Page 1

ENTREPRENEURSHIP

REAL ESTATE

ENTERTAINMENT

ISSUE 9

TECHNOLOGY & INNOVATION

APRIL - JUNE 2016

Creative Industry The Power of shared knowledge in building a creative ecosystem

CREATIVE INDUSTRY INTELLECTUAL PROPERTY RIGHTS AS A PLATFORM TO ADVANCE KENYA’S ENTERTAINMENT INDUSTRY Kenya..........Kshs370 Uganda..Ushs 13,800

Tanzania......Tshs 8,300 Rwanda......RWF 2,800

TECHNOLOGY & INNOVATION LEADING INNOVATION FOR CORPORATE GROWTH South Africa........R 40 Angola ...........OA 520

Algeria.........DA 395 Egypt...EPounds 32

Tunisia....Dinar 8.50 Ethiopia...........R 90

REAL ESTATE KENYA’S RESIDENTIAL PROPERTY MARKET Gambia........Da 165 Ghana....GH114,000

Nigeria...........N 840 Morocco........Dh 48


APRIL - JUNE 2016

Contents FILM INDUSTRY 16 I Kenya’s silver screen KYEP 18 I Public Private Partnership ENTERTAINMENT INDUSTRY 22 I Intellectual Property Rights TEXTILE INDUSTRY 26 I Banning mitumba in Kenya MUSIC INDUSTRY 29 I Turning passion into profit TECHNOLOGY & INNOVATION 34 I Innovation for corporate growth REAL ESTATE 46 I Kenya’s retail sector 48 I Kenya’s residential property market WTO

Makings of Success The Private Sector caught up with award winning performer, artist and entrepreneur Juliani go get a personal insight on the business that is Music.

Pg 37

53 I Nairobi outcome “A very pleasant surprise“ ENTREPRENEURSHIP 57 I Business breakthrough 60 I Kisii entrepreneurship summit MUSIC INDUSTRY Turning Passion into Profit When I joined Campus, I remember telling my friend that I did not want to keep asking my parents for pocket money. Prior to that, I had qualified for a one year music-training program dubbed ‘Talent Academy’, initiated by the Government of Kenya in partnership with UNICEF >>>Pg 29

COVER CREDIT: ELIUD MAUMO Private Sector (ISN 61 6600 00 6882 3), is published quarterly: January - March ; April-June ; July-September and October-December. Private Sector is published and printed by Brand Effects East Africa. There is one issue per quarter, each count as four issues in an annual subscription. All rights reserved. Reproduction in whole or part without written permission is highly prohibited. Private Sector design is protected through trademark registration in Kenya. For Article Reprints, Permissions and Licensing www.privatesectoreastafrica.com


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FOREWORD Let’s get the creative Juices flowing

K

enya has earned herself a place on the global spotlight for her majestic scenery, world famous wildlife, world beating athletes and our renowned spirit of innovation. The Kenyan story needs to be told and our tradition and national persona expressed. It is time to get our creative juices flowing and inspire the reinvention of our creative industry. Kenya’s entertainment and Media industry is valued at over Sh. 180 billion ($1.77 Billion) per year while our leather, furniture and fashion industries are valued at over Sh. 95 billion ($940 million). In totality the creative industry has the potential to create thousands of new jobs ranging from the lucrative fashion industry, music, film and arts. Creativity and innovation go hand in hand, encouraging the growth of the creative industry will spur a new wave of entrepreneurship. Beyond the performing arts, artists, craftsmen and designers the industry holds a more diverse employment value chain that has the potential to generate thousands of jobs in administration, value chain management and even spur the creation of new cottage industries to process agricultural materials such as leather and cotton for the fashion industry. In arts and entertainment, new horizons include promotion, export of crafts and artifacts, artist management and mass production of equipment for both craftsmen, recording artists and the wider entertainment industry. In addition to creating jobs, the creative industry holds the potential for Kenya to not only market itself as a destination through film but to also reinvent our national identity among the League of Nations through music, artistic expression and fashion. Millions of Kenyan youth seeking new opportunities can exploit their individual talents and flip the unemployment script into entrepreneurial opportunity. To unlock this potential we all have to chip in, we have to consume the fashion, art, content and dance to the innovative beat of change. Each industry can tap into the creative industry in different ways setting the pace for innovation through among other things; product design, adverting, product placement, brand association and direct purchase. Through the creative industry we can inspire the next generation of entrepreneurs to invest in talent and talent management while at the same time inspiring the creative industry to innovate new solutions for our economy. The creative industry is the next frontier in reinventing the Kenyan economy and national identity.

Carole Kariuki, HSC, MBS Chief Executive Officer KENYA PRIVATE SECTOR ALLIANCE

MANAGING DIRECTOR Preston Muhando SENIOR EDITOR George Sewe COMMERCIAL & RETAIL TEAM Mike K. Sabari Mark Masasabi Rachel Bitutu ADVERTISING MANAGER Fredrick Odenyo PRODUCTION MANAGER Preston Muhando HEAD OF DESIGN Eliud Maumo PHOTOGRAPHY Ochieng’ Maumo ONLINE MANAGER Steven Karumba DISTRIBUTED BY Jetsam Distributors

PUBLISHED BY BRAND EFFECTS EAST AFRICA 2nd Floor Mirage Plaza, Mombasa Road, P.O. BOX 36158 - 00200 CSQ, Nairobi, Kenya. Tel: +254 ( 020 ) 231 3096 / 211 0780 Cell: +254 (0) 722 352 350 . +254 (0) 734 352 350 Email: privatesector@brandeffectsea.com Web: www.privatesectoreastafrica.com Copyright 2016 Brand Effects EA All rights reserved.

While the publisher have made every effort to ensure the accuracy of all information in this magazine, they will not be held responsible for any errors therein.


The Kenya Private Sector Alliance (KEPSA) is the voice of the private sector in Kenya and is the umbrella body for private sector associations and corporate bodies in all sectors of the economy including trade associations. KEPSA speaks for multinationals, SMES and startups organized under different sector boards and working groups reflective of the 16 sectors of the economy. KEPSA has over 100,000 members through business member organizations and companies. It provides a platform for the private sector to engage in Public Private Dialogue at Local, National and International level. It also offers information, advisory and networking opportunities for members and is a key partner to government and other stakeholders in the formulation and implementation of policies and strategies geared towards spurring economic growth, wealth creation and national development.

Amb. Dennis Awori Chairman, Kenya Private Sector Alliance

KEPSA BOARD OF DIRECTORS

Kenya Private Sector Alliance (KEPSA)

Amb. Dennis Awori

Chairman

Laila Macharia (Vice Chair)

Judicial and professional matters

Vimal Shah (Ex-officio)

Regional Integration

Rita Kavashe

Infrastructure

Pradeep Paunrana

Trade and Investment

James Mwangi

Vision 2030 and Entrepreneurship

Brenda Mbathi

Social sectors and Development

Jeremy Awori

Finance and Macro-economic Environment

Chris Wilson

Climate Change and Energy

Carole Kariuki

KEPSA CEO

Nicholas Nesbitt

Science, Technology and Information

Muhoho Kenyatta

Food Security

Linus Gitahi

Productivity and Social Services

Patricia Ithau

MSME

Japh Olende

Foreign Investment

Adam Jillo

Security and Tourism

@KEPSA_KENYA

To find out more about how you can became a member of KEPSA, Contact us today: Kenya Private Sector Alliance I 5th Flr, Shelter Afrique Bldg, Mamlaka Rd. P.O. Bix 3556 - 00100 Nairobi, Kenya office: +254 20 2730371 / 2 / 2727936 Fax: +254 20 2730374 Cell: +254 720 340940 Email: info@kepsa.or.ke Website: www.kepsa.or.ke


AT A GLANCE

At a glance TRANSPORT AND INFRASTRUCTURE SECTOR

CONSTRUCTION OF MOMBASA ISLAND - SOUTH COAST BRIDGE The long lived ferry menace in Mombasa will soon be a thing of the past, as the government proposes the construction of a bridge connecting Mombasa Island and South Coast. Preliminary designs for the proposed bridge are complete. It is expected that the bridge will provide an alternative route between Mombasa Island and the South Coast, which currently relies solely on ferry services ferrying an average of 300,000 people and 6,000 vehicles daily.

This has resulted into huge congestion at the Likoni crossing. A cabinet meeting held in March 2016, approved the second phase of the Standard Gauge Railway. This phase will run through Naivasha-Kisumu/Malaba SGR and once completed, the SGR will be more than 900km between Mombasa and Malaba and is expected to ease movement of goods as well as reduce congestion on main highways.

INDUSTRIALIZATION AND ENTERPRISE DEVELOPMENT SECTOR

REGULATIONS ON SPECIAL ECONOMIC ZONES Special Economic Zones are set to become a reality in the country as the Government finalizes regulations to govern operations of the Special Economic Zones. The regulations are expected to be finalized and operational by end of June 2016. The Special Economic Zones will promote and facilitate investment by global and domestic investors; in the Special Economic Zones.

ICT SECTOR

ENERGY SECTOR

IN THE SERVICE OF DIVERSITY

NATIONAL ICT POLICY REVIEW

The Energy Regulatory Commission is carrying out a review of the electricity Distribution and Transmission grid Code.

The Ministry of ICT has began reviewing the National ICT Sector Policy Guidelines 2006 review to keep up with the fast changing technology sector.

The Electricity Grid Code, is the primary technical document stipulating rules and regulations governing the entire electricity generation and supply chain.

Kenya’s relative stability and above average GDP coupled with its reputation as a leading innovation destination has attracted investors including USA tech firms, Uber and Netflix, whose disruptive characteristics have unsettled traditional players calling for a review of regulations.

The review process started in late 2015, following the need to take into account the rise in the number of investments in renewable energy, especially in wind and solar projects, whose specific needs are not largely covered under the current code.

8 I PRIVATE SECTOR I APRIL - JUNE 2016

ERC has acquired the services of Nexant an American company that is also the consultant for the East Africa Power Pool to review the eight year old Electricity grid code, to enhance the country’s capacity to absorb additional renewable electricity.

The Policy Development Process will be steered by the National Communications Secretariat and will take a multi-sectoral approach and will be carried out in three sectoral working groups to consider infrastructure issues; Devices, Applications and Content; and New and emerging issues. The policy document is expected to be finalized by end of June 2016.


AT A GLANCE

At a glance SECURITY SECTOR

JOINT FIGHT AGAINST TERRORISM Global terror is still on the rise with having been Europe targeted by ISIL in the recent months. France faced coordinated attacks on 13th November, 2015 that left 130 people killed. On 22nd March, 2016 there was another terrorist attack in Brussels Belgium at the Zaventem airport and the Maelbeek metro station that left at least 34 people dead. ISIL claimed responsibility for both attacks shifting the dynamic in the fight against terror and calling for a more concerted global effort in the fight against terror.

SPORTS CULTURE AND ARTS LAND, HOUSING AND URBAN DEVELOPMENT

LAND ACT: PENDING LAND BILLS Crucial legislation touching on land issues are currently in parliament. The Physical planning bill is on the floor of the Senate while the Lands Amendment Act is at committee stage heading to the third reading. The community land bill is at the second reading. These pieces of legislation, some of which have a constitutional deadline of august 2016 are aimed at bringing order to the land sector and ensure proper governance of the land sector. Given that Kenya tends to be caught in election conflict cycles primarily arising out of land disputes, the legislation enactment and implementation is meant to reduce land related conflicts.

IN THE SERVICE OF DIVERSITY Nick Mwendwa was elected as president of the Kenya Football Federation in February 2016, taking over from Sam Nyamweya. Internationally FIFA leadership also witnesses a change of guard in its top leadership with Gianni Infantino being elected to replace Sepp Blatter who had served as FIFA president for close to 18 years. During the Extraordinary Congress in Zurich, FIFA’s Member Associations voted in favour of reforms that will improve football governance. These include separation of commercial and political decision-making, greater scrutiny of senior officials, and commitments to promoting women in football and human rights.

ENVIRONMENT NATURAL RESOURCES AND REGIONAL DEVELOPMENTS

DISCOVERY OF NEW OIL DEPOSIT SHIFTS TALK ON PIPELINE ROUTE Tullow oil have discovered significant oil deposit in the Kerio Valley Basin. Tullow says the first well in the Kerio Valley Basin, Cheptuket-1, has encountered good oil shows across a gross interval of over 700 metres. Tullow is working with partners Africa Oil and A.P. Moller-Maersk to develop finds in the South Lokichar Basin in northwest Kenya, where recoverable reserves have been put at an estimated 600 million

10 I PRIVATE SECTOR I APRIL - JUNE 2016

barrels. Focus has however shift to discussions between Kenya and Uganda on the proposed route for the pipeline with Tanzania pushing to have the pipeline go from Hoima through its territory and terminate in Tanga. The fate of the pipeline now depends on a fact finding mission by Ugandan energy officials who are set to table a report on their findings in April this year.


DELIVERING ON POTENTIAL Base Titanium’s Kwale Mine, a significant producer of ilmenite, rutile and zircon, is Kenya’s first large-scale modern mining operation. A KES26 billion investment, the mine has been exporting minerals since February 2014. The focus is now on optimising operational performance and implementing a comprehensive suite of environment, community and training programmes. Kwale Mine: • Will produce 526k tonnes of titanium oxide minerals and 31k tonnes of zircon in Financial Year 2015/16. •

Has invested close to KES900 million in community resettlement and development programmes including infrastructure, education, agriculture and health.

Has established apprentice, internship and graduate training programmes to ensure rapid transfer of skills to Kenya’s youth.

340 Form One bursaries awarded in 2016 to disadvantaged students. 96% Kenyan workforce Providing skills transfer and maximising local content. Building the mining economy Through direct, indirect and induced economic activity, the Kwale Mine will contribute close to KES100 billion to the GDP of Kenya over its lifespan.

Base Titanium Limited PO Box 1214, Ukunda 80400, Kenya T +254 (0)20 513 0100 E info@basetitanium.com

basetitanium.com


AT A GLANCE

At a glance

EAST AFRICAN AFFAIRS

EAC LAUNCHES ITS FIRST ONE STOP BORDER POST The Republic of South Sudan was officially admitted into The East African Community during the 17th East African Heads of State Summit creating a bigger market and more opportunities for investments within the community.

During the summit the private sector was for the first time allowed to present its agenda that focused on the ease of doing business within the region. Meanwhile the EAC launched the first One Stop Border Post (OSBP) in Holili and Taveta towns on the Kenya, Tanzania border that

will increase efficiency by reducing time and transport costs incurred by businesses. In addition, the launch of the construction works on the Arusha-Holili-Taveta road will provide an additional link between the central and Northern transport Corridors.

