Page 1

TRADE

JOBS

JULY 2015 - SEPTEMBER 2015

THE FRONTIERS OF GOVERNANCE IN KENYA JOBS CREATE NEW JOBS NOW! THE NEW MANTRA!

MANAGEMENT

ISSUE 6

GOVERNANCE

TRADE KENYA’S HARBOURS SET TO TRANSFORM INTO EAST AND CENTRAL AFRICA’S TRADE HUB

AGOA EXTENSION TO YEAR 2025: A GREAT OPPORTUNITY FOR KENYA

Governance

A Matter of National Values

Kenya Kshs370 Uganda Ushs 13,800 Tanzania Tshs 8,300 Rwanda RWF 2,800 South Africa R40 Angola AOA520 Algeria DA395 Egypt EPounds 32 Tunisia Dinar 8.50 Ethiopia R90 Gambia Da165 Ghana GH114,000 Nigeria N840 Morocco Dh 48 Mauritius MR 165


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JULY - SEPTEMBER 2015

CONTENTS AGOA

12 I AGOA Extension to 2025 16 I Kenya–U.S Trade Market GOVERNANCE

24 I

Reinvention of Insecurity & Sickness of Governance

30 I

Integrity Pays

32 I

Frontiers of Governance in Kenya

37 I

Good Governance & Ethics

12 46

TRADE

42 I

Improving Cross Border Trade

47 I

Kenya harbours set to transform into East and Central Africa’s Trade Hub

50 I

Create New Jobs

53 I

INNOVATION: The Key Driver of Prosperity

59 I

The Creative Financing GAP

MAJOR ENGAGEMENTS

KYEP

64 I

Kenya Youth Empowerment Program Cycle 5 intern’s Success Story

70 I

Presidential Roundtable

72 I

Speaker’s Roundtable

72 I

Social Investment Focus Agenda

74 I

Northern Corridor Summit

76 I

KEPSA AGM


FOREWORD A time to act

Kenya continues to attract international attention due to its untapped growth potential in key infrastructure related sectors including; energy, transport, construction, financial services and the emerging mining sector. Over the last six months the country has embarked on various campaigns aimed at improving its global competitiveness as the investment destination of choice. Top on the reform agenda is governance which was a key focus during the fourth presidential roundtable. The cost of vises such as corruption on the economy and on potential investments is too heavy a burden to go unaddressed. In this regard the Private Sector under the leadership of KEPSA has committed itself to the fight against corruption. To do this each and every one of our members will be required to subscribe and uphold a code of ethics and governance. Most of our foreign investors already subscribe to codes of conduct enforced by their respective governments, we therefore urge all companies that have not as yet subscribed to a code of ethics to do so. To facilitate this we as KEPSA are promoting the Business Code of Ethics developed in collaboration with the United Nations Global Compact Network and the Kenya Association of Manufacturers (KAM). In June this year Kenya came in third on the African Development Bank (AfDB) economic development index but ranked eleventh in regard to governance issues. To fully realize the country’s potential both the Public and Private Sectors need to act quickly to tap into the new found interest in the country. For this to become a reality we must all work towards improving investor perceptions while at the same time opening up new opportunities for investment. Top on each investors list of concerns is the cost of doing business, we cannot allow corruption to take root as an additional cost of operating in the country. This untaxable, unethical and disruptive practice must no longer stand. Kenya will in July 2015 host the Global Entrepreneurship Summit (GES) an initiative driven by US President Barack Obama. This is an opportunity for Kenya to put its best foot forward and catch the eye of global investors by showcasing our innovative ICT sector, SMEs and new value chains that can propel Kenya’s economy for decades to come. The GES is our opportunity to bequeath the next generation of entrepreneurs with the platform upon which the realization of Vision 2030 flagship projects shall be realized. It is the platform upon which we can generate the required capital to transform our SMEs into multinationals while at the same time addressing the challenge of poverty through employment and wealth creation. This in deed the time to act. Put your best foot forward.

Carole Kariuki, HSC, MBS Chief Executive Officer Kenya Private Sector Alliance

MANAGING DIRECTOR: Preston Muhando SENIOR EDITOR: Pablo Neruda COMMERCIAL & RETAIL TEAM: Mike K. Sabari, Karen Ngaruiya ADVERTISING MANAGER: Fredrick Odenyo PRODUCTION MANAGER: Alvin Omuga HEAD OF DESIGN: Eliud Maumo PHOTOGRAPHER: Ochieng’ Maumo 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 www.privatesectoreastafrica.com Copyright 2015 Brand Effects EA I 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.


c

KEPSA BOARD OF DIRECTORS Amb. Dennis Awori

Chairman

Laila Macharia (Vice Chair)

