is despite the fact that they pay duty for raw materials used in manufacture of finished goods sold within EAC. Most manufacturers have withdrawn from the duty remission scheme and in the process impacting negatively on the competitiveness of their products both in the home market and export market.

in Kenya by Uganda, lack of preferential treatment for motor vehicle sector in the EAC market and 70% and 75% material local content requirement imposed on cigarettes imported from Kenya into Uganda and Tanzania market require quick resolution and were escalated to Cabinet Secretary level in the line Ministries of Industrialization and Enterprise Development and National Treasury and East African Affairs, Commerce and Tourism. KAM has provided recommendations with regard to the outstanding NTBs to the line Ministries. It is however, necessary for the Government of Kenya to take the matter of denial of access to the EAC market very seriously at the highest level and seek solutions to the same. Nationally, 50% of the reported internal trade hindrances were resolved. These included; delay in clearance of goods at the port, delay in verification and release of orders of export goods, Kenya Revenue Authority Simba System downtime was reduced, KEBS testing certificates that were taking long to be released were issued within required time. In addition, Kenya has reduced roadblocks and introduced highway patrols along Northern Corridor. Containerized goods were weighed only twice in Kenya at entry and exit point.

While some longstanding NTBS have been resolved, others are reported to have been instituted. Notably, levy of US$ 200 on Kenyan trucks by Tanzania was abolished, Uganda no longer demands retesting of Kenya milk. Charging full CET on plastic products from Kenya was stopped. Mutual recognition of each Partner States Quality Mark was adopted. Recognition of East African Rules and and Certification of Origin in the EAC improved and verification inspections were conducted were rules of origin were doubted.

Trade Agreements In view of the proposed free trade agreement between East African Community, Common Market for East and Southern Africa and Southern Africa Development Community, the Association presented its proposals to safeguard Kenyan manufacturing industryâ&#x20AC;&#x2122;s interests in the negotiations. 70% of the proposals were taken up

But other NTBS remain. The outstanding non tariff barriers such as restriction of beef and beef products by Uganda, lack of preferential tariff treatment on rice grown

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

for discussion in the Tripartite Trade Negotiation Forum. Kenya has an opportunity to tap into a population of 600 million in the market that will be presented by the proposed free trade area.

billion in Kenya and is blamed for a lot of harm to society. In light of the above, KAM revived the Anti-Counterfeit subcommittee, with the main mandate of driving the anti -counterfeit agenda on behalf of the manufacturing sector in liaison with other stakeholders.

Trade with Ethiopia and its market of 100 million person is set to increase with the ratification and implementation of the Special Status Agreement signed between the two states in November, 2012. The SSA has now been ratified by both nations and the elements of implementation are under discussion.

KAM presented a position paper with proposed amendments to both the Anti-Counterfeit Act 2008 and its regulations to Anti Counterfeit Agency (ACA) for consideration. Awareness seminars were also carried out in Nairobi, Mombasa and Central Kenya. KAM has partnered with ACA in sensitizing the judiciary on illicit trade at the Judicial Training Institute.

In May 2014, Kenya signed a Bilateral Trade Agreement (BTA) with Nigeria intended to boost trade with the largest economy in Africa and its 170 million people. KAM continues to work with Government in pursuit of implementation of the BTA to ensure delivery of that market to Kenya’s goods.

Anti-counterfeit remains an agenda item for the industry and KAM will continue to work with Government and other stakeholder in the fight against counterfeits. Standards

EPAs: Kenya’s Ksh 100 billion annual earnings from exports to the European Union could be greatly reduced if continued market access is not protected with the conclusion of the negotiations of the Economic Partnership Agreements. To this end the Association has been keenly involved in supporting Government efforts to pursue an acceptable negotiated position. Working with other private sector players – notably the Kenya Flower Council, Association of Fish Processers and Exporters of Kenya (AFIPEK) and the Fresh Producers Exporters Association of Kenya (FPEAK), KAM has worked closely with the Government teams and negotiators on EPAs. We hope the agreement can be concluded before the deadline of October 2014.

Following the challenges raised by members on standards which were hampering trade in the East African region, KAM lobbied for the harmonization and follow up on gazettement of the same was underway by the close of the year. KAM paid a courtesy visit to the Kenya Bureau of Standards’ (KEBS) new Managing Director and presented standards issues affecting industries. The Association participated in a one day validation workshop in Kigali on assessment of the progress in implementation of adopted EA Standards and effectiveness certification schemes in EAC. KAM is following up on the final report.

AGOA beyond 2015: KAM continued to collaborate with other stakeholders including the Government and ACTIF in lobbying for the extension of the Africa Growth and Opportunities Act by the US Congress. The extension of the third country fabric provisions beyond 2015 is expected to create over 500 000 jobs in the textile industry.

Business facilitation The Association continued to facilitate expedition of the processing of work permits and AGOA visas. To this end, 65 work permits , 45 special passes and 3552 AGOA Visas were processed. In addition, 338 duty remission applications were processed.

Counterfeits: The counterfeit menace continued to dog the manufacturing sector in 2013. KAM joined hands with other stakeholders in the fight against counterfeits. Counterfeit industry is believed to be worth over Ksh 2

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Acts, Bills reviewed and tracked

Ensuring the implementation of the constitution

•

A lot of changes came with the implementation of the new constitution. As the devolved Government system kicked in, a National Business Membership Organisation guide for engaging County Governments under the theme ensuring Government delivers for business was developed. The guide was used to engage County Governments through the business coalitions that were formed during the CEOs of BMOs conference early in the year.

Devolution issues Teething challenges were experienced during the early stages of implementation of the devolved system of Government. KAM engaged various Government agencies to demystify devolution to the industry stakeholders. Devolution seminars were held to sensitize stakeholders on how devolution works. We have a dedicated devolution desk to keep track on emerging challenges affecting businesses. Feedback can be emailed to devolutionfeedback@kam.co.ke

• • • • • • • • • • • • • • • •

• • •

County Taxation and Business Regulation Process Bill Public Procurement and Assets Disposal Bill Environment Management and Conservation Act Competition Act EALA Competition Act and SQMT Act: Public Private Partnership Act Anti Counterfeit Act NTB Bill Accreditation Bill Work Injury Compensation Bill VAT Bill Finance Bill Tax Appeal Tribunal Bill: Kiambu County Finance Bill Nakuru County Finance Bill Mombasa County Finance BIll Public Procurement and Disposal (Amendment) Bill, 2013 The County Industrial Development Bill, 2013 NSSF Bill Special Economic Zones Bill

Work with the Judiciary KAM is working with the National Council on the Administration of Justice (NCAJ) to develop an Illicit Trade Manual which will be a one point of reference for all interested parties involved in combating illicit trade. The manual will provide an increased understanding of the impact of illicit trade to the business community among the targeted stakeholders; judiciary, prosecutors and police. KAM is also partnering with the NCAJ to launch Business Court Users Committees (BCUCs) in Nairobi and 6 counties. The BCUSs will create an increased understanding by the courts of the business implication of the court decisions and an appreciation by the business community of the court process and how this should be followed to reduce costs to businesses.

When someone is drawing a line in the sand someone should stand in front and advise on whether they should move a bit to the right or left in order to maintain a straight line. ~ African proverb

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

KAM Consulting KAM Consulting is the business division of the Kenya Association of Manufacturers charged with helping KAM members and customers reduce their operational costs and enhance their revenues through Energy Efficiency Management, development and financing of renewable energy resources, management and leadership trainings, consultancy services and surveys, supply chain linkages, business information services and global market expansions. The unit buoys the sustainability of KAM through income generating projects. KAM Consulting carries out these responsibilities through 5 departments, namely: Francis Kodhiambo Head of KAM Consulting

• • • • •

Centre for Energy Efficiency and Conservation Regional Technical Assistance Programme Manufacturing Academy Business Information Services SMEs Development

In the year 2013 KAM Consulting generated revenue of Khs 35.8 million compared to Ksh 33.8 million in 2012.

CEEC The Centre for Energy Efficiency and Energy Conservation runs programs designed to help companies identify ways of conserving energy and promoted the use of energy efficiency mechanisms in companies operations. The service is offered to both KAM members and non members.

Pillar 2:

The objective of the unit is to competitively offer value-added services to companies on a consultancy basis in an effort to augment KAM’s revenue streams

Energy audits conducted by the Centre continued to gain popularity amongst businesses in the country primarily buoyed by the savings companies make by implementing recommendations from the exercise. To this end, 57 General Audits were completed with potential savings of Ksh 77 million per annum, from an investments of KSh 110 million with a payback of 1.4 years. In addition, 54 Investment Grade Audits completed with potential savings of Ksh 2.5 billion per annum from an investments of KSh 2.3 billion with a payback of 0.9 year. Next is a table outlining audits completed between 2007-2013.