EDUCATION SECTOR

SUPPORT FOR THE “SANDWICH GENERATION� Roll out of the Lap top project is underway with the Ministry of education science and technology allocating Sh2.6 billion for infrastructural readiness and Sh1.32 billion for storage facilities for the laptops. 22,000 primary schools have already been connected to electricity while 62, 000 teachers have had their computer skills updated for effective delivery of the digital curriculum, with another 25, 000 to be trained by August 2016.

12 I PRIVATE SECTOR I APRIL - JUNE 2016

The focus is now set to shift to the development of digital content with the Kenya Institute of Curriculum Development (KICD) taking charge of quality assurance. So far 1,360 publications, mainly story books and textbooks targeting lower primary classes are to be loaded on a universal cloud platform.


#AchieveMore

Change The Way You Bank Introducing DTB Garden City Branch. Welcome to the convenience of our new digital banking hall experience.

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CREATIVE INDUSTRY FACT SHEET According to a PWC report titled ‘Entertainment and Media Outlook 2015-2019’

25% – 34% 77% 60% years 18 – 35 of the national gross domestic product which accounts for

of the country’s employment

with over

The GOVERNMENT OF KENYA MONITOR’S THE PARTICIPATION OF THE COUNTRY’S CREATIVE INDUSTRY TO THE GDP UNDER ARTS, ENTERTAINMENT AND RECREATION. According to the Kenya national Bureau of Statistics the industry contributed Sh. 7.366 billion to Kenya’s GDP by activity in 2014. The Arts, Entertainment and Recreation industry directly employed over 67,000 people and paying out a total of

Ksh. 3.8 billion

in wages. The

average wage per annum was estimated at Ksh. within the private sector and

530,300

Ksh. 635,818 within the

public sector over Ksh. 100,000 more than employees in Manufacturing, Agriculture and Mining & Quarrying

of those working in the informal sector being youth aged between

According to Priority Manufacturing Sector, Value Chain Reports by the Ministry of Industrialization and the World Bank Kenya’s Leather production industry generates an average of

Ksh. 14 billion

($ 140 Million)

per year.

5.3% CREATIVE INDUSTRY FACTSHEET

The estimated National GDP value that creative industry in Kenya accounts for.

The total Value of Wood and Furniture produced in Kenya is estimated at

Ksh. 45.7 billion

($452 Million). Kenya’s total

exports for Textiles and Apparels under AGOA stood at Ksh. 33.5 billion ($332 Million) in 2014.


2015 EARNINGS FROM VARIOUS CREATIVE FIELDS

INTERNET

Kshs. 70.4bn

TELEVISION

Kshs. 45bn

RADIO

Kshs206 Billon

Kshs. 35.8bn

Estimates that Kenya’s Entertainment & Media market made in 2015

Kshs180 Billon

FILM & ENTERTAINMENT

Kshs. 3.8bn

The value of entertainment and media industry, which is projected to grow to over

Kshs330 Billion by 2019.

Kshs33.5 Billon

MUSIC INDUSTRY

Kshs. 2.1bn

then value generated through export of textile & apparels under agoa

Source: Kenya Copyright Board (2013 ), Ministry of Industrialization, World Bank Kenya and PWC Compiled by: Henry Githaiga - Graphic: Eliud Maumo


CREATIVE INDUSTRY

FILM INDUSTRY

Kenya’s Silver Screen The first images of Kenya were shot in in 1909 by Cherry Keaton a wildlife photographer who filmed American President Theodore Roosevelt when he came to Kenya on a wildlife safari. The film ‘Theo in Africa’ was screened in 1910 kicking off Kenya’s love affair with the silver screen. Since then Kenya has played host to 54 international films spanning over a century.

O

ver the last decade however the Kenyan film industry has been struggling faced with the 20072008 post poll violence, terrorism and insecurity resulting in travel advisories. Kenya is once again on the verge of reclaiming its reputation as a prime location for “A” list films. After years of struggling to bring in foreign film makers – a market of between 1 and 2.5 billion Kenya shillings annually. The renewed interest in the Kenyan film industry emanates from a film on

16 I PRIVATE SECTOR I APRIL - JUNE 2016

Dr. Richard Leakey set to be directed by internationally acclaimed actress and film icon Angelina Jolie and media reports on a Westgate film, both with powerful actors attached. As a result the Government of Kenya has taken steps to encourage producers to come to Kenya and use Kenya as the set for both films. CREATING JOBS AND REVENUE Considering that a large portion of our tourism industry was built by a single film, Out Of Africa, and the fact that a vast majority of visitors to Kenya decided to come here after seeing it on television,

By Jim Shamoon Chairman, Production Guild of Kenya

it is no surprise that the concerned authorities would push for more of the same kind of exposure that is guaranteed to show results. Beside the revenue and jobs that goes along with the production of films the country will gain an additional dividend from the destination marketing that often results from the screening of films. Kenya has a pedigree of powerful films such as; The Constant Gardener, Tomb Raider 2, A Perfect Plan, The First Grader which were fully short in Kenya while Partly, The Good Lie, and The Fifth


CREATIVE INDUSTRY

Estate, Kenya were partly filmed in the country, establishing Kenya as an “Easy Location” in international film terms. This means that accommodation, transport, equipment – lights, grip, generators – communication, crew, are all available locally. Kenya’s stability, improved security status coupled with the lifting of travel advisories by some of our development partners has had a very positive impact, with a number of top brand commercials having been shot here in the last one year including the Valentino Fashion brand photo-shoot in the Amboseli receiving worldwide attention. Several producers with Top-tier films have been in the country lately and there is optimism in the Film-Service industry that some of them will be filmed here. However some of the narrative being propagated by our politicians ahead of next year’s general elections may discourage foreign investments and tourism, the film industry is no exception. PROMOTION OF LOCAL CONTENT Government attention and renewed efforts to improve conditions within the film industry by removing the impediments facing filmmakers, coupled with the promotion of local content production for broadcasting, will help build an extremely dynamic industry in Kenya. The improved engagement between the private sector and the government is progressive in not only bringing the industry back on track, but by introducing strategic thinking to transform Kenya into a centre of excellence in the creative arts. This will create an enabling environment for the development of training facilities and increasing the amount of equipment available within the service industry. Additional efforts have been put in place to provide financing and has been implemented with little success, the effort is being repackaged with more appropriate regulations to guide and steer its successful implementation. There is definitely a light at the end of the tunnel that is Kenya’s film Industry.

Beside the revenue and jobs that goes along with the production of films the country will gain an additional dividend from the destination marketing that often results from the screening of films.

JIM SHAMOON PROFILE Jim Shamoon is the Chairman of the Producers Guild of Kenya. A trained electrical engineer, Jim’s career in the film industry began in 1993 working part-time in various positions from; Runner to Driver to Production Manager. He officially ventured into the industry in 2001 joining Blue Sky Films full time and is now Managing Director. Jim serves on the KEPSA Arts and Culture Sector Board. Jim has also served as the Chairman of the Kenya International Film Festival (2009 -2011), Chairman of the Oscar submission committee for Kenya (2009 – 2011) and was the Vice chair of the Kenya Film and TV Professionals Association. Jim was also on the Government Committee charged with drafting the new Film Policy for Kenya

APRIL - JUNE 2016 I PRIVATE SECTOR I 17


KENYA YOUTH EMPOWERMENT PROJECT

PUBLIC PRIVATE PARTNERSHIPS

PPPs sets the pace for M youth empowerment and skills development The high unemployment rate among Kenyan youth aged between 15 and 35 years has been a cause for concern for the country with successive governments unable to resolve the problem.

ost analysts have zeroed down on opportunity and the lack of awareness as the key causes of youth unemployment. Going by the statistics they would appear to be right; according to the Kenya Youth Survey Report 2016 by The Aga Khan University only 52% of youth are aware of government initiated youth programs while 76% have never benefited or participated in the programs. However this logic tends to overlook the underlying problem, youth employability. To address the real challenge we need to put the real facts into perspective. The real challenge is the development of skills through education and linking those skills to the job market and the available opportunities. According the Kenya Youth Survey Report 2016 the education dividend is low due to the high attrition rate between the three main levels of education. 22% of Kenyan youth drop out of the education system at primary level, of the 78% who pursue post primary education only 39% make it to institutions of higher learning. There is an additional correlation between the attrition rate and employability in that 85% of those without post-secondary education are unemployed compared to a 32% unemployment rate among those who attained higher education. According to a 2014 report by the Brookings institute and the Kenya Institute for Public Policy Research and Analysis (KIPPRA), 90% of those employed with primary level education hold vulnerable jobs compared to 61% among those with secondary education and 21% among those who pursued higher education. The underlying truth is that 40% of youth in the last decade did not complete primary education in addition to which 14% of the 10.6 million children enrolled for primary education in 2009 dropped out. With this statistics in mind the majority of youth have had limited exposure to education and skills that would enhance their employability. Even among the educated, matching knowledge to the job market job has remained a huge challenge due to technological innovation

18 I PRIVATE SECTOR I APRIL - JUNE 2016


KENYA YOUTH EMPOWERMENT PROJECT

KENYA YOUTH EMPOWERMENT PROJECT (KYEP) BENEFICIARIES BY REGION

MOMBASA 5,019

and mechanization which have reshaped the modern job market. In today’s world technical and professional skills coupled with agribusiness are the main sources of employment. Ironically the Kenya Youth Survey Report found that only 26% of youth are interested in professional careers such as engineering, law, medicine and teaching while only 11% are interested in Agriculture with a majority of Kenyan youth (48%) in favor of starting their own business.

25% NAIROBI 11,552

57%

KISUMU 3,813

18%

Addressing the challenge of youth unemployment therefore calls for a more innovative multipronged approach. The most successful intervention so far has been the Kenya Youth Empowerment Program (KYEP), which relied on Public Private Partnerships to address youth unemployment.

EMPLOYMENT SUCCESS

68% EMPLOYED

32% TOOK UP ENTREPRENEURSHIP SUCCESS RATE

Young Beneficiaries

23,384 9,626

85%

10,758

INCREASE IN INCOME

KSHS

5,000 – 12,000

KSHS

7,500

KYEP was designed to address the skills mismatch between education and the workplace by providing the youth with much needed work experience to enable them take up existing opportunities.

KYEP was designed to address the skills mismatch between education and the workplace by providing the youth with much needed work experience to enable them take up existing opportunities. The program was also designed to spur entrepreneurship within the target group which comprised of youth aged 15 to 29 years; with a minimum 8 years of schooling and have been out of employment for at least one year. The pilot program was coordinated by the government under the Ministry of Devolution and Planning and implemented by the Kenya Private Sector Alliance (KEPSA) under the facilitation of the World Bank Group. Through the pilot Program over 20,300 youth received training in three counties namely Nairobi, Mombasa and Kisumu with over 3000 employers 60% of whom were MSEs offering internships and job opportunities. The program sought to tackle youth unemployment by offering training to youth in the three broad education categories. Among the beneficiaries 25% had only had primary level education, 50% had secondary level education while 25% had tertiary level education. The youth were taken through two weeks of Life Skills training aimed at strengthening life and other non-

APRIL - JUNE 2016 I PRIVATE SECTOR I 19


KENYA YOUTH EMPOWERMENT PROJECT

cognitive skills, three to five weeks of Core Business Skills Training focused on communication, customer care, entrepreneurship, basic computer use, and office practices. The beneficiaries also underwent five weeks of Sector Specific Skills Training to promote specific technical skills and were then put on twelve weeks of internship in private sector firms.

youth to participate in more skills training and internships, and got more young people to open bank accounts and use them.’ It is therefore important that policy makers develop youth employment programs and policies that are evidence based and results oriented by adoption an approach to youth employability that builds on strong partnerships. The unique approach taken by the project also illustrated the need to link education to the job market and provide relevant skills that foster youth employability.

Employers were expected to provide on-the-job training and mentorship. In the Jua Kali sector, internships consisted of apprenticeship training by master craftsmen. The master craftsmen had to pre-qualify to be eligible for the program by participating in skills upgrading developed by the relevant sector organization for the informal sector under KEPSA.

The five year pilot project illustrates that through Public Private Partnerships we can begin to address the skills gap between education and employment while at the same time offering additional training opportunities for those who have since dropped out of the educational system due to the high attrition rate between the three levels of our education system.

As a result of the exposure 85% of the youth who completed the project are either employed or own their own businesses with a 68% to 32% ratio between employment and entrepreneurship. Given the success rate of those who held tertiary level education 10% of the youth opted to pursue higher education. Six months after completing the training 73% of women secured employment earning Sh. 7,500 more than what they were earning before while 84% of the male participants secured employment earning between Sh. 5000 to 12,000 more than what they were earning before. KYEP is a true testament to the efficiency of Public Private Partnerships in addressing the high unemployment rate among the youth. Following the conclusion of the pilot project the World Bank Group in its Evidence to Policy Note titled ‘Can Private Sector help train youth for Jobs?’ Concluded that ‘Finding effective ways to help unemployed and underemployed youth make the transition from low-paid informal labor to higher paid wage labor is a major challenge for policymakers across the globe. The results from this study contribute to a growing body of evidence on the role that training programs can play in addressing this challenge.

20 I PRIVATE SECTOR I APRIL - JUNE 2016

For the vast majority of those who dropped out we can begin by offering technical skills linked to master craftsmen to absorb those who are capable of taking up opportunities in plumbing, building and construction. For those with post primary level education reintegration into the education system through Technical Education, Vocational and Entrepreneurship Training (TEVET) with each county poised to offer specialty courses to enable it exploit its own resources. For those who have attained higher education levels change has already began with programs like the Presidential Digital Talent Program already offering opportunities to gain work experience and transition into employment.

The findings suggest that offering young people training and work experience in the private sector is a promising way to put youth in jobs and increase their earnings in urban settings throughout Africa. In addition to increasing employment, the program encouraged

To further harness the interest in entrepreneurship KEPSA is working on an SME acceleration model that will nurture the growth of companies from start-up phase in the hopes of growing them into larger companies with access to regional and international markets. Public Private Partnerships such as KYEP offer a permanent solution to the challenge that is youth unemployment.


CREATIVE INDUSTRY

ENTERTAINMENT INDUSTRY

T

he animated debated that was generated brought to the fore the chequered question over whether Kenya had an adequate legal regime to safeguard the rights of those in music production and the entertainment industry as a whole. Because music is a universal language and medium of communication that transcends national boundaries, both national and international law is relevant in addressing the protection of rights associated with music. Intellectual property rights protection is as the very heart of this question.