Judicial and professional matters

Vimal Shah (Ex-officio)

Regional Integration

Rita Kavashe

Infrastructure

Pradeep Paurana

Trade and Investment

James Mwangi

Vision 2030 and Entrepreneurship

Kiprono Kittony

Economic Diplomacy and Media

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

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 I Fax: +254 20 2730374 Cell: +254 720 340940 I info@kepsa.or.ke www.kepsa.or.ke Kenya Private Sector Alliance (KEPSA)

@KEPSA_KENYA

Amb. Dennis Awori Chairman, Kenya Private Sector Alliance


BUDGET FOCUS

PUBLIC FINANCE ENVIRONMENT WATER AND NATURAL RESOURCES

The private sector got reprieve due to the removal of Capital Gains Tax which had previously been set at 5% arising from sale of shares and other securities. The tax was replaced with the introduction of 0.3 percent withholding tax on the transaction value of the shares.

SECURITY Treasury has allocated KSh 29.5 billion for water supply and sanitation, KSh 2.1 billion for water storage and flood control, and KSh 12.6 billion for environmental protection, conservation and management for the year 2015/2016. Meanwhile parliament has approved the Environment Management and coordination Act Amendment Bill which is awaiting presidential assent. The legislation will enable both national and county governments hold polluters responsible for their actions and hold them financially liable.

LAND HOUSING AND URBAN DEVELOPMENT Treasury has allocated KSh 3.5 billion for Land titling. The Government has prioritized the development of industrial parks as part of its industriazation strategy and Vision 2030. To encourage small and medium size enterprises to participate in the development of infrastructure facilities, treasury has proposed to exempt from VAT, taxable goods and services for use in the construction of infrastructure works in industrial and recreational parks of 100 acres or more. This will incentivise the creation of industrial parks creating employment.

WOMEN EMPOWERMENT AND VULNERABLE GROUPS

In response to the rise in insecurity, to bolster national security and increase counter terrorism capabilities, Treasury allocated security organs KSh 223.9 billion, which is KSh 27.1 billion higher than FY 2014/2015. Of this, KSh 112.5 billion has been allocated to Defence and National Intelligence Service and KSh 102.4 billion to the State Department of Interior. The allocations include Ksh. 7.7 billion to lease motor vehicles, Ksh. 1.7 billion allocated for a medical insurance scheme and Ksh. 1.3 billion towards police housing. A total of 15,000 additional security personnel are set to be recruited.

ENERGY

Treasury increased allocations towards the women enterprise fund to Ksh. 500 Million, Ksh 2.1 billion for Affirmative Action, with an additional allocation of Ksh, 1.45 billion to be allocate to the Uwezo Fund. To track progress of Access to Government Procurement Opportunities (AGPO), all Accounting Officers are required to submit quarterly compliance reports to the National Treasury in regard to the 30 percent preferential allocation to Youth Women and Persons with Disability.

8 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

The government continues to support the development and use of clean energy particularly for Kenyans in the rural areas and the poor urban through exemption of VAT on plastic bag biogas digesters. This will further enhance the countryÂ’s green energy agenda for which Kenya has already gained global recognition as a leader in green energy development with an 80% green energy mix.


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BUDGET FOCUS

INDUSTRIALIZATION DEVOLUTION AND SERVICE DELIVERY The national government increased allocation to county governments to Ksh 287 billion. To ease access to government services at county level an additional 23 One-Stop-Shop Service centres (Huduma Centres) are to be rolled out to make it easier for investors to set up businesses. The government will also under take the digitalisation of at least 100 inbound payment service transactions by end of 2015 in order to hasten service delivery and reduce transaction cost through the e-citizen platform. Over 400,000 Kenyans are registered on the e-citizen platform with 8000 transactions having been undertaken as at June 2015.

The Government allocated Ksh. 3B towards promotion of industrial development in the country. This will have a significant impact on the growth of SMEs which currently account for over 70% of the country’s job opportunities with a 40% contribution to GDP. This will further be promoted by the ‘Buy Kenya, Build Kenya’ policy.

HEALTH SECTOR

EDUCATION

The Ministry of Education has announced it will be conducting a comprehensive curriculum review in the year 2015/2016, delivering a new curriculum for primary and secondary education by the end of June, 2016. The review will be carried out in partnership with UNICEF, which will be providing financial and technical support for the project. The last time a comprehensive curriculum reform was carried out was in

AGRICULTURE To promote agricultural transformation from rain fed agriculture the government committed to introduce a raft of tax incentives for new investment in water facilities and small holder irrigation equipment. The Agriculture Policy which is expected to streamline operations in the agricultural value chains is also in its final stages of development.