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

KAM Consulting (Cont’d) 2007-2013 Audits Simple Payback Period ( yrs)

Investment required: Kshs Billion

Potential savings: Kshs Billion

1.1

2.4

2.1

230 General Audits completed

0.9

3.4

3.7

106 Investment Grade Audits Completed

1.0

5.9

6.0

Total/Average

MW equivalent

Six exchange visits were carried out to raise awareness of the audits and to showcase technology available globally. Certified Energy Management Trainings were conducted. 43 participants took part in the training and 32 passed.

EMA 2014 was the 10th of what has become a hugely successful annual event. The event which was held on 4th April 2014 at the intercontinental Hotel and was presided over by the Cabinet Secretary, Ministry of Energy and Petroleum, Mr. Davis Chirchir. The event which was dubbed “Celebrating the 10th Year of Excellence in Sustainable Energy Management” saw industries save over Ksh 10 billion over a period of 10 years through energy management and energy efficiency initiatives.

The audited enterprises are spread all over Kenya with Nairobi (154) taking the lion share followed by Central (59) , Mombasa (32), Central Rift ( 24) South rift (23) North Rift (22), Nyanza ( 15) Eastern (7).

A total of 60 companies participated in EMA 2014 and three new award categories were introduced, namely: • EMA Golden Honours Award, • EMA Silver Honours Award and • Green building and Green Architect of the year Award Bidco Oil emerged the Overall Winner of the 2014 Energy Management Award.

The center also embarked on 5 energy related specialized trainings which attracted on an average 40 participants per training. The trainings serve to equip participants with understanding on how to apply energy management principles resulting in reduced energy consumption and significant cost savings.

Nicholas Gachie EO Energy Services

KAM appreciates the support received from the Government of Kenya and DANIDA for the energy projects. To date the Government of Kenya has extended to KAM Kshs 225 million to and DANIDA has given 30 million DKK to implement various energy efficiency initiatives

Energy Management Awards (EMA)

As a result of this support, KAM through CEEC by December 2013 completed 230 General Audits and 106 Investment grade audits. This has seen enterprises save over Ksh 6 billion in energy costs.

Mary Kiema EO & Coordinator CEEC

Further, KAM through CEEC in conjunction with the Association of Energy Engineers (AEE) in the USA offers the Certified Energy Management (CEM) programme annually and to date there are 100 certified Energy Managers in Kenya from the programme.

Martha Cheruto EO Energy Services

Jeff Murage Project CoordinatorRTAP

Pascal Habay Team Leader RTAP

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

KAM Consulting (Contâ&#x20AC;&#x2122;d) EMA 2014 Winners 1.

Award Categories Overall Energy Management Award

Winners Bidco Oil

Runners-Up

1st Runners up: Sarova Whitesands Hotel 2nd Runners up: Wrigley Ltd 2.

Best energy Management Team Award

Sarova Whitesands

Fuel Savings Award

Electricity Savings Award (SME, Large) -

Bidco Oil ( large) Sarova Taita ( SME) Gathuthi Tea Factory (Large)

Service Sector Award

Sustained High Performance Award

Bidco Oil

Best New Entrant

Wire Products ( Large)

BAT Ltd Mombasa Cement( Large)

SME: None

Kaluworks Ltd.( Large) SME: None

Sarova Shaba (SME) Sarova Whitesands Hotel

Gitugi Tea Factory Sarova Stanley Hotel None Turtle Bay Hotel (Large) Kapsara Tea (SME) Sarova Panafric Hotel

EMA Golden Honours

9. 10

EMA Silver Honours Green Building Award

Green Architect of the year

Lilian Odhek EO Business Competitiveness Services

Bidco Oil Spinknit Ltd LRC Building, Catholic University of East Africa University of Nairobi, Department of Architecture and Building Science

Beatrice Kithinji EO CEEC

Joseph Mwangi AEO Energy Services

Kenafric Confectionery Sarova Whitesands Hotel 1st Runners Up: CocaCola, East and Central Africa Business Unit. 2nd Runners up: Leleshwa Primary School Environmental Design Consultants Chapter, AAK

Peris Kasae Project Assistant

Catherine Mukoko EO Manufacturing Academy

Anne Kariuki AEO Energy Services

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

KAM Consulting (Contâ&#x20AC;&#x2122;d) Energy efficiency and Climate Change Eight of the projects were financed at a total value of USD 39.5 million through co-operative Bank Kenya Limited as the Kenyan partner bank. Co-operative Bank of Kenya formally wrote to AFD seeking for a new line of credit to support the certified projects not funded under RTAP 1 and targeting to support more projects.

The Kenya Association of Manufacturers through the Centre for Energy Efficiency and Conservation (CEEC) spearheaded a strategy for Capacity Building on Energy Efficiency and Climate Change. This initiative was funded by GIZ. The grant was made available for the period from October 2012 to November 2013. In 2014, CEEC continued with climate change initiatives. To this end, the Association received support from Business Advocacy Fund (BAF) so as to sensitize members and the private sector on impact of climate change on businessesâ&#x20AC;&#x2122; bottom line as well as raising awareness on the upcoming Climate Policy and Bill.

Following the successful completion of RTAP phase 1, RTAP 2 was launched in May 2014. It is expected that in RTAP 2 there will be a strong focus in Uganda and Tanzania.

Manufacturing Academy

Supporting Investment in Energy Efficiency and Renewable Energy in Kenya

The Manufacturing Academy which has been in existence for the last three years rolled out 20 new training programmes and 8 consultancy services in 2013. The capacity building programmes were in the following areas; Supervisory Skills Development, Good Manufacturing Practices, Production Management, Accelerated Sales Force, Employment Contracts Management, Lean Manufacturing, Waste Management and Disposal in Manufacturing, Procurement Fraud Detection and Mitigation and Managing Discipline in the workplace. Technical training was conducted in Programmable Logical Controls.

AFD has made available a line of credit to support bank lending to investors on Renewable Energy and Energy Efficiency. The Regional Technical Assistance Programme (RTAP) operated by KAM provides technical support to project sponsors and acts as a liaison between the Banks and the project sponsors to facilitate the development of viable renewable energy and energy efficient projects throughout Kenya, Uganda and Tanzania. Technical assistance offered involves projects support to a bankable level for project owners (in both renewable energy and energy efficiency). RTAP also supports the bank credit officers of partner banks in evaluating the attractiveness of the projects by availing financing through tailor made debt financing through the French development agency (AFD).

The trainings were aimed at bridging the skills gap between the training received from colleges and universities with industry requirements. In addition to this, trainings were also conducted to enhance skills capacity in the existing industry personnel.

RTAP continued to offer technical assistance to energy efficiency and renewable energy projects in the region. This included process improvement that resulted in energy optimization at firm level. In this regard, 31 renewable energy and energy efficiency projects were technically certified during the year. The projects, with a total net worth of USD 110 million qualified for financing.

A total of 11 trainings were conducted during the year and a total of 175 participants from industry were trained.

The project spread its tentacles into the region and formed trade partnerships with companies in Tanzania and Uganda. In Tanzania RTAP mandated Confederation of Tanzania Industries (CTI) as its focal point in Tanzania. Bank of Africa Tanzania (BOAT) is the Local partner bank in Tanzania. Training was done for local banks offering debt financing to the certified projects through the line of credit from AFD.

Business Information Services

Memoranda of understanding were signed with Technical University of Kenya for technical training, Centurion Systems for practical training on use of industrial production machinery and KPMG for fraud finance related trainings.

Through the Business Information Services, trainings continued be offered in an endeavour to equip industry personnel with relevant skills. To this end, about 700 people were trained as the association played its role in bridging the skills gap between the skills churned out from various universities and the industry requirements.

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

KAM Consulting (Cont’d) in tomorrow’s Kenya; an interactive quiz on how to check your Kaizen Quotient and Sensei Masaaki Imai will crown it all with a keynote address

Training services alone generated a net income of Ksh 5.16 million. A total of eight topical seminars attended by an average of 60 participants were held. The seminars were mainly on; fighting counterfeits; Customs valuation; Kenya Revenue Authority Export procedures; devolution; budget; VAT Act 2013 and devolution seminar on fees and charges in Nairobi Country. Trainings were also conducted on Unlock your financial blind spots; social Media Marketing; Tax Compliance and Planning technical training.Breakfast meetings with Africa Trade Insurance (ATI) and NSE were also held to discuss risk management and alternative sources of raising finance through the stock exchange.