Intellectual Property Rights as a platform to advance Kenya’s entertainment industry Kenya’s music industry closed last year in disharmony following a tirade of accusations from musicians who felt short changed by an ineffective mechanism of collecting royalties due to them, as written by Gichinga Ndirangu

The Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS) is the most pronounced legal regime governing the protection of intellectual property rights. When it was first enacted by the World Trade Organization (WTO) and came into force, in 1995, WTO Member States were obliged to domesticate their national laws in line with the provisions of this agreement. In addition, they were to establish the necessary institutional framework to support effective protection and implementation of the rights guaranteed under this agreement. INTELLECTUAL PROPERTY RIGHTS Following the signing of this agreement, Kenya enacted into law, the Industrial Property Act to protect Intellectual Property Rights in various fields ranging from medicines, plants, music and creative works, industrial designs, integrated circuits, geographical indications for select products like wines among other areas. Various institutions and boards were also created to oversee the implementation of these rights such as the Kenya Industrial Property Office (KIPO) later renamed the Kenya Industrial Property Institute (KIPI), the Kenya Copyright Board to name but a few. In addition, some existing government agencies such as the Kenya Plant Health Inspectorate Service (KEPHIS) were assigned specific roles touching on the agreement such as protection of plant breeders rights. The existing legal regime on intellectual

22 I PRIVATE SECTOR I APRIL - JUNE 2016

Music is a universal language and medium of communication that transcends national boundaries, both national and international law is relevant in addressing the protection of rights association with music. Intellectual property rights protection is as the very heart of this question.

property rights is, therefore, premised on providing the minimum standards of protecting intellectual property rights besides creating a comprehensive system and mechanism safeguarding and protecting patents, copyrights, trademarks, industrial designs and trade secrets. TRIPS AGREEMENT In meeting its obligations under international law – and specially its commitments under the TRIPS Agreement – Kenya was obligated to put in place, judicial and administrative procedures on resolution of disputes regarding violation of IP rights. As a result, an Intellectual Property tribunal was established in addition to the normal recourse to the courts for dispute resolution.


CREATIVE INDUSTRY

In line with the legal principle of subsidiarity of national law to international law once ratified by a State, the TRIPS agreement has pre-eminence over any national law that may be in conflict with its provisions – a fact now buttressed by the Constitution of Kenya 2010 which automatically makes any international treaty or protocol ratified by Kenya, a part of national law. The law provides specific protection to the creative industry which means that music and other creatives, are entitled to intellectual property protection against practices such as pirating and copyright infringement. In view of the growing place of music as a critical component of the entertainment industry, this is of the essence and essential in advancing

Co-operation between complimentary national agencies such as music and copyright boards is, therefore, important and potentially advantageous in advancing the rights of artistes.

creative music talent. As music has become a universal medium of communication across peoples and cultures, the need for an effective legal regime that transcends boundaries has become ever more critical. Co-operation between complimentary national agencies such as music and copyright boards is, therefore, important and potentially advantageous in advancing the rights of artistes. So, is

collaboration between law enforcement agencies charged with tracking infringement of rights through practices such as music pirating and unauthorized copying. Copyright laws, such as Kenya’s Copyright Act, seek to protect the rights of music writers, singers and producers against infringement and violation of their rights both in national and foreign markets. However, the law alone cannot

APRIL - JUNE 2016 I PRIVATE SECTOR I 23


CREATIVE INDUSTRY

safeguard the rights of those in the creative industry without the support of complimentary policies that streamline music marketing and distribution channels based on partnerships and joint ventures between artistes, producers and marketers. Besides the intellectual property protection afforded through copyright legislation, other legislation such as that mandating a minimum threshold of local content play time is important in supporting the growth of the creative industry. In Kenya, the Communications Authority has been vocal in advancing legal requirements on local content in the broadcast media to open opportunity for local artistes. COLLECTION OF ROYALTIES A strong regime on copyright protection safeguards rights in a broad range of areas beyond the music stage to areas such as software and educational products that make use of music. But even where the law is strong, there is need for a strong and adequate institutional framework to ensure that artistes reap the benefit of their creativity. In this regard, the collection and distribution of royalties involving composers, performers, publishers and recording companies must be undertaken with utmost transparency and accountability. As last year’s rancor between musicians and the Music and Copyright Society showed, loopholes in the collection and distribution of royalties has the potential of creating a huge bucket hole and can act as a major disincentive to the growth of the entertainment industry.

Besides the intellectual property protection afforded through copyright legislation, other legislation such as that mandating a minimum threshold of local content play time is important in supporting the growth of the creative industry. In Kenya, the Communications Authority has been vocal in advancing legal requirements on local content in the broadcast media to open opportunity for local artistes.

24 I PRIVATE SECTOR I APRIL - JUNE 2016


MOTOROL lubricants are premium quality lubricants blended from 100% virgin base oils. They are ISO certified and comply with the Kenya Bureau of Standard’s requirements. Due to its consistency in manufacturing only the best quality, the lubricants have been certified by the American Petroleum Institute as approved to be complying with their automotive grades classification. MOTOROL has also been awarded with approval certificates for use by various reputed OEMs like Volvo, Mack, Renault, Man, Daimler (Mercedes Benz) and Caterpillar. MOTOROL Lubricants, since their introduction in 1970 have come a long way today, being present in more than 35 countries globally and expanding further. What started with an idea for reform in a small setup and a large resolve to revolutionize the lubricant industry in India, today has emerged as one of the foremost international brands to reckon with. MOTOROL is quickly becoming one of the fastest expanding brands in the world by adding newer regions unswervingly for its availability. With its ever expanding family network of distributors and customers, MOTOROL enjoys immense popularity throughout in the automotive and industrial sectors. Recognized as one of the most technically efficient and adept lubricant manufacturers in the lubricant fraternity, OILZONE group has carried the brand MOTOROL very efficaciously. With the intention of bringing MOTOROL beyond India and introducing it to the world OILZONE started its first manufacturing unit in UAE in 2005. Since then there has been no looking back. In a move driven by the desire and the necessity for strategic and corporate expansion, OILZONE EAST AFRICA LIMITED established its presence in Kenya in 2011. It was a move that introduced the brand MOTOROL LUBRICANTS to the east African markets with its base in Kenya. The brand’s popularity has since grown with both industrial-corporate and automotive end-users with eventually leading to setting up a fully-fledged manufacturing unit in Nairobi in 2014. On the eve of completing 2 years of the manufacturing setup in Kenya, the

company has taken an initiative to revisit its roots and re-assess its motto of providing “Quality Lubricants at the Right Price”. OILZONE EAST AFRICA LIMITED’s operating manager Mr. Jitesh Barot states that MOTOROL has established a strong presence in Kenya and has quickly become a well-known brand here. Backed up by the strong credentials, it still upholds the most stringent quality standards due to vigorous testing and internal inspections in our laboratory. He adds, “Each of our batches are strenuously tested for meeting the specifications and performance before they leave our premises. We still carry the same zeal that we had when we first started manufacturing. The motivation among the employees is high as ever and we recognize the potential to grow and the fact that we are still a long way from our goal.” When asked about his team, he almost blushes and states simply, “We are privileged to be working with the best lot today in the Lubricants market in Kenya. We have a very strong technical and marketing team at our headquarters in UAE and they provide us ample support from there. We have recruited the best local team that is inspired and I am proud to be working with the most motivated and innovative sales and operations team here.”


TEXTILE INDUSTRY

TEXTILE INDUSTRY

Banning mitumba in Kenya our redemption or our noose? In a bid to promote local textile industry, member states of the East Africa Community resolved to outlaw imports of second hand clothes by 2019. That’s a herculean task that will involve a delicate balancing act between addressing the subsequent unemployment while strengthening the local textile industry value chain.

By Laureen Akoa Wesonga

T

he local textile industry in Kenya collapsed in the 80s for a myriad of reasons among them mismanagement of industries as well as permissive regulatory environment that saw the entry of second hand clothes. Of course it did not help matters that steady economic decline lowered living standards resulting in a domestic demand for the second hand clothes as poverty abounded. It is this lovely cocktail that led to the flourishing of the mitumba industry. ECONOMIC DILEMMA OF MITUMBA That the mitumba industry flourished is an understatement. A glimpse into Gikomba market gives you a snapshot of how this industry found its footing and expanded to serve a ready society. Gikomba market, the premier wholesale mitumba market has about 65,000 traders. Kenya managed to import up to 18,000 metric tonnes of clothes from Britain in 2015. The profits are reasonable in a country here youth unemployment is over 40% and the youth bulge is a potentially political problem. BUSINESS INHIBITORS - OUR LOCAL GREMLINS For starters the production cost in Kenya puts it at a comparative disadvantage mainly due to high cost of electricity which is mostly unreliable due to rampant power outages. The high cost of power, hit 20 cents per kWh in 2014 compared to China which costs 7 cents per kWh and Ethiopia at 6 cents per kWh. Unreliable electricity supply has forced manufacturers to rely on fuel generators further pushing up the cost of power. Having old and poorly serviced equipment also adds up to the production cost as the machines operate under capacity and need frequent servicing.

26 I PRIVATE SECTOR I APRIL - JUNE 2016

Of Kenya’s 52 textile mills, only 15 are currently operational at less than 45% of total capacity. As if that was not grim enough, the industry has to choose between using low quality local fibre which then has to be processed to improve quality or import high quality fibre. Either way, this drives production cost up when having local high quality varieties of fibre would eliminate this extra cost. The mills need to begin operating at full capacity and more should be constructed if the country is to meet the envisaged demand. The same applies for apparel factories and retail stores. Limited access to finance is another challenge facing the local textile industry. Access to credit in Kenya is notoriously difficult, characterised by high interest rates —ranging from 15 to 21 percent depending on creditworthiness. Furthermore the horizon period for loans tends to be very shot, usually seven years or less, making bank loans unattractive credit options for young fledgling businesses. Another overlooked challenge is perception. In the even that local textile industries are able to compete effectively in the market and offer accessible and affordable garments, it’s not necessarily a given that the public will automatically buy them. If there is anything microeconomics has taught us is that the rational man is not a given. To this extent, there has to be a concerted effort to persuade the public to shift its tastes and preferences to local manufactured garments. The other challenge is China’s dominance of the textile industry. This will not go away in a flash even as industries seek to relocate to cheaper destinations. After all, the gods of geography bestowed China with a huge


TEXTILE INDUSTRY

The ministry of Industry, Investment and Trade is in the process of setting up a textile city at the Export processing Zone in Athi River, targeting at least 100 firms. This comes in the wake of enactment and assent of crucial business laws in the country including the Export Processing Zones Act, The Business Registration Act, The Companies Act and Insolvency Act.

landmass and Beijing may simply adopt policies to relocate industries to cheaper areas within China. What does this mean for Africa, particularly East Africa? The labour advantage that Ethiopia and Kenya potentially have, may be eroded by such a move by Beijing. More importantly, the barriers of entry into this industry will still be high. The ministry of Industry, Investment and Trade has an innovative response to this. Kenya can focus on niche markets such as small batches and green products. These shun the conventional value chain cycle which is lengthy and wieldy in favour of hyper supply chain management”, a kind of “Just in time” mechanism for the textile industry. Compressing the supply chain structure requires orders to be few, specialised and highly flexible. Green manufacturing has been defined by the ministry of Industry, Investment and Trade in Kenya as “the manufacturing of green products using renewable energy systems and clean technology equipment and the greening of manufacturing—reducing pollution and waste by minimizing resource use, recycling and reusing waste, and reducing emissions”. Focusing on green manufacturing will allow the country to

produce premium products that are not prone to cyclic variations of price. SINO DYNAMICS - THE SWORD THAT CUT BOTH WAYS China has a special role to play in this dynamic. Firstly, China is currently the favoured destination of textile manufacturing plants, as anyone who has visited Guangzhou will attest. However with the Chinese economic slowdown and a desire by the communist party to shift from cheap exports to creating a strong domestic consumer market; China may not be attractive anymore. Furthermore, as economic prosperity increases in China, the cost of manufacturing and labour equally goes up. High production costs are likely to result in apparel companies shifting their plants to cheaper destinations. A caveat to this would be that they may choose to transfer plants away from the sea cities into the creatively undeveloped hinterland. However, the former is far more likely to happen of the recent turn of event is anything to go by. European apparel companies such as H&M, Tesco and Primark have already started sourcing apparels from Ethiopia. But china also has the power to derail the growth of Kenya’s domestic textile

APRIL - JUNE 2016 I PRIVATE SECTOR I 27


TEXTILE INDUSTRY

industry. Simply put, if imports of second hand clothes is enforced without putting in place controls for smuggling, traders will adopt China as their second import market. This means the government will lose out on the punitive tax it intends to put on the imported garments and the local textile industry will still be suppressed. Given the innovation and resilience that is the quintessential Kenyan spirit, this is not a remote possibility, but something The Economist alluded to in a recent article. GOVERNMENT EFFORTS The domestic textile market faces a lot of challenges that need to be addressed if the industry is to gain its footing. Already the government is sending positive signals that should hopefully cascade downwards. The ministry of Industry, Investment and Trade is in the process of setting up a textile city at the Export processing Zone in Athi River, targeting at least 100 firms. This comes in the wake of enactment and assent of crucial business laws in the country including the Export Processing Zones Act, The Business Registration Act, The Companies Act and Insolvency Act. These will allow for a friendlier business environment for investment firms planning to setup shop in Kenya. Treasury on its part set aside Sh. 3 billion for the development of the leather and textile

28 I PRIVATE SECTOR I APRIL - JUNE 2016

Simply put, if imports of second hand clothes is enforced without putting in place controls for smuggling, traders will adopt China as their second import market.

sectors. All this is well and good but a lot more has to be done. In conclusion, this is not a black and white issue for the government of Kenya. It risks upsetting a vibrant industry causing massive job losses on one hand. On the other hand , a report by Mckinsey and Company indicating Kenya , Ethiopia ,Uganda and Tanzania have potential to trade up to Sh. 300 billion worth of garments by 2025 serves as an impetus for the government . The numbers in place no doubt make it a political question as well. This is a litmus test for the government and its policymakers as they seek to create an environment where thriving local textile industries actually make up for banning of second hand clothes.