10 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

1985 resulting in the current 8.4.4 system. To increase quality and access to tertiary institutions, treasury has allocated KSh 3.0 billion for technical training institutes, KSh 52.9 billion for University Education and KSh 7.5 billion for Higher Education Loans Board. Additionally, KSh 2.3 billion has been allocated for recruiting an additional 5,000 teachers, and KSh 2.2 billion for promotion of teachers.

Health is a devolved function and in order to provide for progressive, responsive, sustainable, technologicallydriven and client-centred health system, counties were given a conditional allocation of Ksh. 27.3 billion for the upgrade of healthcare infrastructure and modernisation of equipment. An additional Ksh. 300 million was allocated for the enhancement of healthcare manpower for the creation of an internship program for doctors, clinical officers and nurses.

YOUTH EMPOWERMENT Treasury allocated Ksh. 300 million shillings to the Youth Enterprise Ksh. 25 billion towards the Youth employment and re-engineering of the National Youth Service (NYS) which is to recruit an additional 10,935 youths bring. To encourage employers to mentor and train graduates treasury proposed the Introduction of a tax rebate scheme for employers who shall engage and train at least ten fresh graduates for a period of six to twelve months


BUDGET FOCUS

SPORTS CULTURE AND ARTS

TOURISM Ksh. 5.2 billion shillings has been allocated to the tourism industry to go towards the recovery of the sector under the tourism recovery strategy. The sector also received a boost after the UK government lifted travel advisories to its nationals on Mombasa County, Kilifi County up to and including Watamu. The lifting of the advisories is expected to give a major boost to the tourism sector by opening up its traditional tourism source markets in the West. The sector is expected to spend more money on the development of new markets in China and the far East while at the same time increasing its spend on advertising Kenya as the tourism destination of choice in its traditional markets.

Ksh 1.8 billion has been allocated for the expansion and modernization of sports facilities to reposition Kenya as a regional sports hub. The projects include construction of a major Stadium in each of the following cities: Nairobi; Mombasa; and Eldoret. Ksh 1.1 billion has been allocated to cultural programmes. To spur and promote the local film industry and transform Kenya into a favourable filming destination, treasury has exempted foreign film producers, actors and crew members from withholding tax. Similarly, goods n services purchased for use in film will be exempt from VAT tax. Treasury also proposes setting up a fund for rebating of expenses by producers in the film industry.

INFRASTRUCTURE

ICT Treasury allocated Ksh. 250 Million to finance the digital talent programme. The programme will go a long way in bridging capacity gaps within the government agencies. Towards fostering growth of the technology industry in Kenya 800 Million was allocated towards development of the Konza Technoolis Konza.

Local Private Sector participation in the government projects received a boost following a directive to have all government agencies strictly ensure that a minimum of 40 percent local content requirement is adhered to by the winning tenderers at the procurement and supply stage. This is expected to spur growth of the economy as well as safeguard the country from cheap imports.

Through persistent advocacy spearheaded by KEPSA, through the SGR private sector consortium, local cement manufacturers who meet the required standards have been allowed 100 percent supply to the SGR. This is to be replicated in supply of steel and electronic cables.

Northern Corridor member states signed an MoU on Cyber Security to facilitate establishment of the Northern Corridor Cyber Incident Response Team (NC-CIRT), establishment of a Northern Corridor secure and trusted e-transaction mechanism, creation of Cyber Security Awareness, support harmonization of the Information Security Legal Framework, Protection of Shared Critical ICT Infrastructure and organize Cyber Security Exercise Drills.

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 11


AGOA

Africa

AGOA EXTENSION TO YEAR 2025: A GREAT OPPORTUNITY FOR KENYA

12 I PRIVATE SECTOR I JULY - SEPTEMBER 2015


AGOA

The Preferential Market Access to US granted to Kenya and other African Countries through the Africa Growth and Opportunity Act (AGOA) has played a critical role in spurring Kenya's exports to the US. AGOA created an Apparel Industry in Kenya that would not have been achieved without preferential access to the US market.