Trade and Investment mission to Ethiopia Following the signing of the Kenya - Ethiopia Special Status Agreement (SSA) in November 2012, the Kenya Association of Manufacturers (KAM) in liaison with the Kenya Embassy in Ethiopia organized a Kenya Businesses Investment and Trade Mission to Ethiopia in July. The main objective of this mission was for Kenyan business people to make initial contacts with both Government and Businesses of Ethiopia and to explore Investment and Trade opportunities for both parties to take advantage of the Kenya - Ethiopia Special Status Agreement (SSA) in an endeavour to expand markets. Other objectives of this Investment and Trade Mission included: • To cement the Special Status agreement (SSA) and persuade the respective Governments to develop the necessary protocols to implement it. • To identify possible investment opportunities in Ethiopia. • To expand trade between Kenya and Ethiopia as neighbouring countries. • To identify business partners.

Besides Nairobi, these trainings were also held in counties such as Mombasa, Nakuru and Kisumu. The 9th Annual KAM - Kaizen Conference dubbed ‘KAIZEN for Quality’ was held in July 2013 and attended by 106 participants drawn from the manufacturing, service and hospitality sectors. The conference was graced by Mr. Jon Miller the CEO of Kaizen Institute Global and a global crusader of Kaizen/Lean. His keynote addressed focused on Kaizen for Quality required to drive Kaizen/Lean to achieve true transformation. The conference also took a 2-pronged approach namely: tutorials on Day1 and Company tours on Day 2. Companies that showcased their implementation of Kaizen included: Ubbink of Naivasha; Kariki Farm in Juja; Unga Ltd on Dakar Road, Nairobi; Synresisn in Industrial Area, Nairobi; Associated Battery Manufacturers (ABM) in Industrial area, Nairobi; and Kenafric Industries Ltd in Ruaraka, Nairobi.

36 Kenyan companies took part in the trade mission which was attended by chief executives and other senior management drawn from the manufacturing, banking, floriculture, tourism, tobacco and services sectors. The delegation included five directors from KAM including the Vice chairman, Mr. Pradeep Paunrana. The Kenya delegation organized under the auspices of the Kenya Association of Manufacturers was led by Mrs. Phyllis Kandie, Cabinet Secretary in the Ministry of East African Affairs, Commerce and Tourism. Other Government ministries and departments represented included the Ministry of Industrialization and Enterprise Development, the Ministry of Foreign Affairs, Department of External Trade (Bilateral Division and AGOA Unit) and the Export Promotion Council, Tourism Fund and KICC.

On KAIZEN interventions, the following companies signed up for the Kaizen Journeys: Chnadaria Industries Ltd, London Distillers Ltd, Connix Industries Ltd, Flooring & Interiors, Uhuru Flowers and Stokman Rozen. In July 2014, KAM will host the 10th Anniversary Kaizen Summit at the Safari Park Hotel (Pavilion). The founder and Chairman of the Kaizen Institute, who is also the translator of the Kaizen Principles from Japanese to English – Sensei Masaaki Imai will be in attendance for the 2 days. The event will entail: over 15 top KAIZEN practicing organizations share their experiences; Plenary discussion led by Industry leaders on ‘overcoming barriers in building a Kaizen culture’ and ‘Application on Kaizen Thinking in supplier customer relations for mutual benefit

The delegation had an opportunity to pay a courtesy call on the Prime Minister of Ethiopia, H. E. Ato Hailemariam Desalegn. Meetings were also held with the Ethiopian Ministers of Foreign Affairs, and Trade and Industry.

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

The Year in Pictures

KAM Trade mission to Ethiopia with H.E. Ato Hailemariam Desalegn, the Prime Minister of Ethiopia

KAM and General Electric (GE) hosted Jeff Immelt, Chairman of GE in a Town Hall session during his visit to Kenya

Jas Bedi receives Savant of Advocacy Award from KAM Chairman Polycarp Igathe

Cabinet Secretary of Ministry of Industrialization & Enterprise Development, Mr Adan Mohamed meets with KAM Board during a visit to KAM

Betty Maina greets Alhaji Aliko Dangote of the Dangote Group during a Kenya-Nigeria Business forum held in Nairobi

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

The Year in Pictures (Cont’d)

H.E. The President Hon. Uhuru Kenyatta being welcomed to an exhibition stand by Polycarp Igathe, KAM Chairman and Betty Maina KAM CEO during the National Exporters Forum

Former UNIDO Director General, Yumkella Kandeh, receives commemorative plaque from KAM chairman during a dinner hosted by KAM for African Ministers during CAMI 2013

Signing ceremony of the AFD grant of € 2.1 million extended to KAM for RTAP technical assistance

Cabinet Secretary for Ministry of Energy & Petroleum with Betty Maina and Polycarp Igathe at the Energy Management Awards

Dr. Manu Chandaria greets Deputy. Governor of Nairobi County, Jonathan Mueke at the Nairobi Governor’s Roundtable

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

KAM Consulting (Cont’d) Processors, Kakuku Fruit Growers and among other SMEs in the pipeline Additional firm level interventions for SMEs have been identified and will be rolled out in 2014. The Association carried out a mapping exercise for small and medium enterprises.

The Special Status Agreement signed by the two countries has now been ratified by both States. KAM will continue to lobby for the implementation of the Special Status Agreement.

SME focus and engagement In line with the company’s overall goal of being an all inclusive voice of the manufacturing sector, KAM continues to partner with the Micro-enterprise Support Program Trust (MESPT) to identify high growth SME subsectors and opportunities within specific agroprocessing subsectors’ value chain targeted at firm level interventions and technical assistance. The value chain programme is aimed at enhancing efficiency of manufacturers and competitiveness of manufactured goods in the domestic, regional and international markets. Subsectors of immediate focus are: Mangoes, Aloe Vera, Irish potatoes and coconuts. The KAM – MESPT memorandum of understanding has seen small to medium enterprises benefit from a grant of up to Ksh. 5 million per company to shore up capacity and boost competitiveness of agro products. The funds have been injected into the sector by the Danish Government through Danish International Development Agency, DANIDA. The use of these funds is facilitated through the SMEfleX, a product launched by KAM in 2012, to cater for the needs of SMEs in the agro-processing value chain. Since the launch of SMEflex, the following companies are either utilizing the service or have been earmarked to benefit: Herbal Gardens Ltd, Kabondo Women Fruit

Efforts will be stepped up in the ensuing years to increase the activities and voice of the small and medium enterprises. KAM is making a concerted effort to represent more of the small and medium scale enterprises. As the unit evolves along the strategic path its main thrust will be centred around creating an enabling environment for small and medium enterprises as well as bridging the skills gap by matching industry requirements with the needs of the industry.

If you cannot solve your problems in peace, you cannot solve wars. ~ African proverb

EMA 2014 Award winners.

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Membership The membership unit is in charge of recruiting, delivering relevant , quality, timely and effective services to members. KAM remains the most popular business membership body for the manufacturing sector. The Secretariat continues to attract and retain members through its bouquet of services. The year started off with a round of roundtables with aspiring Governors and after elections substantive Governors were engaged to follow through the promises made during the campaign period. In order to effectively serve our members more emphasis and support was accorded to chapter work in line with the changing architecture of the Government structure which was brought in by the new constitution. Mapping of Counties was done for each County on recruitment & service delivery. The Association also participated in 4 exhibitions to raise awareness of the organization.

Tobias Alando, Head of Membership Services

Pillar 3:

The unit exists to ensure that KAM is the most preferred business membership organisation for manufacturing valueadd industries.

Eric Ochieng Chapter OfficerNyanza/ Western Chapter

Susan Gitau Chapter OfficerCoast Chapter

David W. Kimani Chapter OfficerMachakos Chapter

Judy Njino Coordinator, Global Compact

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Membership (Cont’d) Sectors Sector continued to engage and more subsectors were formed to handle subsector specific issues. A salt subsector was formed. KAM currently has its subsectors organised as follows;

KAM SECTOR AND SUB-SECTORS LIST-2014 NO 1.

SECTOR & Sub-Sectors Metal & Allied Sector • Hot Rolling • Cold Rolling • Wire Products

KAM SECTOR RELATIONSHIP OFFICER Tobias Alando

Food & Beverage (Solids ) • Food & Beverage (Liquids )

Paida Nyamakanga Maria Limo Maria Limo Eunice Mwanyalo David Waweru Georgina Wachuka/Patrick Kaleve

• •

3. 4.