MUSIC INDUSTRY

Makena

Turning passion into profit When I joined Campus, I remember telling my friend that I did not want to keep asking my parents for pocket money. Prior to that, I had qualified for a one year music-training program dubbed ‘Talent Academy’, initiated by the Government of Kenya in partnership with UNICEF >>>


CREATIVE INDUSTRY

I

t was during the program that I first saw music as a viable choice for a career. I had the opportunity to interact with accomplished musicians - the likes of Kavutha Mwanzia, Achieng Abura, along with various music lecturers and performing artists- who stirred up the passion to pursue music full time deep within me. Before the program, I only thought of music as a hobby and understandably so, because in at that time, art did not make for a good career. My first job in music entailed planning for an annual music conference under the same program and made I my first Sh. 30,000 ($300 or there about). I was eighteen at the time, no one had taught me anything on financial management, you can only imagine how felt to hold such a huge sum. Needless to say, no lasting investment was made, but it was the beginning of my realization that the creative industry can be as financially rewarding as any other career. FREELANCING I then embarked on freelance songwriting, writing theme songs for films on behalf of a production company. Earning from my song-writing skill pressed me further to starting my own career. If I could write songs for other people, then why not write my own music? Makena, the gospel artist was born. I joined a music band, continued writing songs as a side gig and went about recording my own song debuting single ‘Najua Hutaniacha’ in May 2012. I learnt how to package my music and sell it. That was a good year. The song was doing well on radio and we put out a video as well which was well received by the media and my newly found fans. One of my firm beliefs is that there is great provision in one’s area of gifting. It was an almost effortless journey once I took the first step. Friends and family

came out to support my music and much to my delight, in June 2013, I received the ‘Worship song of the Year Award’ for my debut single. This was a pivotal moment, as it encouraged me on my journey and helped me spread my wings. Thereafter, the Groove Tour followed. It entailed performances all around the country. In 2013 December I got a job as a host for a gospel show known as ‘Pambazuka’ on Citizen TV. This is not to say that there weren’t any challenges. With this tremendous growth, my music career demanded more from me, I had to strike a balance between music and academics as I was still a student at the time. For my third and fourth years I decided to give my studies undivided attention as I also thought on which path to take on the long term. My training is in Health Services Management, and I am thankful for the opportunity to go through university and be able to practice in an area I have great interest in. In future, I hope to initiate my own community health development projects and participate in policy development in the Kenyan health sector. However, I am a musician first. It is a beautiful thing to be able to build a ministry and career out of my passion. Primarily, I draw my business principles such as honesty excellence, faithfulness et cetera from the Word of God and also borrow from people who are more experienced than I am in business. I take each day as a learning experience. To sum up, I have learned that the satisfaction an artists draws from their work is usually enough to keep them going. Inasmuch as this is a great thing, it may blind one from translating passion into profit, and therefore artists need to be diverse and develop other aspects of their life. For an artist Balance is key.

My training is in Health Services Management, and I am thankful for the opportunity to go through university and be able to practice in an area I have great interest in.

30 I PRIVATE SECTOR I APRIL - JUNE 2016


MARTIN DIAS - GROUP CEO

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CREATIVE INDUSTRY

TECHNOLOGY & INNOVATION

Leading innovation for ‘corporate growth’ Innovation is change, whether radical or incremental. Change transforms the course of companies, industries and societies, and even of our lives. It drives growth, profitability and competitiveness

I

nnovation sustains planning, strategy, productivity and efficiency. It increases shareholder and customer value, a market share, brand equity, and product change capacity.

The consequences are that more than 70% of all major innovation efforts fail, disengaging the workforce and costing money. Annually, this costs the US organisations £300 billion.

In the economy of the 21st century, globalisation, technology, growing expectations of consumers, demand for customised products and services, and increasing focus on sustainability and environment has moved innovation front and centre in corporate consciousness. Innovation is now essential for survival and success, it is no longer a ‘luxury’. As leadership expert John Adar point out, ‘the graveyard of business is littered with companies that could not or would not innovate’.

What are the organisational practices for improving innovation within the company? What is the effective framework that shapes and lead innovation?

But change needs creative and innovative leaders. The old-style ‘command and control’ leadership gives way to those who can - before anyone else - bring new ideas and create dynamic innovation corporate culture. However, according to leading business surveys , 40-50% of CEOs say they are ‘weak at creating a corporate culture that fosters innovation’; they do not have the right organisational structures in place; do not know how to manage innovation successfully; are not satisfied with the overall financial return on innovation spending; and are ‘not as good as their competitors at turning ideas into profits’. Only 56% say they are only ‘moderately’ successful in innovation.

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INNOVATION PROCESS To understand this, leaders should grasp the 5-step process. First, leaders must commit to change and to form and articulate a clear strategic vision for change. Creative leaders are always committed champions of innovation. Their commitment encourages others. People innovate when their leaders expects it; no creativity in boardroom - no creativity on the ‘shop floor’. Second, leaders must overcome resistance to change and align all company members behind your vision. We are attracted by the new. But our response to innovation is different according to the social and corporate cultures in which we live and work, our age, education (more educated need more change to stimulate the minds), and how we perceive the new. We need change, but we also need continuity to feel safe and secure. Therefore, there will always be resistance to change, particularly when it is sudden, unexpected or affects us personally.

By Alla Tkachuk contact@creativity-gym.com

TO OVERCOME RESISTANCE TO INNOVATION, LEADERS SHOULD IMPLEMENT THESE FOUR MAIN PRINCIPLES 1. Create dissatisfaction with things as they are. Target assumptions and fixed ideas in your organisation. Ask questions such as ‘Why we do things in this and not the other way?’ 2. Create a sense of urgency. Opportunity open and close more quickly than ever before. Companies see a 37% increase in revenue when they employ creative leaders who are able to see the opportunity, and engage and adapt quickly to mobilise around it. 3. Make change incremental. Plan innovation in gradual stages. Have a practice run. People tend not to believe in new things until they experience them. 4. ‘Sell’ innovation to all company members. Your innovative ideas are nothing if you cannot sell them to your stakeholders. Change can only occur when a significant numbers of employees are committed to launch, drive and sustain innovation. Build excitement around your vision, bearing in mind Henry Ford’s three questions: is it useful? Is it practicable? Is it commercial? Show that idea cuts cost, increases profits, or serves other corporate interest. Communicate your vision for change clearly: ask people in your organisation about the vision and see how many different answers would you get? Appoint those high in your organisation to support the innovation process.


CREATIVE INDUSTRY

Extracurricular activities or volunteer work can be analysed. Half of employers use performance evaluations. Creative people are generally more open and flexible and brave to be different. They have fresher solutions and opinions, a broader range of interests, and independence of judgement. They are highly self-sufficient, and motivated by hard work. They are curious and intuitive, with good observation skills. Breaking old behaviour habits and developing creativity demands training. In the US, employers use working in departments other than their own an activity (86%), working with outside innovation consultants (75%). All employees are fully briefed at recruitment stage as to what is required of them in relation to innovation.

Third, leaders should establish innovation culture at the company. As mentioned earlier, 50% of CEOs say their company’s innovation culture is weak. Innovation culture is not only about new ideas. It is also about destroying barriers to implementing those ideas, barriers such as lack of creative leaders, the short-term pressures, complacency, rules and procedures, or a corporate narrowmindedness. Forth, leaders should recruit, train and motivate creative workforce. To make innovation a success, companies need a workforce that is creative; academic qualifications are no longer enough. According to surveys , business leaders view creativity as the ability to identify problems and to offer novel and effective solutions, the ability rooted in the capacity to form new connection across disciples. 90% of CEOs say that acquiring or developing creative employees is ‘the number one practice for improving innovation within companies’ and a ‘top concern’ . 72% of CEOs put creativity and innovation among the top five skills companies need . However, companies report that a lack of creative executive personnel constitutes

CHARACTERISTICS OF A COMPANY WITH A SUCCESSFUL INNOVATION CULTURE: • Its benchmarks are 'outside-box' thinking, tolerance and encouragement of risk, experimentation, and acceptance of failed ideas (mistakes are seen as learning opportunities). Company has a long-term focus on innovation and understand that innovation is not a costs but an investment. • Its organisational structure is decentralised, non-bureaucratic, with reduced hierarchy. The hierarchies limit innovation, and stifle employees' communication and engagement. 44% of CEOs agree that their management strategies are too bureaucratic. • Its working space is conducive to creativity. • Its innovative processes are built around teams • There is a free flow of information, and the knowledge-transfer among employees is encouraged.

a major barrier to successful innovation. In Africa, 75% of CEOs say that a lack of creative ‘talent’ threatens their companies’ growth . The first step in hiring or in developing programs to instil creativity in employees is to ascertain the creative abilities of workers. Creativity tests and faceto-face interviews could be used.

Creative employees cannot be ‘manage’; they need to be inspired and motivated. They need to be given a choice and to feel they truly have permission to step forward and act. Leaders should suspend their judgement and criticise creative employees in diplomatic way; modesty and humility are hallmarks of creative leaders. Find people within your organisation who are the ‘change agents’, ad encourage them, ensure their success, and celebrate their wins. And fifth, guide innovation from start to end. Leaders should understand processes, tools, and mechanisms that keep innovation process effective, planed, deliberate, and on budget: • Stating a problem in ways that encourage creative problem solving • Approaches and paths for setting directions for specific innovations • Forming creative teams- matching creative and innovative employees to projects • Leading solution-generation sessions: ground rules and techniques • Evaluating solutions strategies and practical tools • And, innovation ‘selling’ techniques Balancing leading innovation with innovation process guidelines is the essential factor in sustaining acceleration.

APRIL - JUNE 2016 I PRIVATE SECTOR I 35


www.kpda.or.ke

KENYA PROPERTY DEVELOPERS ASSOCIATION

THE KENYA PROPERTY DEVELOPERS ASSOCIATION VALUE CHAIN Let KPDA become your partner in advocacy, education, information, research and helping develop your business.

CEO BREAKFAST FORUM HELD ON TUESDAY 19TH JANUARY, 2016 AT THE INTERCONTINENTAL NAIROBI HOTEL

L – R: Dominic Mutegi, (Nairobi City County Government, Urban Planning Department), Elizabeth Mwangi – Oluoch ( KPDA), Arch. Steven Oundo ( Chairman, NCA), Hamish Govani ( KPDA Chairman), Prof. Mwangi Maringa, (Principal Secretary for Public Works, Ministry of Land, Housing and Urban Development), Arch. Daniel Manduku, (Executive Director and Registrar for NCA), Gikonyo Gitonga, ( KPDA Board Member) and Eng. Raymond Karani, (General Manager for Registration and Compliance for NCA)

THEME: ‘Investment Opportunities for the Real Estate Sector Within Konza Techno City’ The meeting was attended by one hundred and twenty five participants, a clear indication of the unwavering interest in the Konza project. KPDA would like to thank the following for contributing to another successful CEO Breakfast Forum:

CEO BREAKFAST FORUM HELD ON THURSDAY 18TH FEBRUARY 2016 AT THE INTERCONTINENTAL NAIROBI HOTEL

• All our guests • Prof. Mwangi Maringa, Principal Secretary for Public Works, Ministry of Land, Housing and Urban Development • The National Construction Authority • The Nairobi City County Government • PG Bison Kenya Ltd • MMC Africa Law • Gikonyo Gitonga, Director for Axis Real Estate Ltd and • George Wachiuri, CEO for Optiven Ltd

THEME: ‘Construction Regulations and Compliance In Kenya’ This CEO Breakfast Forum was attended by one hundred and seven (107) participants. The event was opened by Eng. Victor Kyalo, Principal Secretary for the Ministry of ICT and Innovation and featured the following speakers/panelists: • David Mugambi, Director at KoTDA • Hamish Govani, Chairman of KPDA • Eng, John Tanui, CEO of KoTDA and Anna Musyimi of KoTDA

As part of the way forward, it was agreed that KPDA will form a technical committee to better engage with KoTDA as pertains the interests of potential investors. This committee will constitute members of KPDA as well as KoTDA and the Ministry of ICT and Innovation. There will also be a follow up meeting where participants will be briefed on the progress of this committee in achieving its stated terms of reference and objectives.

BENEFIT OF BECOMING A KPDA MEMBERS: 1. Advocacy that champions the interests of the industry to both the public sector and the wider private sector to ensure a better business environment for the property industry; 1. Information on the latest issues affecting the industry, via regular publications, newsletters, media reports and research; 1. Networking events, putting members in touch with industry leaders and potential clients; 1. Professional development courses which reflect the changing

nature of the property industry; 1. Marketing opportunities for member companies with discounts offered to various advertising platforms; 1. Discounted rate at both KPDA events and events organized by international and regional organizations in the building and construction industry; 1. Access to emerging markets and exposure to joint venture opportunities.

While KPDA membership is open only to companies, the benefits of membership extend to all staff in member companies.

Development brings development! Become a part of this formidable family! To get information about the 2016 KPDA Calendar of Events, Kindly contact our KPDA secretariat Fatima Flats, Suite B4 ,Marcus Garvey Road Off Argwings Kodhek, Kilimani Area P. O. Box 76154 – 00508 Nairobi, Kenya. Tel: +254 737 530 290 / +254 705 277 787 Website: www.kpda.or.ke


By Henry Githaiga

To most people the music is nothing more than entertainment and at most inspiration, for a select few however music is an industry employing thousands of Kenyans >>>

Julius Owino, Juliani

AKA

JANUARY - MARCH 2016 I PRIVATE SECTOR I 37


MAKINGS OF SUCCESS

S

ituated off Ngong road is the Global Platform an Action Aid run program that seeks to inspire creativity in all spheres of life, it is here that we met up with Juliani as he went about mentoring a group of up and coming musician from his old neighborhood Dandora in Nairobi’s Eastlands. By his own description Juliani is the kid from the other side of tracks, Eastlands or Eastlando as it is commonly referred to. Dandora holds a special space in the history of Kenya’s Music industry having bred Kenyan hip-hop artists such as Kalamashaka who are touted as Kenyan hip-hop pioneers. It is in this setting that Juliani was brought up, amidst the would be chaos of that combined slum life and the aspirations of an emerging middle class.

MUSIC INDUSTRY

To most people the music is nothing more than entertainment and at most inspiration, for a select few however music is an industry employing thousands of Kenyans. The Private Sector caught up with award winning performing artist and entrepreneur Juliani to get a personal insight on the business that is Music.