By Jaswinder Bedi,

A

GOA has been described as the cornerstone of US trade and economic policy in relation to Africa. During its first five years (20002004), AGOA had a transformative effect on Africa. This can be seen most clearly in the textile sector, where an estimated 300,000 new jobs and perhaps twice that number of indirect jobs in support sectors were created. US apparel imports from Africa more than doubled between 2000 and 2004. The lives of an estimated five to 10 million Africans were improved by AGOA as it helped build the regional value chain. All these accomplishments were at essentially zero cost to the US Government, as the private sector responded to the duty-free incentives created by AGOA to invest and support the economic development of Africa by creating new jobs. But AGOA’s success began to fade with the expiration of the Multi-Fibre Arrangement system of quotas on January 1, 2005, pursuant to the Uruguay Round Agreement on Textiles and Clothing. Literally, scores of mostly Chinese-owned apparel factories closed across Africa, and were reopened in China, Bangladesh, Cambodia and Vietnam. There was a wholesale transfer of more than 100,000 jobs from Africa to Asia. By 2009, US apparel imports from Africa had fallen by nearly half (-48 per cent), while at the same time apparel imports from Asia shot up. While China by itself accounted for the lion’s share of the job losses in the African textile and apparel sector, three other Asian producers also enjoyed tremendous growth at the expense of Africa: Bangladesh up 71 per cent in 2009 over 2004, Cambodia up 31 per cent and Vietnam up 98 per cent. By 2009, these three producers were exporting more than 10 times the

SUB- SAHARAN AFRICA Imports

( $ Million )

2000

$ 748

2004

$ 1, 757

2009

$ 922

% CHANGE 2004 – 2009 -

48%

BANGLADESH Imports

( $ Million )

2000

$ 2,116

2004

$ 1, 998

2009

$ 3, 410

% CHANGE 2004 – 2009 +

71%

CAMBODIA Imports

( $ Million )

2000

$ 808

2004

$ 1, 429

2009

$ 1, 871

% CHANGE 2004 – 2009 +

31%

VIETNAM Imports

( $ Million )

2000

$ 47

2004

$ 2, 562

2009

$ 5,058

% CHANGE 2004 – 2009 +

98%

Source: US Department of Commerce, Office of Textiles and Apparel

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 13


AGOA

apply to all AGOA beneficiaries. This includes access to third country yarns and fabric and also to apply simplified rules of origin for all to foster regional integration.

volume of apparel as the whole of Africa combined. The Role of African Cotton and Textile Industries Federation

4. Need for the US administration to negotiate regional FTAs with AGOA beneficiaries as part of an effort to transition the US-Africa trade relationship from unilateral preferences to reciprocal free trade.

ACTIF has been on the forefront of engaging the US Government and related agencies on behalf of the private sector to seek the sustainability of AGOA. In response to various initiatives undertaken by ACTIF and African governments to enhance the competitiveness of the continent’s textile and apparel industry, by 2010 US imports from Africa begun to stabilize. There was reason for optimism that US apparel buyers were beginning to return to Africa. The recovery continued through 2011, when US imports from Africa went up by 14 per cent measured by value and 1 per cent by volume. However, a further dip was experienced following the uncertainty before the extension of third country fabric provision from 2012 to 2015. ACTIF has consistently maintained a strong position on the sustainability of AGOA, outlined in four key messages. 1. AGOA needed to be extended and for a sustainably long period - at least 10 years - in order to save an estimated 350,000 jobs dependent on AGOA. Previous short term renewals of AGOA always served to deter textile investors as they were never assured of sufficient period to amortise their major investments. 2. AGOA third country provision needed to be extended for the full term of AGOA renewal, considering that more than 95 per cent of the apparel exports under AGOA are dependent on third country yarns and fabric from Asia, primarily China. 3. The same Terms of Access should

14 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

The Opportunity for Kenya

AGOA, Kenya needs to seize the opportunity to leverage on its strength in the apparel manufacturing to attract additional investment

AGOA’s impact on Kenya’s exports has been nothing short of impressive. Growing at an average of two per cent a year before AGOA’s passage, Kenya’s exports to the US exploded to an annual growth level of 28 per cent until 2005, when it was significantly interrupted, following the expiry of the Multi Fibre Arrangement systems quota as well the global economic crisis of 2009. With the long term renewal of AGOA, Kenya needs to seize the opportunity to leverage on its strength in the apparel manufacturing to attract additional investment. It also needs to explore investment in textile manufacturing. This will require a strategic and aggressive approach, including overall improvement of the policy and business environment as well as proactive participation in leading textile and apparel events like Origin Africa (www.originafrica.org) in order engage with buyers and investors and woo them to the country.


AGOA

KENYA REMAINS A SIGNIFICANT PLAYER IN THE TEXTILE AND APPAREL EXPORTS TO US, WITH OVER 40,000 DIRECT JOBS CREATED.

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COUNTRY

2013 EXPORTS ($ million)

Botswana

$ 5.85

$ 9.46

Ethiopia

$ 10.34

$ 12.03

Kenya

$ 308.56

$ 378.91

Lesotho

$ 321.27

$ 290.30

Madagascar

$ 20.26

$ 18.66

Malawi

$ 8.41

Mauritius

$ 191.18

$ 4.08 $ 223.06

South Africa

$ 5.83

$ 6.09

Swaziland

$ 49.74

$ 54.98

Tanzania

$ 10.38

$ 17.48

Rest of Africa

$ 4.75

TOTAL

$ 936.64

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2014 EXPORTS ($ million)

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AGOA

AGOA

Kenya – United States TRADE MARKET By Victor Ogalo

16 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

>>


AGOA

Let us TRADE MORE than in textiles WITH THE U.S THE AGOA PROGRAM –WHAT IS IT?