5. 6. 7. 8. 9.

10. 11. 13. 14. 15 16

Edible Oil Salt subsector

Energy & Electrical Sector Chemical and Allied Sector • General Industrial Chemicals • Agro-Chemicals • Paints & Resins • Cosmetics & Hygiene Products Pharmaceutical Sector Leather Sector Plastic Sector Paper and Paper Board Sector Motor Vehicle sector • Motorcycle • Motor Vehicle & Accessories • Motor Vehicle Assemblers • Bus Body Builders Textile and Apparels Sector • Local Textiles • Apparels Exporters Timber, Wood and Furniture Sector Service Sector • ICT Building Mining & Construction Fresh Produce SME Focal Point

Gladwell Kamau Chapter Officer- Central Kenya Chapter

Robert Juma Chapter OfficerIndustrial Area

Bella Akinyi/Wambui Ndungu Catherine Mukoko/Joseph Wairiuko Robert Juma/ Beatrice Githinji Wambui Ndungu Joseph Wairuko/Phyllis Wakiaga Emmanuel Alenga Joseph Wariuko Phyllis Wakiaga Tobias Alando Joseph Wairiuko Jeff Murage Francis Kodhiambo/Zipporah Maina Phyllis Wakiaga Paul Mutambuki Martha Cheruto Kennedy Mohochi

John Kamau Chapter OfficerNakuru Chapter

Edith Koske Chapter OfficerEldoret Chapter

Josephine Ngugi EO Business Information/ Library Services

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

New Members KAM welcomed the following members in 2013 into the Associationâ&#x20AC;&#x2122;s ambit:

Westminister Paints & Resins Ltd

Glacier Products

United Distillers Vintage

Brush Manufacturers

Kenrub Ltd

Top Pak

East Africa Malt Ltd-EAML

Solimpex

Kenwear Garments Ltd

E-manage Africa

East Africa GlassWare

Soloh Worldwide Interenterprises

GZ Industries

Seven Seas Ltd

Endest Bites Ltd

Kip Melamine Co. Ltd

De La Rue Currency & Security Print Ltd

Vectus Kenya Ltd

CFC Stanbic Bank

Selecta Kenya GmbH & Co. KG

Richfield Engineering Ltd

Adpack

CompuLynx

Connix ltd

Sintel Security Print Solutions

Endmor Steel Millers ltd

Ernest & Young

Flair Kenya Ltd

Morani Ltd

Rongai Workshop & Transport

Price Water House Cooper

Cica Motors

Brilliant Garments Kenya EPZ

Kenya Breweries

Savana Cement

Salim Wazarani Kenya Company Ltd

Load Trailers

Symbiotic Media Consortium Ltd

Jumbo Quality Products

R.T East Africa Limited

Intraspeed Arcpro

Scania East Africa Limited

African Retail Traders

Gone Fishing

Essential Manufacturing

CFC Stanbic Bank

Kenafric Bakery Ltd

Dodi Autotech (k) Ltd

Honda Motorcycle

Tile & Carpet Centre Ltd

Naline Steel Works Ltd

Tana River Quarry Ltd

Pernod Ricard Kenya Ltd

Ikapamedia East Africa

Kerio Valley Development Authority

Tuff Foam Ltd

Fine Engineering Works Ltd

Kenya Flower Council

Darshan Plastic

R.T East Africa Limited

MFI Ultra Print Ltd

Farm Refrigeration & Electrical Systems Limited

Eunice Mwanyalo EO Salt Subsector

Otto Marevu Salt Subsector Community Liaison Officer

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Chapters Report Mombasa Chapter The chapter was a hive of activity during the year as it adapted to changes brought about by the new constitution. Engagements with Executives in the new structure of Government begun in earnest. The Chapter held a meeting with Governor Hassan Joho, Finance Walid Khalid, CE Tourism, Anthony Njaramba and stakeholders from KAM, KAHC, KATO, KNCCI, EATTA, and the Disaster Management Director to discuss the Finance Bill 2013. The Governor emphasised the need to have stakeholders involvement and consultation as it is enshrined in the constitution. Various stakeholders present appreciated the fact that the County needs to raise revenue in order to render services, however the sentiment shared by the stakeholders is that the margins of revenue increment are too high and they will adversely affect business in the

County. Stakeholders were asked to engage with their members and come up with a proposal, to be presented to Finance before the bill is presented for approval. The County Government is putting up a 5 member committee, of which KAM is part of to discuss give their views. Once passed, it will propose the fees and charges for the County. The Salt Sub-sector that is primarily based in Mombasa organised itself and elected a Chairman to drive its Agenda. Two officers have already been recruited one to focus on general advocacy and engagements and the other one to focus on community engagements. KAM Coast chapter in partnership with Kenya Power held a dinner for the coast region power consumers, the dinner which was held at Nyali Beach

Munir Thabit

Chairman, Coast Chapter

hotel was attended by the Managing Director of Kenya Power Dr Bernard Chumo, Mvita MP Abdulswamad Sharif Nasir, KAM Chief Executive Betty Maina and representatives of Business Membership Organizations. Historically there were challenges to do with power supply and that is why most members of KAM invested in training on energy management and auditing to cushion themselves against high power costs.

Central Kenya Chapter In its second year of operation the Chapter continued to advance advocacy issues for members in the Central Kenya area. The Chapter held a successful Kiambu Governors Round Table in September under the auspice of the Kiambu Business Coalition. The Kiambu County Government promised to promote an enabling environment for business. This follows the contention with the Finance Bill that had been passed by the County. Concerns and proposals were raised in the following key issues

• Fifth Schedule Part III – Agricultural Produce Cess • Second Schedule – Permit/ License fee for various businesses • Third Schedule Part II – Solid Waste Management Services • Third Schedule Part XIV – Fees for physical Services • Third Schedule Part XV – Other Fees for development • Third Schedule Part VII- Fees for outdoor advertisement and Signage • Third Schedule – Fees for Parking • Third Schedule Part IV – Public Health Services

Rajan Shah

Chairman, Central Kenya

The County Government committed to engaging industry on the issues raised as well as to share ideas on how to improve service delivery.

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Chapters Report (Cont’d) Commissioning of the Thika Industrial substation in Makongeni, Thika. The quality of power supply to the industries and residents of Thika town was set to greatly improve following the completion of a 66/11 kv substation with two 45 MVA transformers at Makongeni. The ultra-modern facility, constructed by Kenya Power at a total cost of Ksh 642 million, has adequate capacity to accommodate additional power demand by existing industries who would like to expand their operations, as well as new industrial and commercial enterprises. Speaking during the official commissioning of the substation, Kenya Power’s Managing Director and Chief Executive Officer, Dr. Ben Chumo, said that the substation will greatly complement the efforts that the power firm has put towards meeting the growing demand for reliable and competitively priced electricity in the greater Kiambu County. Kenya Power has so far invested Ksh 4.5 billion towards constructing

substations in Githunguri, Gatundu, Kirigiti, Magumu, Rironi, Lower Kabete, Dagoretti, Uplands, JKUAT, and on Thika Road within the County.The power utility promised to invest in n another new substation at Kahaini, Thika, at a cost of Shs.532 million, in the coming few months to further stabilize and meet growing demand in the north of the town. The Thika Industrial Substation and the company’s other undertakings in Kiambu County, were part of projects the Government and electricity sub-sector players are speedily implementing so as to develop at least 5,000 MW of additional generation capacity by 2017.

Kiambu County Business Agenda Validation The Kiambu County Business Agenda draft was validated during a breakfast meeting attended by the officials of the business membership organisations in Kiambu County.

The Manufacturers called for enabling environment from the County Government and listed pertinent issues that needed to be resolved in the County for a conducive business environment which include; land issues, infrastructure issues and investments in the health and security sector. 500 kilometres of road were graded out of the 5000 kilometres and work was ongoing however the issue of quality was raised. The County Spatial Plan is in the final stages and a ban of the change of user had been placed to help in the zoning. A commitment was made by the County Government to continue engaging businesses in order to create an environment which promotes industrial growth.

Nairobi Industrial Area Nairobi County is home to the largest number of manufacturing companies in Kenya. The Association set up an office in the industrial area in 2013 to deliver membership services more closely to the industry.