‘My government name is Julius Owino,’ Juliani starts up in true hip-hop fashion, ‘It was tough growing up, I was born in Mathare then my parents moved to Dandora. I have six siblinsg and as you can imagine it’s a lot of mouths to feed. My father was a road construction worker and traveled around a lot because he drove the machinery, my mother on the other hand did not have it easy, she had to result to drug peddling at some point to make ends meet. But she knew it would land her in trouble so she raised some money and opened a kiosk selling chapatti madondo (beans),’ He smiles to himself and says ‘It is still my favorite food to date.’ By his own admission Juliani did not have much passion for school, mostly because the system did not support his creativity. ‘I went to school in Wangu primary then just over the fence to Dandora high school. I never did pick up my form four results, the system says I am stupid because I was no good at biology and mathematics. But I know am bright, I was good at languages and telling stories. I had a talent in music and would rap among my peers’ Juliani. Beyond School Juliani was picking up some lessons in business while helping run his mother’s food kiosk. ‘I would wake up at 5 every morning to

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MAKINGS OF SUCCESS

light the makaa jiko (charcoal stove), so that it would be ready to start preparing Chapatti and tea for customers. I would often leave the house for school and even gigs smelling of smoke. But that’s what I had to do. Every evening before I went to sleep, nilikua na kanda unga ya chapo (I would knead the dough), so whether I had a gig till 2 Am the dough had to be prepared before bed because leaving it overnight saved time and also made the best chapatti in the area. They were so good we hiked the price but people kept coming for more.’ He looks down as if reliving a distant memory. ‘looking back the late nights and early morning at the kiosk taught me a lot, from discipline to time keeping, accounting for the cash made, the hard work ethic and the realization that with enough effort and by keeping good standards the product you produce can be priced higher than the competition.’ After abandoning his education in secondary school Juliani slowly gravitated towards music as a passion and pass time away from his mother’s kiosk. ‘For me music was just a form of expression, I did not think much of it. I heard about all the big names from Tupac to BIG to Eminem and Kalamashaka but to me they were just inspiration. There were a lot of evils around me, from robbery to drugs, gang violence, police harassment… but I knew none of that was for me. Music to me and my friends at the time was a way to gain our own identity away from the gangs and drugs.’ Juliani says. HOWEVER LIKE ALL TRULY TALENTED INDIVIDUALS FATE FOUND HIM. ‘I was determined to make it out of Dandora, I knew there was more to life than my mother’s kiosk that had slowly grown into a hotel. I wanted more but was smart enough to stay away from the gangs and keep doing free gigs with my friends. After one gig, someone came to me and begged me to take the little money he was offering to perform at his party.’ He smiles, ‘when he said 3000 shillings, I just pretended to be disappointed but in my heart 3000 was a lot of money it kept me going for a whole

month’ Juliani got his first break through gospel recording label ‘Kijiji Records’ run and founded by legendary performing artist Kanji Mbugua where he got to work with Award winning producer Blackman. Through the style and influence of Kanji, Kijiji Records cut a niche for itself by placing emphasis on live performances often accompanied by a live band. It’s Iconic live performances and crowd hyping live band performance style has stuck with Juliani to date setting him apart from his peers. As his number of performances grew he teamed up with a group of friends and became part of the Ukoo Flani Mau Mau group which included the legendary K-Shaka (Kalamashaka) and other artist like MC Kah, Wenyeji, Sharama and Wakamba Wawili who went on to become Kenyan hip-hop icons in their own right. ‘After Ukoo Flani Mau Mau, I got a call from the UK, I thought it was a hocks because the guy offered Sh. 300,000 to sign me and produce an album. I thought what! Yani uta lipia kila kitu hadi studio na promotion na unilipe bado (you will pay for everything including studio time and promotions and still pay me). It was too good to be true but it worked out.’ Juliani adds. It was only then that Juliani began to

grasp the potential of the music industry. He started seeing beyond his lyrics and into an untapped industry that could propel him into the life that he could only dream about. ‘All those late nights and early morning managing my mother’s business grounded me. They made me think like a businessman. Yes I was making some money from music but I knew I had to find a way to make it sustainable.’ He looks to the side at his producer ‘Music is a value chain, my producer here has to eat, he has a girlfriend, wants to start a family and move up in life. I realized that you have to pay for quality in order to grow your music.’ It’s only at this point the real business mind that is Juliani emerges with a sense of purpose and wisdom beyond his years. ‘Up until now music and the creative industry in Kenya has been propelled by chance, luck and fads. There is no clarity in the industry, if you ask how much should I charge? How much should it cost to produce one song? How much do I sell it for?’ He pauses, ‘No one has an answer. We keep saying that the creative industry in Kenya is worth billions of shillings and produces the same billions every year. What are we talking about, is it music? Acting? Sports? Art? Dance? Or are we just talking about

APRIL - JUNE 2016 I PRIVATE SECTOR I 39


MAKINGS OF SUCCESS

‘When I was fresh out of high school doing music for the passion and identity, I never thought I could make. I looked down on myself because I thought there were no opportunities, no access to finance, I had what I call Mtaa Mentality. But with time I overcame it. We need to stop looking down on ourselves no matter where we come from. Believe in yourself and your talent enough to feed your passion. Then you can become anything, look at me today I am a vice chair at KEPSA meeting CEOs I never thought I would ever meet. Take the initiative’

advertising?’ Juliani founded the ‘My Msanii’ a digital Startup that seeks to create a talent management platform through which artist can get booked for events, sell their content and pursue new avenues to monetize their content. ‘Music is a business on which a whole value chain is built. We have producers, DJs, Bands, lyricist, backup singers, event organizers, managers, promoters, sound engineers, electricians, drivers, publicist, makeup artist, manufacturers of equipment… the list is endless. In one concert alone I employ over 100 people directly and hundreds more indirectly. Unfortunately no one knows what an artist earns, some say as much as 20 million shillings a year for big artist and as low as 200,000 shillings a year for new entrants, but we cannot be sure because some come from wealthy families and already had the money to buy big cars produce their music and even shoot their own videos. How much does it cost them? Where do they get the money? Do

40 I PRIVATE SECTOR I APRIL - JUNE 2016

they repay it? How do they calculate their profits? What did they put in to make that money?’ Juliani says. Despite his success as an artist and performer it would seem that something drives Juliani, a sense of conviction to shape, change and mold a new industry for the music business. ‘People with jobs walk to the bank and get loans, the question I keep asking myself is; can we as musicians do the same?... Can I walk in with the royalties and take a loan for which I can repay over time with my earnings from an album? Our industry is not yet bankable. My vision through My Msanii is to give it that bankability’ Juliani adds. So what are the current channels of revenue generation for the music industry? ‘My last Album cost me upwards of Sh. 1 million to produce, add in distribution costs and promotions and it becomes expensive. However there are many channels to monetize the content, we have the royalties paid through

MCSK, Placement, Ringtones, Live performances, CD sales and online downloads. What we need to do now is seek new avenues and diversify away from the norm. Our challenge is placing a real financial value on the end product.’ SO WHAT DRIVES JULIANI? ‘I don’t like to fit in, when I start filling confined it’s time to move to the next project. If I feel that I fit in then there is a problem. Music is about passion, we evoke emotion, we can make you laugh, cry or feel inspired. We are prophets, art is pure, it says what needs to be said. As long as I have something to say or do I will keep doing it’ Juliani has also set up a creative academy in Dandora to inspire the next generation to invest in their talent. ‘We all don’t have to be artist, that’s why Kenya has too many struggling musicians. There are other aspects of the business that are bigger than the artist. We have too many gaps in this industry, not enough producers, engineers, promoters, talent manager and business developers. To make it in this industry you have to see the opportunity beyond the artist. I would like to see people who even though they can sing focus on the other aspects of the business, that is what will drive the industry forward.’ AND HIS LAST WORD? ‘When I was fresh out of high school doing music for the passion and identity, I never thought I could make anything out of it. I looked down on myself because I thought there were no opportunities, no access to finance, I had what I call ‘Mtaa Mentality’. But with time I overcame it. We need to stop looking down on ourselves no matter where we come from. Believe in yourself and your talent enough to feed your passion. Then you can become anything, look at me today I am a sector vice chair at KEPSA meeting CEOs I never thought I would ever meet. Take the initiative’ As we leave the studio Juliani pumps up his latest Track banging along his dreadlocks in what has become his signature performance. We at the Private Sector salute Juliani for his passion, drive and commitment to the monetization of the Music industry.


42 I PRIVATE SECTOR I APRIL - JUNE 2016


E – Available Version www.privatesectoreastafrica.com @privatesecctorkenya

Private Sectore is a Kenya Private Sector Alliance Publication, published quarterly by Brand Effects East Africa www.brandeffectsea.com

www.bctrends.com


What is the private sector doing about

CORRUPTION?

Writes Martin Dias ‘The private sector can no longer sit and watch things deteriorate without being proactively involved and making its contribution to the country’s stability,' this firm remarks from BIDCO CEO Vimal Shah Chairman of Mkenya Daima initiative which...actively involved in the fight against corruption and the push towards the adoption of ethical practices during a recent breakfast meeting hosted by the Kenya Private Sector Alliance (KEPSA) continue to linger in my mind and made me realize how serious and immense corruption is and the need for private sector to join hands in eliminating it. Last year at a similar event, KEPSA Members signed on to a code of ethics that is meant to initiate a culture of integrity among its members. Corruption is not new to other great nations; the latter has been in existence for many decades. For instance, in the 17th and 19th century, local governors in the Dutch Republic were accused of corruption and harming the common good for favouring their own families by providing them with offices or money collected to maintain city services. It is highly implausible to say that the ambitions and the determination behind mammoth projects is the drive to seek money in the wrong ways but truth be told, in today's business world being a cartel is the new trend and a shortcut to success. Anyway who doesn’t need money? We all do, we are in business to make both ends meet. I am however not convinced that bribery is the only way to secure business contracts. Further, it is undeniable that corruption has been on a patterned rise in the private sector especially now and has become an achilles heel for the sector. This increase in graft within this sector can be associated with scramble for mega government contracts and tenders. The nature of business contracts offered bears no room for thought, some of these tenders are short lived and this becomes a lifetime opportunity you cannot afford to lose. One would ask why lose when all you need is to have professional links in the department who will connect you, and all they will require is a small percentage of the total amount paid? Every time I hear of such cases I ask myself how hard it is to actually say ‘No’. And by the way is it so hard to follow the right channel and be safe?

Considering the cutthroat competition within the sector, it becomes as tough as the jungle where only the strong shall survive. However, tough times sire tough people thus the urge to be at the centre and dominate in certain field I would say is yet another leading factor that has contributed hugely to the rise of corruption in this significant sector. The private sector and corruption. This key sector has been central in achieving development objectives of the country and has been significant in creating greater wealth and employment opportunities to many Kenyans. However there have been challenges preventing the sector from reaching its full potential. Corruption, infrastructural deficits as well as untapped informal sector are some of the challenges affecting the sector. I am optimistic about the economic prospects of Kenya and especially those stirred by the private sector. The sector has the potential to stimulate significant growth if well focused and if stakeholders are willing to kick corruption in every corridor. What leads to corruption in the private sector? The private sector has been caught in the temptation of wanting to be a first mover in the government tenders, which range from supply to construction. Bribery had become a pathway to their success with some willing to share the benefits with anyone in cahoots to secure the tenders. Sadly, public officers have befallen as the victims despite sharing thefreebees with private sector officials. Anti-corruption bodies involved have turned a blind eye to huge involvement of the private sector individuals as accomplices. This ignorance has led to the spread of this cancer in big, midsized and even small private organisations grappling for business survival.


communication including training. Proportionate policies and procedures, these policies should be clear and emphasized to scale up company activities; the same too should be practical, accessible and effectively implemented and enforced within the company. Due Diligence Procedures, all companies and Organisations falling under the private sector should take proportionate and risk-based approach for anyone involved in the day-to-day activities of the organisation in order to mitigate identified bribery risks. Monitoring and Review, every limited company should monitor and review procedures designed to prevent bribery by persons associated with it and makes improvements where necessary. And finally, the companies should adopt Response Strategy and Investigation Procedures. every limited company should monitor and review procedures designed to prevent bribery by persons associated with it and make improvements where necessary. And finally, the companies should adopt Response Strategy and Investigation Procedures. In case of any bribery occurrence, a company should have controls designed to take corrective action and remedy for the harm caused by bribery and corruption. Further, members of staff in the private sector need to be sensitized on corruption. They should never be allowed to accept any form of advantage intended to award a business or any other benefit.

To add insult to injury, it is frightening yet funny how paying of bribes remains routine for ordinary Kenyans. The potential in the private sector don’t really require a bribe, but since we have made it a culture, big firms are also bribing their way out making bribery and corruption a serious obstacle to the sector’s growth and development. So far so good, only companies that practice strong ethical culture and principles are experiencing significant positive impact, the rest are struggling in building up their credibility after engaging in corrupt grafts. All said and done, the issue of private sector involvement in corruption has become a great concern and needs to be addressed. We need to join hands and build morality, not corruption, promote intellectualism in all spheres of development, fight segregation, promote tolerance and fairness in all our dealings as the private sector. How to keep corruption in check. Kenya Association of Manufacturers formulated seven key pillars companies can adopt in their effort and commitment towards deterring bribery and corruption in their booklet ’Business Against Corruption’ These pillars include; Governance, Organisations should strive to formulate strategies and policies which will prevent bribery and corruption. The set governance should state the duties and obligation of every staff and their responsibility in fighting graft. The same should ensure compliance with the laws of the country. Anti-Corruption Risk Assessment, Corruption and bribery can undermine business objectives; the dual can bring down a stable company and reduce it to ashes. The aim of this pillar is to create internal and external understanding of bribery and corruption risks. Communication and Training, communication is central to any business, according to KAM, the commercial organisation seeks to ensure that its bribery policies and procedures are embedded and understood throughout the organisation through internal and external

Corruption starts with you and me, the moment we allow it, be sure everyone else will start and we end up cultivating a culture of corruption. We must therefore be the first to say no to corruption and save this vibrant sector. The communication services in the country can also assist in fight against graft by blacklisting anyone involved in corruption. The practice of voluntary declaration of wealth in the sector should be encouraged. The step by Safaricom Chief Executive Officer Bob Collymore and KCB CEO Joshua Oigara to declare their wealth in public wealth in public, were encouraging and we should all come out in large numbers to enhance transparency in the sector and also ensure our lifestyle is in line with our earnings. If possible, private entities should formulate stand-alone policies that will enable the fight against corruption and bribery coming from within the organisation or outside. Rather simple, we cannot under estimate the consequences of corruption in the private sector, for this is likely to affect the livelihood of the Kenyans and the country at large. Kenya is currently gaining significance in the global market. Ranked 115th globally in terms of development and 19th in Sub-Saharan Africa is positive and the huge load of systematic corruption caused by fraud for quick money cannot be allowed to deprive us room for more development and investment. Kenya is a hot bed of investments; hence major impediments of doing business caused by corruption cannot be allowed to get on the way. So the message to the private sector is to say ‘NO’ to corruption as it starts with you and me.

Martin Dias - Group CEO, FAPCL Group Email: md@fapcl.com


REAL ESTATE

Kenya’s retail sector

Ranks as second-most formalised in Africa By OXFORD BUSINESS GROUP

I

ncreasing urbanisation and rising levels of disposable income should fuel growth in Kenya’s retail sector in 2016 and beyond, as demand for quality outlets and a broader range of shopping options drives the construction of floor space. Over the past five years, the average value of consumer spending has risen by as much as 67%, making Kenya the continent’s fastest-growing retail market. With increased urbanisation and an ongoing rise in disposable incomes, formal retail activity – which is led by large blue-chip domestic companies in a number of segments – should continue to expand and diversify, especially as more international brands enter the marketplace.