T

he African Growth and Opportunity Act (AGOA) was signed into law by President Bill Clinton on May 18, 2000 as a preferential trade program meant to facilitate trade between the US and Sub-Saharan Africa (SSA) countries. Its main objectives are to promote political and economic reforms within the SSA sub continent including fostering market liberalisation and integration of SSA into regional and global value chains as a vehicle to promoting investments and reducing poverty on the African continent. AGOA was designed as a non-reciprocal and unilateral preferential trade program. It is therefore a one-way tariff preferential program in which the United States provides duty-free and quota-free (DFQF) access into its market for the qualifying exports from eligible SSA countries without requiring the SSA countries to reciprocate the treatment to the US exports into the SSA countries. Kenya is among 39 of the 49 SSA countries that are currently trading through AGOA. Of the SSA products that qualify for this preferential treatment, apparel products are seen to bear significant economic importance for many SSA countries including Kenya, partly because of the

special provisions known as “ThirdCountry Fabric Provision”. The Special Provision allows the qualifying SSA countries such as Kenya to import third country yarn and fabric to make apparel to export to U.S. on DFQF terms. The importance attached to this provision comes from the fact that apparel production is seen as a manufacturing sector that faces relatively low technological and investment barriers to entry yet it has mass-job creation potential for the relatively low-skilled labor force. Both aspects of low entry barriers and use of low-skilled labour are of particular relevance to many of what can be categorized as newly industrializing African countries. In addition to the DFQF preferential trade provisions, the AGOA Act establishes an annual AGOA Forum bringing together African government officials and the U.S. to discuss trade and economic issues and how to better channel the U.S. development assistance toward SSA countries. In order to qualify both for the tariff preferences and the development assistance, countries must be assessed as having met specific eligibility conditions.

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 17


AGOA

Since its enactment, the US Congress has amended AGOA five times, making some technical changes and renewing its trade preferences. The Act has been reviewed five times since 2002 and its expiry pushed from an initial date of 2008 to September 30, 2015. Bills to further renew the preference program beyond 2015 were introduced to the Congress and Senate in April, 2015. The Bill was passed by both Houses and the President signed into law the renewal of AGOA, extending the preference program for another 10 years in what has become known as AGOA Extension and Enhancement Act, 2015 (AGOA IV). KENYA’S DISMAL TRADE WITH THE US SHOULD BE IMPROVED The US Harmonised Tariff Schedule (HTS) contains a list of over 10,500 tariff lines that can be imported into the country through different market access regimes. There are three market regime codes (Code A, A+ and D) with some products overlapping in the various codes but the important one is Code D which contains 10,400 product lines for AGOA eligible nations. Some 128 tariff lines are excluded from any preferential trade regime because they are considered as import-sensitive. These are selected goods in different sectors (mostly agricultural) whose importation into the US has been protected through high ad valorem tariffs because they could disrupt local industries and jobs in the US. Under the arrangement, Kenya is eligible to export to US about 6,500 products on DFQF access basis.

THREE MARKET REGIME CODES (CODE A, A+ AND D) WITH PRODUCTS Over 10,500 Products

• Total tariff lines for US goods imports as per the US Harmonized Tariff Schedule (HTS)

7,200 Products

• Code A denominating products that benefit from GSP preference; • Contains 3,800 products that enjoy zero MFN tariff allowed to all WTO members • Contains additional 3,400 products for all GSP eliginle countries

8,600 Products

• Code A+ denominating GSP products for Least-developed cou tries (LDCs) • Contains all the Code A products. • Plus a further 1,400 products benefitting all GSP eligible LDCs.

10,400 Products Some 128 Products

Code D denominating AGOA GSP eligible products. Contains all Code A+ products plus another 1,800 tariff lines duty-free. • Import Sensitive products excluded by the US from any preference regimes attract very high ad valorem tariff rates

KENYA – US BILATERAL TRADE ( $ MILLIONS ) Since coming into force, AGOA has led to a steady rise in Kenyan exports to the US between 2001 and 2005-06 when it started to decline and only picked up from 2011 800 600 400 200 0

2000

2001

2002

2003 2004 2005

2006 2007

2008 2009

2010

2011

2012

2013

-200 -400 -600

Exports

Imports

Trade Balance

2 per. move Avg. (Imports) 2 per. move Avg. (Exports)

• Kenya registered positive balance of trade with the US only in 2003, but the trade balance has been worsening staedily since 2010 in spite of not hving an FTA with US.