Manoj Shah

Chairman, Industrial Area Chapter

The Industrial Area chapter has been involved in various activities for the last one year aimed at improving the overall business environment. During the past year, the chapter caretaker committee was formed comprising of the following members;

• Mr. Manoj Shah-Osho Chemical Industries (Chapter Chair) • Mr. Manish Shah-Polyflex Industries (Chapter Vice Chair) • Mr. Hezekiah Macharia-Twiga Chemicals Ltd (Chapter Treasurer) • Mr. Amir Parpia-Alpha Fine Foods (Member) • Ms. Mary Gesare-Elys Chemicals (Member) • Mr. Nashir Kassam-Sadolin Paints (Member) • Mr. Robert Juma-KAM (Secretary to Committee)

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Chapters Report (Contâ&#x20AC;&#x2122;d)

Plans are underway to expand this team to reflect various sectors that make up the chapter membership to push the manufacturing agenda better. The Chapter engaged with different County and central Government officials and other key stakeholders over the year to bolster the manufacturing industry in the country, whose growth is by a large margin pegged on robust manufacturing industry. This is not only through the production of superior quality Kenyan products for local consumption and export, but also offers thousands of jobs to Kenyan and foreign professionals. Furthermore, the contribution made to Government coffers is quite significant. A two-day Public Private Partnership workshop for Nairobi, Machakos and Kiambu counties was held in July 2013 at Nairobi Safari Club. H.E. William Kabogo, the Governor, Kiambu County and H.E Dr. Evans

Kidero, Governor Nairobi City County and representatives form Machakos County were in attendance.he workshop sought to identify ways the County Governments and other business membership organisations can work in synergy to boost business growth and spur economic development. An annual chapter security meeting was held at Highchem in October by the members to discuss security matters with security agencies in Industrial Area and surrounding regions. In attendance were representatives from the Makadara District who assured members of their security at all times. Sighting frequent cases of break-ins in companies, members were asked to be cautious of the private security guards they engage as some connive with criminals. Other measures that were discussed to curb crime included installation of modern security systems like CCTV cameras and electric fences around business premises. In November, members engaged

directly with the County Government on key issues that affect business during a forum that was held at Sadolin Paints. In attendance were Hon. Anna Othoro, the Nairobi County Executive in charge of Trade, Industry, Corporate Development, Tourism and Wildlife, her public works, roads transport counterpart Hon. Evans Ondiek, among other key County Government officials. Several pertinent issues were discussed in depth and by the end of the forum; members were assured that the city is on the right path to clean up a name that has been tarnished by years of oppressive practices and high-handedness when dealing with the business community. Some key areas discussed during the forum were; city inspection processes that needed streamlining, bad state of most roads and overall infrastructural challenges, inter-County business challenge due to devolution, security, just to mention a few. A similar event will be held this year

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Chapters Report (Cont’d) Machakos Chapter The Chapter was involved in a number of activities to advance advocacy issues for manufacturers in the County. At the onset the Chapter helped organize and participated at an investment conference where the County Governor, Dr Alfred Mutua outlined the County’s strategic plan. This was in response to a memorandum containing our members’ wish list that KAM presented to him at his first engagement with business at Maanzoni Lodge. The Governor committed to facilitate business in the county. The County Government has plans to set up one stop shops for investors to register their businesses in the county without encountering bureaucratic procedures. With this process still ongoing, the chapter has been engaging with county officers at all levels to ensure that business runs smoothly, uninterrupted. A major hurdle facing many members is the harassment issue by county officials. Branding, parking and distributing goods have become very expensive. We are in constant communication with the Trade Executives in the county to iron out the issue. The Mlolongo weigh bridge was a major headache for traders. Through our engagement together with other stakeholders, the regulations where trucks were weighed per axle were revoked and now trucks are weighed as a unit, thereby reducing time spent at the bridges.

The chapter also held its annual general meeting, after which there was a chapter meeting to elect the Chapter Committee Officials. They include:

Mr Gideon Aswani: Chairman (Nation Media Group) Mr Mureithi Regeru: Vice Chair (African Cotton Industries) Mr Peter Kilonzi: Treasurer (Mabati Rolling Mills) Ms Hilda Kamau: Secretary (KAPA Oil Refineries) Mr Walter Mochoge: Member (Orbit Chemicals) Mr Patrick Kariuki: Member (East African Portlands Cement)

This team has been working hard to ensure that members’ issues are tackled fast and that County policies are formulated to bolster growth in the various sectors within the chapter. Together with the Industrial Area Chapter, Members were hosted to dinner by Kenya Power, where the MD, Dr Ben Chumo assured large consumers of dedicated lines to ensure their operations run smoothly, as well as a host of other remedies to the current problems facing industry as far as power issues are concerned. At the event, the Machakos County Executive in charge of Energy, Land and Natural Resources, Mr Joshua Musili, graced the occasion and added that as part of the projects planned for the upcoming city and its industrial area, the government was looking to generate its own power to

Gideon Aswani

Chairman Machakos Chapter

supplement existing supplies in order to ensure that industries shall have adequate power supply. The chapter was able to establish a library based at Mabati Rolling Mills. Members can access KAM material as well as borrow on short loan from the library, located on the second floor of the main administration building at MRM. In an effort to give back to and improve the environment within which we operate, KAM members planted a total of 1000 trees in Mlolongo, Athi River and Chumvi on 22nd May, 2014.

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Chapters Report (Cont’d) Uasin Gishu Chapter The Chapter continued to champion manufacturers’ advocacy issues in the County. In June the Chapter hosted the Governor to a business dinner whereby the members presented a report on issues affecting manufacturers and businesses in Uasin Gishu County. These issues included; infrastructure, urban planning, disaster preparedness, business processes, insecurity, industrial zoning among other issues. The Governor together with his County Executive Committee assured the members of his commitment to address these issues. In July 2013, the Chapter Officer was selected to be in the Committee in the development of the County Integrated Development Plan (CIDP) under the Industry Sector. The CIDP was finalised and passed by the Members of the County Assembly. The Chapter held its first Governor’s Roundtable in August, in collaboration other business membership organisations from the County. Members of the County Executive Committee were also in attendance. A consultative meeting with the County Executive Committee from various sectors; Industry, Trade, Infrastructure, ICT and E-government, Environment, Water, Energy, Land and physical planning, Finance was held to discuss ways in which to promote manufacturers competitiveness. Follow up meetings will be held on a quarterly basis. The members actively influenced decision making processes in the County and a KAM Eldoret Chapter

member, Mrs Margaret Ong’are of Fantex(K) Ltd was appointed to be in the County Budget and Economic Forum whose main mandate focuses on county budget, county fiscal strategy paper and financial management at the county level. This is in pursuant to Section 137(1) of the Public Finance Management Act. There were engagements with other stakeholders including; several consultative meetings with Kenya Power Management Team which focused not only on addressing key power issues affecting members but also to build relationship between KAM members and Kenya Power North Rift Management Team. This culminated into a successful business dinner which was held at the Boma Hotel, Eldoret whereby Kenya Power Shared the power supply Plan for the North Rift Region. H.E. Jackson Mandago, Governor of Uasin Gishu County, Dr. Ben Chumo, the Managing Director of Kenya Power, the Deputy Governor Elgeyo Marakwet, Members of the County Assembly and Chairmen of Various Committees of County Assembly participated in the meeting. Plans on energy for the region included; • Alternative power supply sources will be created for major power consumers; Fluorspar, Raiply and Unga Ltd • A senior Kenya Power Officer has been assigned to each major customer as a dedicate relationship officer • Creation of more and shorter feeders serving Eldoret environs by June 2015

Albert Kimwatan

Chairman Uasin Gishu Chapter

• Creation of Primary Substation to Lessos Power Centre via fibre optic at lessos and Rivatex Substation to improve supply restoration time, flexibility and sytem isolation on planned outages It was during this dinner that the Chapter, together with other business membership organisations launched the Uasin Gishu County Business Agenda. The Governor assured the business community of his commitment to creating a conducive environment for investment. Standards Tribunal, KEBS and KENAS held an awareness workshop with manufacturers, traders and exporters on standards issues during the year. The stakeholders also visited two manufactures; Raiply and New KCC. The chapter participated in the World Environment Day by attending the event held by the County Government and donating Trophies to the best institutions in Environment Conservation Practises as part of the members corporate social responsibility initiative.