46 I PRIVATE SECTOR I APRIL - JUNE 2016

DEMOGRAPHICS OF DEMAND The rise in formal retail activity can be seen most clearly by the expansion of dedicated property in major urban areas, including the country’s 3.5m-person capital city. Last year alone saw a near tripling of Nairobi’s modern retail space, with close to 170,000 sq metres of new leasable area coming on-line. The rise in capital investment – combined with encouraging fundamentals, such as an urban population that the UN expects will rise by 2.8m over the next five years to reach 14.7m by 2020 – has led to the country being singled out as a hot prospect in several recent publications. In its 2016 “Global Cities” report, for example, real estate consultancy Knight Frank predicts the Kenyan retail sector’s positive momentum will continue over


REAL ESTATE

new centres, the 27,000-sq-metre Lake Basin Mall, was developed at a cost of KSh2.5bn ($24.5m) and now stands as the largest mall in the region, according to developers. Existing shopping centres in Kisumu are also being expanded to accommodate growing demand. The Mega Plaza Mall, which opened in 1996, is adding an additional 10 storeys, while the Mega City Mall is also undergoing expansion. Meanwhile, in Eldoret, a second Buffalo Mall – following on the successful launch of the first Buffalo Mall in Naivasha in 2014 – is currently being built. The 14,250-sq-metre shopping centre, located on the outskirts of the city, plans to open in 2017.

“By shifting focus from capital cities to smaller areas, investors get more for their money due to lower costs of land, resources and building materials,” Karua told media in late 2015. “Developers have more space for construction. This makes these second-tier cities a very attractive option for real estate professionals.” the next two years. “In 2016 and 2017, a further [120,750 sq metres] of modern retail space will complete development in Nairobi,” the report said. Online real estate platform Lamudi, part of Germany’s Rocket Internet, has also tapped Nairobi as one of the world’s fastest-growing real estate markets this year, with particular mention of the prospects for commercial and retail real estate, which it says will benefit from a rise in white-collar professionals. FORMAL MARKET EXPANSION In comparison to other African markets, Kenya’s formal retail penetration rate – which ranges from 30% to 40%, according to analysts – is the second highest in sub-Saharan Africa. This places the country at roughly half the level of South Africa, where formal retail is estimated to stand at 60% of overall activity, but twice that of Nigeria, Africa’s largest economy.

At least some of this potential is likely to be unlocked by the expansion of retail hubs into rural areas and cities outside of Nairobi, reducing the distance shoppers have to travel to access large shopping outlets. While much of Kenya’s formal retail capacity is concentrated in central Nairobi and the port city of Mombasa, there has been growing development of formal space in cities such as Kisumu and Eldoret in recent years, with potential for even wider diversification in the future. This is being driven in large part by the devolution process, which has led to higher incomes in counties outside the capital, and consequently to a significant increase in investor interest in developing retail centres in these areas. In Kisumu, Kenya’s third-largest city, three new shopping malls opened in the twelve months to November 2015, bringing the total in the city to seven. One of the three

URBAN SPRAWL The ongoing development of satellite communities outside Nairobi should also help drive retail expansion in the coming years, as investors move to cater to the rising middle class and the overflow of residents from the capital. Expanding commuter townships and second-tier cities, such as Kiambu, Kiserian, Kitengela, Mlolongo, Ongata Rongai, Ruaka and Syokimau, are all poised to see rapid growth, offering further opportunities for retailers, according to Dan Karua, managing director of Lamudi Kenya. The KSh60bn ($588.9m) Two Rivers Mall – which, at 62,000 sq metres, will be largest shopping centre in East Africa when it opens in March 2016 – is being developed on the outskirts of Nairobi. The mall has been cited as one of the driving forces behind rapidly rising real estate prices in the nearby satellite town of Ruaka. According to local media, Ruaka now has the highest per-hectare prices of any satellite town, with prices up 9.4% yearto-date as of June 2015. “By shifting focus from capital cities to smaller areas, investors get more for their money due to lower costs of land, resources and building materials,” Karua told media in late 2015. “Developers have more space for construction. This makes these second-tier cities a very attractive option for real estate professionals.”

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REAL ESTATE

THE NEXT BIG INVESTMENT

Kenya’s residential property market shifts to multi-unit housing

While housing prices in Kenya’s residential real estate market stabilised late last year, land costs have seen significant increases, indicating a rise in demand for apartment units By OXFORD BUSINESS GROUP

A

ccording to the latest housing price index from the Kenya Bankers’ Association, released at the end of January, average housing prices edged up by just 1.14% in the last three months of 2015. This marked the third consecutive quarter with a less than 2% period-on-period increase. ACROSS THE BOARD As average housing prices have declined, land prices in the capital have recorded significant growth. Prices in Nairobi have risen five-fold since 2007, with average land costs in the city up 9% in 2015. While the centrally located Upper Hill area of Nairobi had the most expensive land

48 I PRIVATE SECTOR I APRIL - JUNE 2016

in 2015, averaging around KSh206.2m ($2m) per hectare, land prices in outlying areas, such as Kitisuru, Loresho and Gigiri, increased at the fastest pace. According to a recent survey by housing consultancy HassConsult, land prices in Nairobi’s satellite communities rose by around 11.9% last year, almost three percentage points ahead of comparable acreage in the city centre. In Kiserian, a satellite community southwest of central Nairobi, land prices rose by more than 25% over the period. “With the devolution plan driving infrastructure development in outlying


REAL ESTATE

areas, there are significant prospects for further real estate sector growth,” Charles Odere, chairman and CEO of real estate company RE/MAX Kenya, told OBG. Multi-unit focus

Appetite for new multiunit housing saw the value of approved residential building plans climb by 11.2% in 2015, according to data from the Nairobi Directorate of Planning, Compliance and Enforcement.

Land inflation has already begun to change the shape of Kenya’s property market, prompting a shift away from standalone houses and towards multiunit buildings. The KBA noted that apartments, which saw relatively higher price movements last year, accounted for more than 90% of the units offered in the fourth quarter, followed by maisonettes (5.8%) and bungalows (1.41%). “This justifies the increased appetite and relative affordability for apartments by an apparently growing middle class,” the report said. Developers are increasingly building up rather than out, as they seek to maximise returns against a backdrop of limited

urban space. “We are seeing a lot of lending for housing being channelled to residential projects in the outskirts of major hubs like Nairobi,” Jared Osoro, director of research and policy at the KBA, told OBG. “Lending for commercial development of multi-unit housing is particularly significant.” Appetite for new multi-unit housing saw the value of approved residential building plans climb by 11.2% in 2015, according to data from the Nairobi Directorate of Planning, Compliance and Enforcement. Just over 60% of the approved building plans were for residential developments in and around the capital, for a total value of KSh147bn ($1.5bn). Investment in non-residential developments, meanwhile, declined marginally, falling by less than 1% to KSh95.18bn ($936.5m).

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REAL ESTATE

Financing remains very costly in Kenya, not just for buyers but for developers as well,” Chetan Hayer, director of real estate developer Nirbhau Group, told OBG. “In addition to these kind of incentive programmes, we need to reform the way that mortgages are structured to ensure funding can be released during construction, not just when properties are completed.

SHORTFALL IN ENTRY-LEVEL HOUSING Despite continued investment in boosting residential housing stocks, Kenya continues to experience a nationwide housing deficit. Although 50,000 new residential units are added to housing stocks annually, national demand for new housing runs at around 250,000 units per year, Jacob Kaimenyi, cabinet secretary in the Ministry of Land, Housing and Urban Development, told media earlier this year. In early February the government announced plans to provide both financial and non-financial incentives to the private sector to help bridge this 200,000-unit gap, which mainly exists at the lower end of the housing market. Among the incentives proposed is the provision of serviced land to developers, access to affordable financing and legislative reforms of land-related laws. A national housing fund to help finance social and low-cost housing is also being considered, Kaimenyi said. “Financing remains very costly in Kenya, not just for buyers but for developers as well,” Chetan Hayer, director of real estate developer Nirbhau Group, told OBG. “In addition to these kind of incentive programmes, we need to reform the way that mortgages are structured to ensure funding can be released during construction, not just when properties are completed.” The government will be looking for these incentives to encourage some developers to shift their focus towards mass housing schemes and entry-level residential projects. Such projects could become more attractive to the private sector, particularly if demand and sale prices in the middle-to-high end of the residential sector continue to stall.

50 I PRIVATE SECTOR I APRIL - JUNE 2016


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WTO

Nairobi Outcome A very pleasant surprise If truth be told, it was an outcome that few predicted By Keith M. Rockwell Director of Information & External Relations at WTO


WTO REVIEW

In the run up to the WTO’s 10th Ministerial Conference held in Nairobi last month, the pundits and prognosticators were united in predicting that this meeting would end in failure and disunity.

T

he story line was that WTO and the multilateral trading system would be cast aside and all future efforts at trade reform would take place regionally or bilaterally. Yet, when Cabinet Secretary Amina Mohammed gaveled MC10 to a close after a grueling week of negotiations, the 162 members of the WTO had made history. In the space of those few days, Ministers had agreed to the most significant agriculture trade reform in decades, had created important new trading opportunities for entrepreneurs in the world’s poorest countries and had added two Least Developed Countries , Liberia and Afghanistan to the swelling ranks of WTO Members. Beyond this, cotton producers in the LDCs will no longer face either quotas or tariffs on their exports cotton and certain cotton products to advanced countries and some emerging countries, including China. Separately, 53 WTO members concluded an agreement that would remove barriers to trade for 201 information technology products including GPS units, medical devices, latest generation semiconductors and video games. The

54 I PRIVATE SECTOR I APRIL - JUNE 2016

The pre-Nairobi pessimism of the cynics was understandable. WTO Ambassadors had set a tall order for their Ministers, leaving Geneva for Nairobi with so many issues still to be decided.

annual value of trade in these products comes to $1.3 trillion, or about 10% of total trade each year. SOME FAILURE, SOME DISUNITY True WTO Members could not agree on the future of the 14 year Doha round of negotiations. But they did commit to continuing negotiations on the crucial Doha issues -- agriculture, industrial goods, services, fisheries subsidies and on the key development principles that have been so central in the Doha talks. It remains unclear, how these negotiations will proceed. But the importance of these


WTO REVIEW

OUTCOMES OF THE WTO Yet in Nairobi, as in Bali at MC9 two years earlier, Ministers passed this test. It was not easy. The level of negotiating intensity in Nairobi was such that the Conference needed to be extended an extra day. Even then, the final agreements were not struck until night had fallen. But key players showed the necessary flexibility and political will at the critical junctures, CS Amina and DirectorGeneral Roberto Azevedo displayed great leadership in conducting the negotiations and the entire membership demonstrated patience and determination in crafting a compromise acceptable to all. issues and the desperate need to jump start sluggish global trade, provide a powerful incentive to negotiators who, after all, are united in their belief that the global trading system is in need of further reform.

This WTO Ministerial Conference was the first to be held on African soil. The government and people of Kenya wanted us to be there. The effort expended on our behalf was monumental. To let down the people of Africa, of Kenya and of Nairobi was, for most delegates, an unthinkable proposition.

The pre-Nairobi pessimism of the cynics was understandable. WTO Ambassadors had set a tall order for their Ministers, leaving Geneva for Nairobi with so many issues still to be decided. The lion’s share of issues were bundled up and dispatched to their Ministers for resolution at the Conference. There was general acceptance of some elements of the draft Ministerial Declaration dealing with the basic work of the organization and the current state of the global economy. But issues pertaining to agriculture, the Least Developed countries and the vitally important question of how the WTO would manage its future negotiations were still on the table. WTO officials are fond of saying that if a Ministerial Conferences is to succeed it is vital that virtually all matters be resolved in Geneva ahead of time leaving Ministers with a manageable handful of questions to settle at the meeting itself. This remains wise counsel. Negotiations at a Ministerial Conference are not for the faint of heart. Brokering consensus among more than 160 Ministers on a large array of complex and politically sensitive issues in only three or four days under the glare of global media spotlight is an extraordinary test of skill and stamina.

This WTO Ministerial Conference was the first to be held on African soil. The government and people of Kenya wanted us to be there. The effort expended on our behalf was monumental. To let down the people of Africa, of Kenya and of Nairobi was, for most delegates, an unthinkable proposition. This explains why all delegations were steadfast in their view that whatever the outcome at MC10, it had to bring benefit to Africa. Taken together this represents quite an impressive package for Africa. Is it everything that African negotiators sought? Certainly not. But the measures agreed in Nairobi will doubtless create more opportunities for African entrepreneurs and bring greater equity to the global trading system. Moreover, WTO Ministers committed themselves to continue negotiating on the crucial issues that remain to be concluded. And this brings us to our future work programme. One area where divisions were not overcome in Nairobi was on the future of the Doha round, the possibility of negotiating agreements on new issues and on potential new directions for the negotiations. The debate on this matter was heated in Geneva prior to MC10, and the quarrelling among Members continued in Nairobi. DG Azevedo faces a great challenge in finding common ground here, but he rose to the challenges set for him in Bali and Nairobi and emerged from these meetings with enhanced support from across the membership.

APRIL - JUNE 2016 I PRIVATE SECTOR I 55


WTO REVIEW

WTO ACHIEVEMENTS: • From January 1 of this year, direct export subsidies paid by advanced countries to their farmers have been eliminated. Developing countries providing such support will phase it out by 2018. Disciplines have also been agreed which would bring the extension of government credit for farm exports more in line with market practices. Rules were also agreed that will require governments to take steps to ensure that their food aid programmes do not displace local farmers in countries receiving this aid. Reining in export subsidies was among the highest priorities set by developing countries when the Doha round was launched in 2001. To gain immediate elimination of the most trade distorting form of subsidy, while curbing other practices which extend unfair advantage to rich country farmers constitutes the most far-reaching farm trade reform in the WTO’s history.

56 I PRIVATE SECTOR I APRIL - JUNE 2016

• Exports of raw cotton and certain cotton products from LDC farmers have been granted duty-free quota free market access in advanced countries and in certain emerging countries, including China. • New rules of origin guidelines have been agreed which reduce the administrative burden on the poorest countries (the LDCs) and which make more transparent what constitutes a product of LDC origin. This is important because many advanced and emerging economies extend preferential treatment to exports from LDCs. But taking advantage of these preferences has been difficult because the burden of proving that such products are indeed from LDCs has been onerous. The decision taken in Nairobi states plainly that products where 25% of the value has been added in the LDC warrant this status and removes much of the paperwork required to prove it. This will reduce costs and create new opportunities

for LDC exporters. • Trade in services is the fastest growing segment of world trade but services providers from Least-developed countries have yet to benefit as fully from this expansion as they would like. But the agreement reached in Nairobi to extend preferential treatment to LDC services providers should help address this. To date, 21 developed and emerging WTO Members (this includes the 28 countries of the European Union) have notified the WTO of preferential offers which will make it easier for LDC-based lawyers, teachers, accountants, maritime and tourism professionals, truckers and journalists to compete more effectively in these markets. Of the world’s 48 Leastdeveloped Countries, 34 are in Africa and these include all of Kenya’s immediate neighbours. Greater prosperity on Kenya’s frontiers will bring significant benefit to Kenyans as well as their neighbours.