18 I PRIVATE SECTOR I JULY - SEPTEMBER 2015


AGOA

NEED TO SCALE UP DEVELOPMENTAL IMPACTS OF AGOA Although the direct and indirect impact of AGOA on FDI are still hard to quantify, the program’s trade benefits and eligibility criteria appear to have motivated Kenya to improve its business and investment climate to take advantage of AGOA, a factor that has positively impacted on FDI inflows registered in the textile and apparel sector through export processing Zones (EPZs). Employment in Kenya’s EPZs rose to 37,758 workers in 2014 from 32,932 in 2013 and 24,114 in 2010. There has also been significant rise in garment manufacturing industries from 10 in 2000 to 40 in 2003, but this fell to 19 enterprises in 2008, in part because of the relocation of foreign companies out of Kenya with corresponding job losses amounting to 5 per cent

better route and Kenya can leverage on its experience in the ACP-EU EPA negotiations; improving investment impact of AGOA by encouraging the US to steer investment under AGOA by offering tax incentives to US firms to invest in Kenya; and, improving the impact on farmers and SMEs through capacity building programs, sensitization of the farmers and SMEs on the existing AGOA opportunities that they can exploit, and, finding home-grown mechanisms to facilitate their access to funds will help such firms to participate in products that are eligible in AGOA market. Other measures could include improving the integration of Kenya into regional and global values chains; improving business climate and investment environment in Kenya; and, locking in policy reforms with AGOA. ROLE OF PRIVATE SECTOR IN THE POST-2015 AGOA

% OF TOTAL SSA AGOA EXPORTS IN 2013 Kenya’s US exorts in 2013 consituted 7% of all SSA AGOA exports, making it the 3rd largest AGOA exporter

4.3

All Other Angola

2

Congo Rep.

3

Mauritius

3.9

Lesotho

6.7 7

Kenya Nigeria

19.6

South Africa

53.6 0

10

20

30

40

50

60

% OF TOTAL SSA AGOA EXPORTS ( 2001 – 2013 ) However, South Africa and Nigeria still control 73% of all SSA – US non–crude petroleum exports 120 100

On the other hand, Kenya has registered low participation in the global supply chain downstream activities, yet, one area of success has been in agro-processing (mainly production of vegetables and vegetable agro-processing and floriculture) and manufacturing (mainly apparel production). It is therefore instructive for Kenya to find measures to improve the developmental potential of the post2015 AGOA. Such efforts should include integrating a performance monitoring mechanism within Kenya’s AGOA Strategy; improving the products scope of AGOA by requesting the US to allocate quota provisions for the protected product lines of interest to Kenya; improving competitiveness to achieve lower cost of production and higher quality standards of the export goods; improving predictability of the trade regime and in this case pursuing a negotiated FTA with US could be a

Market access is not sufficient and it is important that the post-2015 AGOA must seek to complement market access concessions with targeted programmes aimed at economic transformation, building productivity capacities and the development of trade infrastructures. It is also important to seek technical assistance to build local institutional capacities to ensure Kenyan producers comply with certain non-trade barriers such as the American animal and plant health standards.

80 60 40 20 0 ‘01

‘05

‘08

‘09

‘10

‘11

‘12

‘13

All Other

Angola

Congo Rep.

Mauritius

Lesotho

Kenya

Nigeria

South Africa

Finally, the private sector has a huge role to ensure AGOA is fully utilised. The private sector represents a special group of stakeholders in the sense that they are the people who actually carryout business; and, they possess one of the most powerful voices if channelled in the right direction.

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 19


AGOA

KEY HINDRANCES FACTORS TO MAXIMIZATION OF AGOA HAVE BEEN

There is need for private sector to pursue partnerships with the government, civil society, and research institutions to push the country’s trade and development agenda beyond AGOA to include also RTAs such as EPAs and other bilateral trade and investment agreements so that these can be meaningful tools for wealth and employment creation and eventual development of the country.

There’s need for them to pursue partnerships with the government, civil society, and research institutions to push the country’s trade and development agenda beyond AGOA to include also RTAs such as EPAs and other bilateral trade and investment agreements so that these can be meaningful tools for wealth and employment creation and eventual development of the country. There is need for them to raise their ante by enhancing their participation in the Private Sector segment of the annual AGOA Forum. The onus is on the private sector to work together with government and civil society on trade policy advocacy to ensure Kenya moves away from being producers of raw materials to high-end value addition work that can spur mass job creation and integrate the country more effectively into the global value chains.