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Chapters Report (Cont’d) Kisumu Chapter Work in the Chapter was mainly concentrated on ensuring that the devolved system of Government delivers for the manufacturers. The chapter held a successful first Kisumu Governor’s Round Table (GRT) which was presided over by the Governor H.E Jack Ranguma who committed to working closely with businesses to ensure consultation and inclusion in decision making on matters that affect the business climate of Kisumu county. Another GRT in Homa bay county in a session presided over by the Governor H.E Cyprian Awiti who committed to a continued engagement and collaboration with businesses within the county and assured businesses that the GRT will be a regular event.

The chapter committee members Mr. Israel Agina and Ms Joyce Opondo were appointed by the Kisumu County Governor H.E. Jack Ranguma to serve in the County Business Economic Forum for a period of 3 years representing the associations interests. The business community in the County held a joint consultative forum with the county security team and the county Government led by the Governor of Kisumu county to address serious security concerns. A team was picked to steer the functions of the committee including Chapter chair Sagar Shah and Mr. Israel Agina. There were changes in the Chapter’s leadership structure in September 2013. Mr. Sagar Shah was

Sagar Shah

Chairman Kisumu Chapter

elected chapter chairman, taking over from Mr Israel Agina at the expiry of his two-year term. Ms Joyce Opondo was elected as Chapter vice chairlady and Mr. Jayesh Patel as the chapter treasurer.

Nakuru Chapter The chapter continued to engage with the County Government to ensure a conducive business environment. A series of sectoral meetings were held with the County Government over the contentious Nakuru County Finance Act. Proposals on amendments were submitted and forwarded to the county assembly for approval. As a follow up to the Governors roundtable held in May 2013 a County Business Agenda was published and shared widely with the county Government and other Business Membership Organizations in the county. A blueprint for the county was also developed and shared with the Governor and his team. The chapter will continue to engage to ensure the blueprint is implemented.

To ensure representation in key Boards at the County, the chapter is monitoring formation of the same and nominating persons to seat on the boards. The Rift Valley Water Services Board recently advertised for board positions at the Nakuru Water and Sanitation Services Company Ltd (NAWASSCO) and the chapter promptly nominated one of our members to seat on the Board. The selection process however is not concluded. The Chapter had regular engagements with the Regional Management of Kenya Power over power supply issues. As a result outages have reduced significantly in industrial area and there is regular communication to the KAM office in the event of

Rajen Shah

Chairman Nakuru Chapter

planned outages. Kenya power has also promised to dedicate a feeder to industrial area to improve reliability. The chapter has also scheduled quarterly meetings with Kenya Power with a view to ensure issues are captured and addressed proactively. Recently the chapter hosted a dinner

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Chapters Report (Cont’d) Nakuru Chapter (Cont’d) meeting for the Managing Director of Kenya Power Ben Chumo and his team. Kenya power shared the power plans they have put in place for the county including dedicating a feeder to large consumers in the industrial area. On coalition building to ensure the business community speaks with one voice, the chapter continues to lead a coalition of Business Membership Organizations (BMOs) in Nakuru dubbed the “Nakuru Business Coalition”. The initiative has brought together players from all sectors of the economy and has been instrumental in advancing our advocacy agenda and recognition by Government.

Nakuru County Governor, H.E. Kinuthia Mbugua receives Nakuru County Business Agenda at a dinner hosted by KAM

Membership Satisfaction Survey

efficiency in service delivery, reliability, staff being knowledgeable on KAM products and services, speed in service delivery, adaptation of technology and accuracy in providing information.

A membership satisfaction survey was carried out towards the end of the year to assess members’ satisfaction levels with the bouquet of services for the Association.

In the last two years members ratings on KAM has increased by the following percentage, 2% in 2011, 9% in 2012 and 1% in 2013.

KAM Performance Rating: The overall performance ratings of KAM in 2013 stood at 85%, the index drivers were good customer service,

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

UN Global Compact Kenya Network The local network of the United Nations Global Compact continues to foster engagement and activities of the Global Compact principles in supporting the sustainability journey of local network members.

3 outreach and 10 learning events. Three companies successfully published Communication on Progress Reports as per the UNGC requirements. Best practice case studies were also done for two companies to showcase some of the activities that are being done in order to share experiences with other members.

In 2013 the local network recruited 18 new members. 15 companies added their signatures to the Code of Ethics for Business in Kenya, committing to uphold good ethical standards in their operations. A total of 55 companies had signed up to the Code of Ethics by the end of the year. The network engaged the local membership through

Training was also conducted on the UK Bribery Act to sensitise members who deal with companies in United Kingdom on ethical standards requirements in order to trade with companies in the United Kingdom.

Betty Maina, KAM CEO, Bob Collymore, UN Global Compact Board Member and Brenda Mbathi of EABL addressing addressing business leaders in Nairobi on Global Compact activities

In a dance if the music changes the steps will also have to change. ~ African proverb

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Communication The unit is in charge of ensuring proactive and timely delivery of information to stakeholders as well as offer strategic communication advisory services to support advocacy communication. In support of the Association’s services and activities the unit continued to ensure supply of relevant information to stakeholders and auxiliary services work. During the first quarter messages were crafted around the elections with a view to foster the spirit of peace in the workplace and urging all Kenyans to go and vote peacefully as well as resume to work after the elections. In line with the industrial business agenda, communication was centred around influencing policy makers to incorporate manufacturers’ in policies requirements to promote an enabling environment Paida Nyamakanga Head of Corporate Communication

Publicity As the various policies were announced by Government during the year, the Association stepped up its communication using various tools to ensure that its voice was heard.

Pillar 4:

In this regard, over 233 media mentions , 38 opinion editions, 32 CEO’s briefs and 11 KAM Wins and 3 Industry Today magazines were published. Supplements and advertisements were also run in various publications throughout the year. Daily snippets of the main stories carried out in the media were shared with members throughout the year in an effort to keep the members abreast of current affairs.

This strategic pillar ensures proactive and timely delivery of effective communication to both internal and external stakeholders.

The unit maintained mutual relations with the media throughout the year. A media relations strategy was implemented to ensure a follow through with the overarching aim of delivering on the Secretariat’s mandate. New tracking methods were introduced by the unit and social media updates on facebook and twitter remained robust. Communication was revamped using other technology applications such as Isuu and Mail Chimp.

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Communication (Cont’d) other Business Membership Organisations were held. Power breakfasts were held with Parliament Committee Chairmen and Vice Chairmen to raise awareness of advocacy issues. Courtesy calls were also paid on the Speakers of the National Assembly and Senate.

As the new constitution implementation began with the coming in of the new Government there were a number of teething challenges that were ushered in by devolution and new policies that kicked in such as the VAT Act. Various communication was pushed out in this regard to support the manufacturing sector’s position in order to promote competitiveness of the Kenyan industry.

The manufacturing sector had an opportunity to interact with the Chief of Defence, Mr Julius Karangi, during a breakfast hosted by KAM on security and strategy.

Events A total of 58 events were organised by the Association during the year to support KAM’s core business.

As Kenya deepens trade relations in Africa, manufacturers had an opportunity to engage with Nigeria businessmen at a Kenya- Nigeria Business forum which was held during a state visit to Kenya by the President of Nigeria, H.E Goodluck Jonathan. A return state visit was also made and captains of industry accompanied the President to Nigeria. A Kenya - Nigeria trade agreement was signed during the visit to Nigeria by the President.

The Association held its debut Chairman’s Ball during the last quarter of 2013. At the Chairman’s discretion a number of Awards were given to honour companies and individuals who had shown remarkable leadership in various sectors. The awards which were presented include; Top Brand in the Manufacturing Sector, Most Promising SME, Leadership in Sustainability, Savant of Advocacy and Long Service. The event was captured in the local media as one of the top 13 events of the year countrywide coming in at number 6.

KAM took part in the Conference of African Ministers of Industrialization (CAMI 20) and had the opportunity to address Ministers from all over Africa on the Association ‘s input to the industrialization drive. In order to maintain consistency of voice, speeches were drafted for KAM spokespersons for various events throughout the year and position papers were also drafted for advancing advocacy issues for the manufacturing sector.

Stakeholder Engagements A number of high profile engagements with stakeholders including meetings with the President, Deputy President, other Government officials Government agencies and

Courtesy call on KAM by visitng journalists from Denmark

Bella Akinyi EO Corporate Affairs

Anne Ndung’u EO Research and Business Writing

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Communication (Cont’d) The brand

Corporate social responsibility

In all engagements KAM maintained its brand profile by consistent use of its brand and enhanced the profile through the Association’s key brand drivers; thought leadership from the board, leadership team and staff, superb workplace environment, financial liquidity and a solid corporate social responsibility programme. The KAM brand was well represented in various fora and publications.