ENTREPRENEURSHIP

BUSINESS BREAKTHROUGH

Supporting entrepreneurship through ‘Publish What You Buy’ initiative

By Davilyne David Busuru Political Analyst & Research Assistant, KEPSA

“Publishing what you buy is an informed way to make the Government accountable for the management of funds and a clear way to ensure transparency in awarding of contracts. It is a prudent way to support the Buy Kenya Build Kenya initiative by tracing Government expenditure and commitment to support Local industries.”

P

romotion of local industries and entrepreneurship has taken centre stage in Kenya within both the public and private sector. This has instigated concerted efforts by stakeholders in improving the business environment to spur entrepreneurship in the country. In July 2015, Kenya was a beehive of activity focused on improving the state of entrepreneurs during the Sixth Global Entrepreneurship Summit (GES). One of the big take-homes for Kenyans was perhaps the need for Government support to local entrepreneurs by way of creating an enabling business environment. There was a consensus that the business environment in Kenya was not supportive to entrepreneurs. In this case, creating a market and establishing a staunch business

APRIL - JUNE 2016 I PRIVATE SECTOR I 57


ENTREPRENEURSHIP

environment will be the breakthrough. Improving the business environment and supporting local industries has been the anvil of Government and Private sector engagement. Buy Kenya Build Kenya, is one among many initiative that has informed the advocacy agenda in the engagement between Government and Private sector. Buy Kenya Build Kenya, is an affirmative action aimed at promoting the local industries through procurement of locally made products. It seeks to ensure that locally manufactured products are preferred over imported products. Even though the initiative is seen as a protectionist move by sceptics as it negates the tenets of the free market, it ensures sustenance of local manufacturers due to their impact on the economy. The importance of the local manufacturing cannot be downplayed in view of its contribution in the economy through job creation, tax remittance, infrastructure development and corporate social programmes. To protect and spur the interest of the local manufacturers, the business fraternity in Kenya has in the recent past witnessed a commitment

58 I PRIVATE SECTOR I APRIL - JUNE 2016

by the Government to implement the 40% local content rule on the award of contracts to promote local industries, a move aimed at promoting the Buy Kenya Build Kenya policy. The above follows the logic that the government is the largest consumer. Globally, governments are the largest procurers, and the Centre for Global Development estimated government expenditure at $ 9 trillion in 2015. In Kenya, Government procurement is estimated at KES 1.77 billion (FY 2015/16 Budget provisions), and it is huge expenditure that has attracted the interest local manufacturers’. PROMOTING QUALITY AND COMPETITION The question to ask, however, might not be the seriousness of the government, but perhaps how to monitor the initiative and at the same time promote quality and competition amongst local industries to ensure that contracts are not only a reserve of a few local industries but an open and fair field for all to bid and participate. The Ministry of Industry, Trade and Investment steers the implementation of the Buy Kenya Build Kenya initiative alongside other Government agencies.

However, there are no clear ways of monitoring the initiatives and it is for this reason that the ‘publish what you buy’ initiative promises to be a solution that could seal the glaring gaps. Publish what you buy simply requires the government to make open the whole procurement process to the public. When the procurement process is made open, all the stakeholders from the monitoring agencies, local manufacturers and the general public are able to trace the intelligence of the whole procurement chain. The Publish what you buy initiative will help clear the air both for the local manufacturers and to the government itself. It will help in setting standards for the local manufacturers, support the bidding process by the same local manufacturers, increase competition and enhance government credibility by being open. Publishing what you buy is an informed way to make the government accountable for the management of funds and a clear way to ensure transparency in awarding of contracts. It is a prudent way to support the Buy Kenya Build Kenya initiative by tracing Government expenditure and commitment to support


ENTREPRENEURSHIP

will be able to determine the standard procured and gauge their ability on meeting the standards and inform their bidding process in the future. Seemingly, not only will it set standards, but aid local firms in bidding for government tenders. As witnessed through the supply of locally produced cement for the construction of the Standard Gauge Railway, local manufacturers are willing to invest in quality to match the expectations of the market.

Local industries. Globally, a number of Governments have ascribed to the ‘Publish what you buy’ initiative. For example, the Australian government has introduced legislation that obliges companies to publish what they pay governments in the countries in which they operate. Similarly, the United States and the European Union have followed suit in implementing legislation in the same direction. Colombia and the Slovak Republic are also implementing the ‘publish what you buy’ policy. Although skeptics have thwarted the buy Kenya build Kenya initiative on the ground that it may not work due to a number of reasons, criticism on the grounds that the local industries lack the wherewithal to produce high standard goods may bear credence. For this reason, many government tenders have been won by foreign companies leading to infiltration of foreign products and services in our economy at the expense of local firms and products. The rationality in this rhetoric has been whether the standards are too high or whether the local industries are incapable of meeting the required quality? By publishing the purchased goods, the local industries

Buy Kenya Build Kenya, is an affirmative action aimed at promoting the local industries through procurement of locally made products. It seeks to ensure that locally manufactured products are preferred over imported products.Even though the initiative is seen as a protectionist move by sceptics as it negates the tenets of the free market, it ensures sustenance of local manufacturers due to their impact on the economy.

HEALTHY COMPETITION The principles of market forces are built on elements of competition, where the best seller offering the best quality at a particular price will carry the day. When fully adhered to, competition on the supply side will always result in fair prices on the side of the buyer. Publishing the required standards for a specific product and consequently doing the same on the purchased products will encourage healthy competition amongst the local forms at remarkably fair prices. Non-publishing of awarded contracts has seen the government lose huge sums of money due to altering and overstating contracts and prices. Making known the preferred products and perhaps accounting for the same will ensure integrity in procurement. Publishing government contracts will make it easy for tracking of the same contracts by the public, local manufacturers and the civil society. Kenya is ranked at position 145 in the Corruption Perception Index (CPI 2014) by Transparency International, and mainly due to rampant corruption in awarding of government contracts. In a nutshell, for the government to fully support local manufacturers through the Buy Kenya Build Kenya initiative, publishing what it buys is essential. This will provide a trail on what type and standards of goods it buys, increase competition amongst the local manufacturers and save the government revenue from purchasing overpriced and low-quality products. In combination with procurement mechanism such as e-Procurement, “Publish what you buy” will enhance transparency and accountability in the government.

APRIL - JUNE 2016 I PRIVATE SECTOR I 59


ENTREPRENEURSHIP

THE NEXT BIG INVESTMENT By Henry Githaiga

T

he political class has true to its nature leveraged on the economic disparities to drive their agenda, with successive governments building their election manifestos on the redistribution of wealth. Socioeconomic empowerment has always been at the center of Kenyan politics and the very psyche of the electorate. Political solutions to resolving the inequality have had some level of success with the Constituency Development Fund (CDF), marking what is perhaps; the most important socioeconomic tool for the political class. The real change however came through the devolved system of government; creating 47 executive governments whose sole purpose is to foster development by bring services closer to the citizen, among other socioeconomic gains.

Lessons from the Kisii Entrepreneurship Summit Since independence Kenya has faced challenges in attracting investment away from the major investment areas namely; Nairobi, Thika, Mombasa, Nakuru and Kisumu. As the capital city, Nairobi generates up to 40% of Kenya’s GDP, Thika has been the traditional centre of industry while Mombasa has largely been a beneficiary of tourism and the port. Kisumu and Nakuru on the other hand, have been largely dependent on their status as administrative and trade hubs

60 I PRIVATE SECTOR I APRIL - JUNE 2016

It is devolution that can finally address the wealth redistribution dilemma. At county level, not only can each region identify its resources but also develop its own development agenda, separate from the focus of the national government. Four years into devolution however the tide of change has largely gone unfelt if not unnoticed. The debate has turned cyclic devolving the challenges of the national government to the counties. From revenue shortfalls to graft and misaligned priorities, devolution has been diverted from its course. It is time to point it back in the right direction. During the Kisii Entrepreneurship Summit, speaker after speaker talked about the potential that each county has and the opportunities for wealth and job creation and ultimately the alleviation of poverty. Like all other summits, the focus was on attracting investors by highlighting the opportunities available, however we all need to go a step further to not only identify the opportunities but also map out their commercial viability and establish bankability. This is not necessarily a task for county governments.


ENTREPRENEURSHIP

ENTREPRENEURSHIP SUMMIT The Kisii Entrepreneurship Summit held in February 2016, brought to the fore the countless opportunities that have gone unnoticed for half a century of self-rule, highlighting interesting statistics about the county. With 1.3 million inhabitants the county’s labour force is 56.5% and has literacy rate of 86.5%. The County accounts for 60% of the money market in the Western region and 30% of the county’s population is banked. The Kisii has immense potential for horticultural production and agro processing alongside pharmaceutical and agro chemical production due to the vast deposits of soap-stone in the county. All this economic potential has however remained just that, Potential.

Every county has identified its own resources and opportunities mapping out areas that are likely to drive its economic growth, the challenge for investors has always been bankability. For instance,geothermal power has always been touted as the solution to Kenya’s energy needs but it was not until recently that real investment into the sector became a reality. INVESTOR’S APPETITE The growing investor appetite for geothermal power has been driven by three factors; first the government through the Geothermal Development Company (GDC) has taken up drilling and preparation of wells for power production, two the African Development Bank offers risk guarantees for major projects and finally the government signs power purchase agreements on a ‘take or pay’ basis for those producing power. The three factors simply mean that regardless of how much power actually ends up on the grid the investor is guaranteed of payment for their installed capacity and that any other risks involved in prospecting for steam are mitigated. In essence most investors opt to forego the risk all together and apply to take up wells drilled by GDC. Simply put not only is geothermal commercially viable it is bankable.

Political solutions to resolving the inequality have had some level of success with the Constituency Development Fund (CDF), marking what is perhaps; the most important socioeconomic tool for the political class. The real change however came through the devolved system of government; creating 47 executive governments whose sole purpose is to foster development by bring services closer to the citizen, among other socioeconomic gains.

Counties need to adopt the same view in regard to opportunity. It is not enough to identify an investment opportunity, they have to go beyond that and establish the market size for the end product, land for investment, risk mitigation mechanisms and the return on investment. At the moment each county seems to be preoccupied with traditional opportunities such as agriculture. While 80% of any given arable county can effectively be classified as an agricultural zone, the nature of the agricultural activity leaves little to be desired. SUBSISTENCE UNITS Three generations of largely polygamous families have subdivided land to subsistence units that can barely meet their day to day needs. Consequently agriculture though still the leading contributor to GDP should not be the main selling point for counties unless the county is willing to set aside large tracts of land for a particular crop or has a successful out growers scheme that can feed into large-scale production. Since independence Tea and Coffee have through the cooperative movement been top earners for both the country and farmers. Over the last decade however, the two cash crops have come under pressure from real estate which promises higher returns. Comparatively

APRIL - JUNE 2016 I PRIVATE SECTOR I 61


ENTREPRENEURSHIP

while the acreage under coffee has declined from 170,000 ha in 2005 to 110,000 ha in 2014, the acreage under Tea has increased from 141,000 ha to 198,600 ha in 2014. This is simply because most of the production for both crops (about 60%) is done by smallholder farmers. With increasing subdivision of land Coffee has lost out to real estate to farmer apathy, over pricing and security of payment after the collapse of Kenya Planters Cooperative Union (KPCU). Tea on the other hand has had more success in dealing with farmer apathy with the Kenya Tea Development Agency (KTDA) able to offer farmers financial support to sustain the crop. To attract investment counties need to go the extra mile and conduct feasibility studies, establish supply chains and create the core infrastructure to support investment. In the case of mineral deposits counties will have to look beyond the mineral and into its commercial viability. While many investors are willing to prospect, few do so in uncharted lands. FOREIGN INVESTORS The second impediment to investment is definition of the term ‘investor’, the common tendency has been to focus on foreign investors who by the nature of their investment look for large scale, high capital investments. There are however two other categories of investors that have largely been overlooked; the indigenous investor (from the county) and the local investor (from other counties). As a result much needed capital has been expended on county homes that remain empty year round save for the far between public and religious holidays. This is the missing gap at county level, the tendency to focus on foreign investors limits the development of smaller value chains and entrepreneurship. Take Kisii for example which has a large number of dairy animals with over 300,000 heads of Cattle and is surrounded by other counties with above average livestock populations including Nyamira, Homa Bay, Migori and Narok making it a viable location for dairy processing ranging from

62 I PRIVATE SECTOR I APRIL - JUNE 2016

small dairies to large plants.

During the Summit speaker after speaker talked about the potential that each county has and the opportunities for wealth and job creation and ultimately the alleviation of poverty.

This kind of investment can be undertaken by indigenous investors though co-operatives or by local investors looking to either expand their operations or venture into new industries. For instance Githunguri Dairy Farmers Co-operative which initially started as a supplier of milk to KCC, is today the second largest dairy by market share commanding a 16% share. Similar comparisons can be drawn with Limuru Dairy Farmers Co-operative Society and Bukezi Dairy. Due to its well thought out investment prospectors Kisii County was able to attract deals worth over 21 billion shillings with commitments towards


ENTREPRENEURSHIP

the construction of a sugar factory, modern housing schemes and internet infrastructure. Through the summit Kisii County was also able to identify potential investments in soap stone, coffee and horticulture. The county’s rich agricultural potential makes it ideal for would be agro processors more so small scale value addition chains for the consumption of its 1.3 million strong population and neighboring counties. At the end of the day the real untapped resource for counties is their own population and the local investor.