20 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

• UNILATERALISM OF THE PROGRAM given that it is at the discretion of US and it is non-negotiable. This means it suffers from unpredictability and sustainability. Potential investors consider AGOA as a short-lived initiative yet most investments require 8-10 years to be established before they can start to make any positive returns. • UNCERTAINTY OF THE 3RD COUNTRY FABRIC PROVISION RENEWAL is also an issue considering, for instance, that 95 percent of Kenya’s apparel and textile products are dependent on this provision, which provision is often renewed every 2 to 3 years, resulting in major uncertainties to investors and sometimes this has led to significant loss of export orders and consequently, unemployment. • THE PREROGATIVE THAT IS SOLELY VESTED ON THE US PRESIDENT TO DESIGNATE SSA COUNTRIES’ eligibility to AGOA has also been an

issue of concern and adds to the unpredictability concerns around the AGOA initiative. There have been cases where some beneficiary countries such as Ivory Coast and Sudan have in the past lost their eligibility on political grounds. • HIGHER TRANSPORTATION COSTS TO THE U.S. MARKET has also been a key factor given the absence of direct flights or sea transport to the US thereby adding to the cost of shipment of products such as cut flowers and apparel among others. • INADEQUATE WELL-DEVELOPED INFRASTRUCTURE, appropriate information and communication technology, post-harvest handling facilities, cold chain facilities, power, irrigation, water and sanitation, poor road and railway networks have also limited the supply capability of Kenya to exploit potential of AGOA benefits.


AGOA

OVER 70% OF KENYAN EXPORT TO US ARE AGOA PRODUCTS, MAKING KENYA HIGHLY AGOA-DEPENDENT Kenya’ utilization rate of AGOA is impressive within SSA as a whole when non-crude petroleum products are considered for 2013 data

TOP EXPORTS IN 2013 Apparel ( Knit & Woven )

$308 million

Spices, Coffee & Tea

$39 million

Edible Nuts ( macadamia nuts ) Kenya

Mauritius

Nigeria

South Africa

Tanzania

77%

55.6%

50.2%

30.7%

14.7%

Uganda 0.1%

Rwanda, Less than 0.05%

$24 million Cut flowers

$3 million Fruit & Vegetable Juices

$1 million

• Kenya’s export to U.S would plimmet substantiall. Hence the importance of renewal of AGOA to support Kenya’s continued trade growth with the U.S.

Sporting goods

$1 million

• This high dependence on AGOA could represent vulnerability of Kenya and weak competition point were AGOA to be withdrawn.

THE INSTITUTE OF CERTIFIED PUBLIC SECRETARIES OF KENYA 19TH ANNUAL INTERNATIONAL CONFERENCE AUGUST 19 – 21, 2015

SAROVA WHITESANDS BEACH RESORT & SPA, MOMBASA

THEME:

GOVERNANCE AND LEADERSHIP: TRANSFORMING AFRICA FOR GLOBAL COMPETITIVENESS

The Annual International Conference is a premier event of the Institute. The Conference deals with contemporary issues and affords members an opportunity to network with their fellow professionals. Members can also utilize this opportunity to take their families on holiday as they attend the Annual Conference, hence mixing business with pleasure.

TARGET AUDIENCE

The Conference is open to members and non-members of the Institute. It will be of benefit to Chairpersons of Boards, Board members, Members of County Public Service Boards, Secretaries to the County Public Service Boards, Members of the County Assemblies, Chief Executive Officers, Company Secretaries, Governance Professionals, Management Consultants, Lawyers, Administrators, Accountants, Senior Managers, County and Town Clerks, among others.

CONTINUOUS PROFESSIONAL DEVELOPMENT

The members of the Institute attending all the sessions will get 18 Continuous Professional Development (CPD) credit hours. Members of LSK can transfer the CPD credits and earn CLE points.

REGISTRATION

TUITION FEE PER DELEGATE

The tuition fee per delegate is Kshs. 40,000 for members of the Institute and Kshs. 50,000 for non-members.

TRAVEL AND ACCOMODATION ARRANGEMENTS

The participants are required to make their transport and accommodation arrangements.

PAYMENT OPTIONS

Cheques payable to: Institute of Certified Public Secretaries of Kenya Cash payments can be paid at the ICPSK secretariat or Cash deposit to: A/c Name: Institute of Certified Public Secretaries of Kenya A/c No: 1103151045. A/c Type: Kenya Shillings (Kshs.) Bank: Kenya Commercial Bank, Branch: Capital Hill Branch Branch Address: 69695 Nairobi, SWIFT CODE: KLENX

Please register with the Institute’s Secretariat on Tel: 020-3597840/2, 0734603173, 0770159631 or E-mail: info@icpsk.com. For more information, visit our Website www.icpsk.com.