KAM continued to support the Green Line project which was initiated as the Association’s 50th Anniversary Project in 2010. Over 100 participants from manufacturing companies and the KAM Secretariat participated in planting and nurturing trees at the Kenya Wildlife Society. The project is meant to protect animals in the park from encroachment by city developments. The Green Line Project was handed over to the GreenLine trust towards the end of the year.

KAM maintained its brand promise of inspiring global competitiveness in all its activities. A brand training was also held for staff members.

As the Association evolves on its strategic road map, communication will continue to play an integral role in driving the manufacturers’ agenda. In this regard the Association will continue to proactively engage and disseminate information that support the manufacturing revolution.

Internal communication was maintained through various briefs and news alerts throughout the year. There were regular internal departmental and general staff feedback meetings that were held throughout the year. A staff weekly report continued to be used to keep all members of staff a breast of the association’s activities. As the unit delivered on the three year strategic plan a new plan for the next three years was developed and the team is already operating in full swing to deliver for the association and its stakeholders for the next three years.

KAM breakfast meeting with Cabinet Secretaries and Principal Secretaries

There are three kinds of people, those who make things happen, those who watch things happen and those who do not know what is happening. ~ African proverb

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Finance, Administration & Projects 2013 was a mixed bag of events as the Secretariat, working closely with the Finance, Management and Projects Committee of the Board, worked on delivering the multimillion state-of-the-art new building which will be an income generating asset for the Association going forward. KAM Secretariat will take occupancy of the new building at the end of June. On the other hand more effort was geared towards ensuring that the Association maintained its fiduciary responsibility to its members by being good stewards of KAM finances and remaining financially stable in an environment which was marred by a number of risks. The Association maintained its financial prudence and closed the year with a strong balance sheet

Zipporah Maina, Head of Finance, Administration and Projects

Number of paid up members

Pillar 5: 650

The unit ensures that KAM is financially sustainable, motivates a conducive environment for high staff retention & that the Association adheres to high standards of corporate governance.

619 579

560 525

524

595

522

490

469 462 411 374

377 350

1999

2000

2001

336

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Annual Turnover

Below 20 million 20-50 million 51-100 million 101-250 million 251-500 million 501 million – 1 billion 1 – 3 billion 3 - 5 Billion Over 5 Billion

Annual Subs Fee VAT Building Levy at 25% of New Members Inclusive (Ksh.) Subs Entrance Fees 2010 – 2014 (5Yrs) 19,140.00 4,785.00 9,570.00 28,072.00 7,018.00 14,036.00 42,108.00 10,527.00 21,054.00 70,180.00 17,545.00 35,090.00 105,270.00 26,318.08 52,635.00 140,360.00 35,090.00 70,180.00 210,540.00 52,635.00 105,270.00 223,300.00 55,825.00 111,650.00 255,200.00 63,800.00 127,600.00

Total Payable by New members 33,495.00 49,126.00 73,689.00 122,815.00 184,223.08 245,630.00 368,445.00 390,775.00 446,600.00

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Finance, Administration & Projects (Cont’d) Projects The Association continued to be a good steward of donor funds for the projects that it undertook with funds from various agencies. Financial prudence was exercised in managing all funds and projects were delivered as per mandate. The following projects were work in progress during the year 2013: Current Summary KAM Donor Funded Projects Project Name and Objectives

Donor

Grant Ksh M Project Dates

KAM Advocacy and Member Services 1

Improving EAC competitiveness through evidence/ research based advocacy. The aim of the project is to improve the cost of doing business

TMEA

July 2011 - Nov 2013.

Updating Manufacturing Survey in Kenya 2012. The aim was to update the manufacturing survey which was commissioned by KAM in 2006

Business Advocacy Fund

2012 - 2014

Ensuring Devolution Delivers for Business. The aim was to ensure collaboration of Business Membership Organisations through County Coalitions to work on Governors Roundtables throughout the 47 Counties to address emerging issues from devolution.

Market access for Kenyan Goods. Lobbying and advocating to sustain and enhance current preferential market access the EU and competitiveness of Kenya’s exports to the EU by signing Economic Partnerships agreement (EPA’s)

Industrial Business Agenda. Consolidating and documenting issues affecting doing business in Kenya with proposed solutions on how to address the bottlenecks through Industrial Business Agenda

Climate Change Policy Awareness and review. The aim was to work in partnership with the National Steering Committee on Climate Change Policy to spearhead forums with members and key BMOs such as KNCCI, KEPSA, FPEAK, KENFAP, EATTA, KEREA and the KFC at KAM’s 6 regional chapters to collect feedback from the private sector on the Policy and draft Bill as well as educate members on the implications of the Policy and draft Bill on their businesses.

Promoting Local Governance Reform at Sub-national Level

Center for International Private Enterprise (CIPE)

Annually

Regional Technical Assistance Programme to support Industry by providing comprehensive assistance scheme to both the investors and the banks: The Programme contributes to the development of capacities in Kenya, Uganda, Tanzania through the transfer of skills to local experts and help the development and the financing of renewable energy projects in the region

AFD

8, 000

August 2012 - April 2016

KAM DFID Project (Climate Change Adaptation, Resiliance and Mitigation Program to strengthen business society engagement in Climate Change mitigation advocacy

DFID

135

March 2014 - March 2016

Energy Audits and Capacity building. The aim was to increase energy efficiency by manufacturers through trainings in energy efficiency and certified energy managers

DANIDA

410

Jan 2011 – Dec 2015

Energy Efficiency and Conservation through audits, trainings.

Ministry of Energy

Ongoing

Capacity Building on energy efficiency and Climate Change

GIZ

Oct 2012-Oct 2013

Global Compact. Support to locacl network initiatives on awareness and recruitment through the Local Global Compact Network Kenya based at KAM

DANIDA Global Compact

March 2011 – November 2014

Business Ethics and Standards advocacy

Jan 2011 – March 2014

Business Initiative Alliance Against Corruption program

Feb 2013 - March 2014

August 2011 – Dec 2014

British High Commission Global

Small and Medium Sized Enterprises Program (value chain and firm level intervention) 16

Support to SME agro-processing sector value chain through firm level interventions

Paul Mutambuki

EO HR & Administration

Danson Ndetei

AE IT Support Services

Micro Enterprise Support Program (MESPT)

Miriam Wambaa

Administrative Officer & PA to CEO

Heizoh Machira Receptionist

Rachael Mwangi Accounts Assistant

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Finance, Administration & Projects (Cont’d) Information Technology

Capacity building, Employee Wellness and Succession Planning

KAM revamped its information technology system in order to effectively deliver to its stakeholders. The Information system remained secure from hackers because of the e-security system in place and constant update of the anti virus system of the Association.

In order to keep ahead of the pack by hiring, retaining, nurturing and developing talent to effectively deliver to members’ expectations, KAM maintained a healthy staff compliment. More people joined the staff employ to strengthen the capacity of our units to deliver services to members. The Secretariat closed the year with a staff strength of 54.

The section continued to ensure that the flow of content was open and available to all staff, members and stakeholders. Some programmes were integrated into the system in an effort to support the delivery of services to KAM stakeholders. Trillions of data were pushed through the Association’s system throughout the year.

A total of 20 employees undertook training during the year to enhance skills capacity. Staff members took part in a team building exercise in the second half of the year in an effort to enhance a teamwork culture within the organisation.

Back up on cloud based platforms was done to enhance security and ease access to data from anywhere in the world.

If a drum is not made blame the king. If a drum is made and it is not played blame the rest of the people. ~ African proverb

Johnstone Konji and Betty Maina received awards at the Chairman’s Ball

Teresia Mumbi Administration

Geoffrey Chepkwony

Johnstone Konji

Driver

Stanley Langat Driver

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Corporate Governance Statement KAM is owned, funded and managed by its members. At the apex of its governance structure is the member’s Annual General Meeting, which elects the Board of Directors to give strategic direction to the organisation. The Board further establishes downstream organs for membership engagement in the advocacy process such as board committees and working committees, sector and regional chapter committees and an executive secretariat to oversee and execute the operational plan.

KAM is a company limited by guarantee without share capital. The Association is governed by a member’s articles and memorandum of association and also operates within a member’s charter which members consent to upon joining. The charter has the following contents; 1. Mission and vision 2. KAM’s strategic objectives 3. Equitable treatment of members 4. Modus operandi 5. Conflict of interests 6. Declaration against corruption 7. Corporate governance and social responsibility and ethical business practices 8. Members’ special responsibilities (working within applicable laws & regulations) 9. No misuse of office by board or members of staff 10. Impartiality of Executive Officers without giving undue advantage to any member 11. Decision making through working committees and the board 12. Amendment/Replacement of the charter by executive committee KAM’s core values of innovation, effectiveness, responsiveness and resilience guide the organisation’s vision to be a world-class business membership organisation effectively delivering services to its members. KAM is committed to promoting competitive local manufacturing in liberalised markets.