To attract investment counties need to go the extra mile and conduct feasibility studies, establish supply chains and create the core infrastructure to support investment. APRIL - JUNE 2016 I PRIVATE SECTOR I 63


KEPSA MEMBERS 2016

BUSINESS MEMBERSHIP ORGANIZATIONS (BMOs) 1

African Women in Agribusiness Network-Kenya Chapter

42

Kenya Motor Industry Association

2

Agricultural Employers' Association

43

Kenya Motor Repairers Association

3

Agricultural Industry Networks Limited

44

Kenya National Chamber of Commerce & Industry

4

Agrochemicals Association of Kenya

45

Kenya National Farmers' Federation

5

American Chamber of Commerce (K) Limited

46

Kenya Oil & Gas Association

6

Aquacultural Association of Kenya

47

Kenya Private Schools Association

7

Architectural Association of Kenya

48

Kenya Property Developers Association

8

Association of Chartered Certified Accountants

49

Kenya Renewable Energy Association

9

Association of Consulting Engineers of Kenya

50

Kenya Security Industry Association

10

Association of Gaming Operators Kenya

51

Kenya Ships Agents Association

11

Association of Insurance Brokers of Kenya

52

Kenya Tea Growers Association

12

Association of Kenya Insurers

53

Kenya Tourism Federation

13

Association of Practitioners in Advertising

54

Kenya Water Industry Association

14

Association of Small and Medium Energy Contractors

55

Marketing & Social Research Association

15

British Chambers of Commerce Kenya

56

Marketing Society of Kenya

16

Clean Cookstoves Association of Kenya

57

Matatu Owners Association

17

Delegation of German Industry and Commerce of Kenya

58

Media Owners Association of Kenya

18

East Africa Venture Capital Association

59

Micro& Small Enterprises Federation

19

East African Tea Trade Association

60

National Association of Private Universities of Kenya

20

Eastern Africa Grain Council

61

National Potato Council of Kenya

21

Federation of Kenya Employers

62

Oil & Gas Contractors Association of Kenya

22

Federation of Women entrepreneur Associations

63

23

FEWA SACCO

Organization of Women in International Trade (Nairobi Chapter)

24

Institute of Certified Public Accountants of Kenya

64

Outdoor Advertising Association (K)

25

Institute of Certified Public Secretaries of Kenya

65

Petroleum Institute of East Africa

26

Institution of Engineers of Kenya

66

Private Sector Youth Federation

27

Institution of Surveyors of Kenya

67

Producers' Guild of Kenya

28

Kenya Agribusiness and Agroindustry Alliance

68

Protective Security Industry Association

Kenya Association of Air Operators

69

Pyrethrum Growers Association

30

Kenya Association of Independent International Schools

70

Retail Trade Association of Kenya

31

Kenya Association of Manufacturers

71

Roads & Civil Engineering Contractors Association

32

Kenya Association of Tour Operators

72

Safaricom Dealers Association

33

Kenya Association of Travel Agents

73

Seed Trade Association of Kenya

34

Kenya Association of Women Business Owners

74

Shippers Council of Eastern Africa

35

Kenya Association of Women in Tourism

75

36

Kenya Auto Bazaar Association

Telecommunications Service Providers Association of Kenya

37

Kenya Bankers Association

76

The Chartered Institute of Arbitrators

38

Kenya Healthcare Federation

77

The Kenya Chamber of Mines Company

39

Kenya Institute of Supplies Management

78

The Kenya Flower Council

40

Kenya IT & Outsourcing Services

79

United Business Association

41

Kenya Miners Marketing Cooperative Society

80

Wide Vision Investors and Business

29

64 I PRIVATE SECTOR I APRIL - JUNE 2016


KENYA PRIVATE SECTOR ALLIANCE

Membership Drive

Influencing PUBLIC POLICY through POLICY FORMULATION and IMPLEMENTATION

THE KENYA PRIVATE SECTOR ALLIANCE (KEPSA) IS THE VOICE OF THE PRIVATE SECTOR IN KENYA AND IS THE UMBRELLA BODY FOR PRIVATE SECTOR ASSOCIATIONS AND CORPORATE BODIES IN ALL SECTORS OF THE ECONOMY INCLUDING TRADE ASSOCIATIONS. KEPSA speaks for multinationals, SMES and startups organized under different sector boards and working groups reflective of the 16 sectors of the economy. KEPSA HAS OVER 100,000 MEMBERS THROUGH BUSINESS MEMBER ORGANIZATIONS AND COMPANIES. • It provides a platform for the private sector to engage in Public Private Dialogue at Local, National and International level. • It also offers information, advisory and networking opportunities for members. • it is a key partner to government and other stakeholders in the formulation and implementation of policies and strategies geared towards spurring economic growth, wealth creation and national development.

Timothy Odongo, todongo@kepsa.or.ke I tel: +254 20 273 0371 Contact us: Pascalina Kagunda, pkagunda@kepsa.or.ke I mob: 0720 340 949371 Visit www.kepsa.or.ke to find out more


KENYA PRIVATE SECTOR ALLIANCE Membership Application Form

MEMBERSHIP APPLICATION FORM Name of Organization Physical Address

P.O.Box

Postal Code

Telephone

Mobile

FAX

Email (s) Contact person Telephone

Mobile

Nature of Business

Sector Please check the field applicable Corporate Membership

Category

Categories of Membership

BMO Membership

Amount (KSHS)

Category 1

1,000,000

Category 2

500,000

Category 3

250,000

Category 4

150,000

Amount

Signed by:

Signed by:

Official Stamp

Official Stamp

100,000

MEMBERSHIP RULES 1. New Members will be required to pay a one-time joining fee of Ksh.10,000/= 2. Membership runs from January to December of every year. 3. Subscriptions received by 31st January attract a discount of 5%. 4. Normal rates apply from February to December 5. Members who will have not paid up by 31st march (at least a deposit) will miss out on being active members 6. Subscriptions can be prorated for members who join within the year 7. Installment payments are acceptable


Code of Ethics for Business in Kenya Letter of Commitment & Engagement

As a company doing business in Kenya, and in my capacity as the CEO/Chairman of ------------------------------------------------------------------------------------------------------- (please write name of company), I hereby express my company’s voluntary will and commitment to: (Please tick applicable box): Support and implement the Code of Ethics for Business in Kenya as per category 1 Support and implement the Code of Ethics for Business in Kenya as per category 2 In order to demonstrate our commitment to this Code in the Category chosen, we shall endeavour to do the following: 1)

Our company and its entire staff will aspire to live up to the Code and adhere to the requirements as set out in the applicable category of engagement;

2)

We shall demonstrate visible and active commitment to the implementation of this Code;

3)

We shall base our Company policies on the Code and provide leadership, resources and active support for implementation of the Code;

4)

We shall dedicate resources towards achieving the aspirations of the Code; Further, we shall ensure that the company Code of Ethics and ethical internal control and operation mechanisms serve to strengthen this Code;

5)

Our enterprise shall ensure that subsidiaries, joint ventures, and branches over which we maintain effective control subscribe to ethical business. Where we do not have effective control we shall make known our ethical policy and use our best efforts to monitor that the conduct of such subsidiaries, joint ventures and branches is consistent with the Code;

6)

Our business enterprise shall make known its ethics and anti-bribery policies to contractors and suppliers;

7)

We shall make it mandatory that all known instances of corruption are reported to the relevant authorities.

This letter of commitment will be renewed annually with communication to the GCNK secretariat :

Full name

Name of company/organization Witnessed By (KAM/KEPSA): Name: Signature:

Designation

Signature

Date


Adherence to the Code Of Ethics

A company commits to the Code of Ethics by signing this Letter of Commitment and Engagement.

Levels of Engagement: Category 1: ADHERE: In the first year following their commitment to the Code of Ethics, companies are not expected to report on their adherence to the Code, but they have to: Aspire to adhere to the Code; Make it public that they have committed to the Code of Ethics (on website, in annual report or through the annual Communication on Progress report); Participate in seminars and workshops organised by the Global Compact Network Kenya (GCNK),Kenya Association of Manufacturers (KAM), Kenya Private Sector Alliance (KEPSA) and Federation of Kenya Employers (FKE). Category 2: INTEGRATE and REPORT: From the second year after committing to the Code of Ethics, a company will publicly report on its progress with regard to the implementation of the Code. The company will also make its report available to the GCNK Secretariat. In this report, the company will indicate: How it has applied and integrated the Code within the company; Progress it has made with implementing an internal ethics and anti-corruption management programme (e.g. ethics and corruption risk assessment, top level commitment, policies and procedures, effective implementation, training, awareness, monitoring and review); Whether its report has been externally audited (which is optional). In addition, a company will: Visibly promote responsible business conduct and convince other companies to also commit to the Code of Ethics; and Participate in seminars and workshops organised by Global Compact Network Kenya. A company may immediately start adhering to the criteria under ‘INTEGRATE and REPORT’ from year 1, but will only have to start reporting from year 2.


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KEPSA MEMBERS 2016

CORPORATES CONTD’ 1

AAR Insurance Kenya Limited

48

Engen Kenya Limited

2

Actis Africa Limited

49

English Press Limited

3

Advantage Financial S.A

50

Eveready East Africa Limited

4

AEA Limited (Avery)

51

Express Communications Company Limited

5

Africa Practice East Africa Limited

52

Financial & Property Consultants Limited

6

African Banking Corporation

53

Fincom Technologies

7

Agri Experience

54

Flowmatics Limited

8

AIG Kenya Limited

55

Freight Forwarders Kenya Limited

9

Airtel Networks Kenya Limited

56

Frontier Investment Management Africa Limited

11

Akiira Geothermal Limited

57

Fusion Capital Limited

12

Aldwych Africa Development Limited

58

G4S Kenya Limited

13

Apec Consortium Limited

59

Gapco Kenya Limited

14

Ascent Capital Advisory Services

60

GE East Africa Services Limited

15

Ashleys Kenya Limited

61

General Motors East Africa Limited

16

Atlas Copco Eastern Africa Limited

62

Generics Africa Limited

17

Avenue Healthcare Limited

63

Geonet Communications Limited

18

Bamburi Cement Limited

64

Gertrude's Children's Hospital

19

Base Titanium Limited

65

Good Testimony Junior School Limited

20

BAT Kenya Limited

66

Google Kenya

21

Bidco Africa Limited

67

Grant Thornton Consulting Limited

22

Bio Food Products Limited

68

Haco Tiger Brands E.A. Limited

23

Biogas Company of Kilifi Limited

69

Heva Fund Limited

24

Blue Sky Films EPZ Limited

70

Hewlett Packard

26

Bollore Africa Logistic Kenya Limited

71

Hospitality Systems Consultants

27

Brands and Beyond Limited

72

Housing Finance Company Limited

28

Bright Vision Media Limited

73

Human Capital Synergies Africa Limited

29

Brookside Dairy Limited

74

IBM East Africa Limited

30

Centum Investment Company Limited

75

ikapamedia East Africa Limited

31

CFC Stanbic Bank

76

Infinity Industrial Park Limited

32

Chase Bank Limited

77

Interconsult Engineers Limited

33

Citibank N.A

78

Interconsumer Products Limited

34

Civicon Limited

79

International School of Advertising

35

Coca Cola East & Central Africa

80

Ipsos Limited

36

Control Risks East Africa Limited

81

iWay Africa Kenya Limited

37

Cooper K-Brands Limited

82

Jamii Telecommunications Limited

38

CPF Financial Services Limited

83

Jungle Group Holdings Limited

39

Davis & Shirtliff Limited

84

Kaluworks Limited

40

Deacons Kenya Limited

85

Kenergy Renewables Limited

41

Deloitte Limited

86

Kengas Link Limited

42

Dow Chemical East Africa

87

Kenwest Cables Limited

43

Dynamic People Consulting Limited

88

Kenya Bus Service Management Limited

44

Eagle Africa Insurance Brokers Limited

89

Kenya Kazi Services Limited

45

East African Breweries Limited

90

Kenya Markets Trust

46

East African Cables Limited

91

Kenya Power & Lighting Company Limited

47

Eastern Produce Kenya Limited

92

Kenya Tea Development Agency

70 I PRIVATE SECTOR I APRIL - JUNE 2016


The Organizer MICE brings the World together in Planning, Managing, Organizing and Coordinating the operational aspects for:

CONTACT Ibrahim Karanja (Sales Executive) Mobile: +254 726 28 91 99 E-mail: info@theorganizermice.com

Why hustle for no

reason, leave the hustle

to us we know it better!!


KEPSA MEMBERS 2016

CORPORATES 93

Kenya Toner & Ink Suppliers Limited

139

ResponsAbility Africa Limited

94

Kenyatta International Convention Centre

140

Riverside Place Limited

95

Keroche Breweries Limited

141

RSM Eastern Africa

96

Kinangop Wind Park Limited

142

Safari Park Hotel & Casino

97

KPMG Kenya

143

Safaricom Limited

98

Kuguru Food Complex Limited

144

Sameer Africa Limited

99

KUSCCO Limited

145

SAP Africa

100

Kwale International Sugar Company Limited

146

Sarova Hotels Limited

102

Lantech (Africa) Limited

147

Sasini Limited

103

Lee Construction Limited

148

Savannah Cement Limited

104

Liaison Group (I.B) Limited

149

Scania East Africa Limited

105

Liquid Telecommunications Kenya Limited

150

Scion Real Estate Limited

106

Lukenya Schools - Boys

151

Senaca East Africa Limited

107

Mabati Rolling Mills Limited

152

Seven Seas Technologies Limited

108

Maersk Kenya Limited

153

SGS Kenya Limited

109

Marubeni Corporation

154

Simba Corporation Limited

110

Mckinsey & Company

155

Sodexo Pass International

111

MTN Business (Kenya) Limited

156

SP Advisory

112

Multichoice Kenya Limited

157

Steam Plant Limited

113

Mwongozo East Africa Limited

158

Stima Sacco Society Limited

114

Nairobi Bottlers Limited

159

Sunesis Consulting Limited

115

NIC Bank Limited

160

Suraya Property Group

116

Nicky Consultants Limited

161

Synergy Industrial Credit Limited

117

Oakar Services Limited

162

Tata chemicals Magadi

118

OBG Company Limited

163

The Cooper Motor Corporation

119

Octagon Pension Services Limited

164

The Copy Cat Limited

120

Oil & Energy Services Limited

165

The Riara Group of Schools Limited

121

Ol Pejeta Ranching Limited

166

The Standard Group Limited

122

Optiven Limited

167

The Wrigley Company (E.A.) Limited

123

Oracle Corporation

168

Toyota Kenya Limited

124

Osho Chemical Industries Limited

169

Transcend Media Group Limited

125

Oxford University Press East Africa Limited

170

Transcentury Limited

126

Pamoja Capital Limited

171

Tullow Oil

127

PDM Kenya Limited

172

Tusker Mattresses Limited

128

Pewin Cabs Limited

173

Twiga Chemicals Industries Limited

129

PKF Kenya

174

UAP Insurance Company Limited

130

PricewaterhouseCoopers Limited

175

Ultravetis East Africa Limited

131

PrideGroup Kenya

176

Verve K.O. Limited

132

Prime Bank Limited

177

Vestas Deutschland GmbH

133

Procter & Gamble

178

Virgin Tours Limited

134

Qalaa Holdings

179

VISA International Service Association

135

Quest Holdings Limited

180

Vivo Energy Kenya Limited

136

Questworks Limited

181

WildlifeDirect Kenya Limited

137

Rescom Development Group Limited

138

Resolution Health Limited

72 I PRIVATE SECTOR I APRIL - JUNE 2016


WWW.KATOKENYA.ORG

Mount Kilimanjaro & Mount Kenya African Safari & Great Migration The Great Rift Valley National Parks & Reserves

“The driving force behind Kenya’s Tourism” KATO Place, ( Opp. Shelter Afrique Centre ) Upper Hill P.O. Box 48461 - 00100, Nairobi, Kenya Dropping Zone No.174, Biashara St. Revlon Plaza


excl. VAT

offer valid while stocks lasts. Terms and conditions apply. E&O.

Issue 9  

THEME: Creative Industry

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