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Corporate Governance Statement KAM’s BOARD OF DIRECTORS

2. Human Resource Committee The HR Committee reviews and advises the Board on the organisational establishment, reviews annual Human Resource Management and Administrative policies, procedures and practices and makes recommendations to the Board. It also reports and advises the Board on HR policies, reviews and advises the Board on staff recruitment and selection, it reviews the performance of the secretariat, appoints Senior Staff, reviews remuneration and works closely with FIMAPS on staff costs.

KAM is lead by an able Executive Committee who comprises the Board of Directors. The Executive Committee is made up of 17 Board members and one (1) ex-offficio member and they are: Mr Polycarp Igathe, Chairman Mr Pradeep H. Paurana, Vice Chairman Mr Kaushik B Shah, Director Mr Mahul J Shah, Director Mr Muhoho Kenyatta, Director Mr Bimal Kantaria, Director Mr Lutaf Kassam, Director Mr Bharat V. Shah, Director Mr Joseph Lithimbi, Director Mr Sachen Gudka, Director Mr Stephen Brooks, Director Ms Flora Mutahi, Director Mr Vimal Shah, Director Mrs Tabitha Karanja, DIrector Mr Perviz Rajnikant Dhanani (Palu), Director Mr Yaw Nsarkoh, Director Mr Jaswinder Bedi, ex-officio

3. Business Competitiveness Services Committee The Committee monitors and reviews the provision of business competitiveness services, including firm level interventions in energy services, export market development, Kaizen continuous improvement services, mid-level training, and technical support to growthoriented SMEs, among others.

KAM WORKING COMMITTEES These Committees have been established by the Board to facilitate member’s engagement with the government and to provide oversight on KAM advocacy agenda. They are: 1. Tax and Trade Committee It covers the broad areas of industrial tax proposals, tax facilitation, trade blocs and investment a) Tax, cost and trade facilitation b) National, regional and international trade and new markets

The Executive Committee’s role is to manage KAM’s business. It may from time to time elect to the Executive Committee any person who qualifies for election under the organisation’s Articles of Association. The members of the Executive Committee are selfless and highly dedicated to their work. They are determined to see KAM achieve its set goals through its mission and vision. For this reason, the Executive Committee members offer their services to KAM on Voluntarily basis. Their dedication is seen in their attendance to Board meetings, which are held six times a year. The Board Committees and the Working Committees have four Statutory Meetings per year, held on a quarterly basis, to review progress and emerging issues, but they may have bilateral dialogue meetings with relevant government agencies as need arises. The Board Committees and the Working Committees are as follows:

2. Legal and Regulatory Committee This Committee covers the broad areas of legal and regulatory issues related to quality and standards, labour matters, intellectual property rights and anti-counterfeit issues, and Environment issues. It has two sub-committees: a) IPR & Counterfeit b) Environment 3. Infrastructure Committee It covers issues related to ports, railways, roads, energy, ICT and telecommunications. It has one sub-committee on energy.

KAM BOARD COMMITTEES 1. Finance, Management & Projects (FIMAPS)Committee It is responsible for the day-to-day management of the Association through the Chief Executive Officer, approval and execution of critical projects undertaken by the Secretariat, oversight on KAM’s finances and provision of services to members and execution of revenue generating initiatives.

4. Licensing and Security Committee It concerns itself with matters of local authorities including licensing, water, roads, liaison with ministry of local government and national security issues among others.

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Abridged Financial Statements KENYA ASSOCIATION OF MANUFACTURERS (A COMPANY LIMITED BY GUARANTEE) STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2013 2013 2012 Notes Sh Sh INCOME 3 132,864,453 108,906,506 OTHER OPERATING INCOME 4 13,791,815 8,341,827 GRANT INCOME 16 229,095,358 160,009,709 ___________ ___________ 375,751,626 277,258,042 ADMINISTRATIVE EXPENSES 5 (116,826,388) (137,076,010) GRANT EXPENDITURE 16 (229,095,358) (160,009,709) FINANCE INCOME 7 21,091,113 41,543,470 ___________ ___________ SURPLUS BEFORE TAXATION 50,920,993 21,715,793 TAXATION CHARGE 8(a) (14,404,232) (9,027,468) __________ __________ SURPLUS FOR THE YEAR 36,516,761 12,688,325 __________ __________ OTHER COMPREHENSIVE INCOME FOR THE YEAR

Items that may be reclassified subsequently to profit or loss: NET (LOSS)/GAIN ON AVAILABLE-FOR-SALE FINANCIAL ASSETS DURING THE YEAR 12 (177,905) 8,709,032 __________ __________ (177,905) 8,709,032 __________ __________ TOTAL COMPREHENSIVE INCOME FOR THE YEAR 36,338,856 21,397,357 ========= ========

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Abridged Financial Statements KENYA ASSOCIATION OF MANUFACTURERS (A COMPANY LIMITED BY GUARANTEE) STATEMENT OF FINANCIAL POSITION

2013 2012 Notes Sh Sh ASSETS Non current assets Property and equipment 9 228,045,993 30,504,022 Treasury bonds 12 84,242,544 122,675,578 Corporate bonds 12 10,204,850 10,247,342 Term deposits 13 5,000,837 3,733,635 Deferred taxation asset 14 1,298,848 3,445,336 __________ __________ 328,793,072 170,605,913 __________ __________ Current assets Receivables 10 61,700,254 5,896,178 Earmarked funds receivable 16 40,351,492 14,054,378 Taxation recoverable 8(c) 4,478,093 3,060,351 Treasury bills 11 19,584,358 6,325,952 Term deposits 13 - 112,768,182 Bank and cash balances 53,950,965 66,333,410 __________ __________ 180,065,162 208,438,451 __________ __________ Total assets 508,858,234 379,044,364 ========== ========== RESERVES AND LIABILITIES Reserves Capital fund 35,919,608 35,919,608 Revaluation reserves on investments (1,664,482) (1,486,577) Retained earnings 91,294,868 54,778,107 __________ __________ 125,549,994 89,211,138 __________ __________ Noncurrent liabilities Gratuity provision 7,479,777 4,164,089 Borrowings 18 80,004,814 __________ __________ 87,484,591 4,164,089 __________ __________ Current liabilities Unexpended project funds 16 176,006,051 178,502,390 Subscriptions received in advance 1,362,740 2,460,631 Payables 15 118,454,858 104,706,116 __________ __________ 295,823,649 285,669,137 __________ __________ Total reserves and liabilities 508,858,234 379,044,364 ========== ========== The financial statements on pages 8 to 34 were approved by the Executive Committee on 20 May 2014 and were signed on its behalf by: SACHEN GUDKA ) ) Members of the Executive Committee MAHUL J SHAH )

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

VISION

To be a world class business membership organization effectively delivering services to its members wherever they operate.

MISSION

To help build a globally competitive and inclusive Kenyan manufacturing industry that is the best in Africa.

GOAL

To transform KAM into a sustainable member focused Association delivering relevant, quality, timely and effective services to members.

VALUES

• Innovation

We aspire to introduce a paradigm shift in the way that we deliver products and services to our members in a bid to make them do things differently in a profitable manner.

• Effectiveness

We ensure that the extent of all our activities and interventions fulfill the intended purpose of function to our members satisfaction.

• Responsiveness

We aspire to be quick in responding and reacting to our members’ needs within the required time.

• Resilience

We ensure that we have the skills and tenacity required to be successful in a fast-paced, changing and constraining business environment.

KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

The Year in Pictures (Cont’d)

BASF Chief Executive Peter van-den Hoek signs the Code of Ethics in Kenya at an Ethics Conference which was graced by the Cabinet Secretary for Ministry of Industrialization & Enterprise Development, Mr Adan Mohamed

Betty Maina addresses Magistrates and Judges at the KMJA Annual Conference

Team building session for KAM staff members at Tafaria Castle

HE Jack Ranguma delivering a speech at the Governor’s Roundtable held in Kisumu

Betty Maina meets Foreign Affairs Minister of Seychelles Jean-Paul Adam during his visit to Kenya

Participants at the 2013 KAIZEN conference

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