EAPIC East African Power Industry Conven on

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• • • •

GOVERNANCE

Reinvention of Insecurity Integrity Pays Frontiers of Governance in Kenya Good Governance & Ethics


REINVENTION OF INSECURITY

The Reinvention of Insecurity and the Sickness of Governance? Ever since the September 9/11 attacks in the America, global security has drawn a lot of attention. More than a decade later, the conversation on insecurity has become local.

By Laureen Wesonga

24 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

K

enya faces an unprecedented wave of insecurity mainly but not solely driven by the rise of the Al-Shabaab terrorist group. Historically, north-east Kenya, has been a sore point for successive governments. It was the main theatre of violence during the Shifta war. Coastal Kenya, which has a lovehate relationship with the government in Nairobi has been one of the Al-Shabaab breeding grounds. THREATS Studies distinguish conventional from unconventional warfare. Conventional warfare would be defined as an armed conflict between states. It has rules and which the belligerents can be held accountable to. In an unconventional warfare, any time of weapon is used to fight the enemy. Its players mostly are a state and a non-state. It is an asymmetrical warfare. For simplicity, the terms asymmetrical and unconventional will be used interchangeably for the rest of this article. The violence by groups like Al-Shabaab and Al Hijra against Kenyans is therefore asymmetrical as it threatens the stability


REINVENTION OF INSECURITY

understand national threats. For example, threats to the banking and finance industry in terms of cybercrime become a national security threats by virtue of the fact that perpetrators are targeting few crucial individuals.

of state. The most common appreciation of enemies of the state has been to assume a threat can only be posed by another country. Therefore a non-state actor as an enemy creates contradictions in terms of neutralising the threat. Unlike a state, non-state actors are very mobile and dynamic. They can move from place to place capitalising on the weaknesses of the state to establish their might. All warfare tactics are open to them. Decapitations and self-immolation by the Islamic State in Syria and Iraq are examples of extreme tactics that cannot be applied by a state. This has left the state in a quagmire. Insecurity in Kenya has seen a number of high profile public servants lose their positions. They include an inspectorgeneral of police and a cabinet secretary for interior and national coordination. The country is facing a new kind of warfare that security agencies, seasoned in ways of the old are struggling to adjust and keep up with. This is not good news, considering that security agencies are not supposed to play catch-up with threats but to pre-empt them. To understand the sickness in the security agencies, we need to go back to the basics and examine two things: The definition of threats and the intelligence cycle. DEFINITION OF THREATS In the past, security threats have been narrowly linked with threats against the state, which are military in essence. However, when one shifts the referential object of security from the state to an individual, the threats are increased and magnified. It only makes sense to sum up individual citizen threats if one really wants to

Studies distinguish conventional from unconventional warfare. Conventional warfare would be defined as an armed conflict between states. It has rules and which the belligerents can be held accountable to. In an unconventional warfare, any time of weapon is used to fight the enemy. Its players mostly are a state and a non-state. It is an asymmetrical warfare. For simplicity, the terms asymmetrical and unconventional will be used interchangeably for the rest of this article.

Threats can come from social, environment and economic elements of society in varying proportions. Whenever there is talk of resource conflict or “environmental stress� as put by Paul Collier, these are security threats that fall out of the traditional definition. THE INTELLIGENCE CYCLE The collection of information relating to identification, analysis and neutralisation of threats sums up the meaning of intelligence. The intelligence cycle demands for seamless synchronisation of many parties if threats are to be identified and neutralised. The recent Al-Shabaab attacks have always been followed by a blame-game as every security agency tries to absolve itself and pass the buck to the other. A clear pattern is the admission that intelligence was provided but no action followed. This is not entirely a Kenyan problem. Lack of information sharing by the different security agencies in the US was attributed to the failure to pre-empt the 9/11 attacks. What is clear in these cases is the catastrophic consequence of breaking links in the intelligence cycle. This calls for co-operation between the police and the national intelligence service. Furthermore, having a devolved system of governance demands a co-ordinating mechanism between the national and county governments on security matters. The George Bush II administration developed fusion centres as a solution that necessitated sharing of security information. Kenya tried to replicate this in its National Government and Coordination Act 2013. The Police Act also

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 25


REINVENTION OF INSECURITY

has sections on community policing that should allow for sharing of information. However, the reality is that all the institutions in the world will not necessarily translate into sharing of information. It is not the dearth of institutions but the changing of mindsets that is the problem. To be fair, government security agencies still have colonial hangovers where the

26 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

relationship between them and the public is characterised by fear rather than cooperation. This toxic relationship and its accompanying baggage prevents ease of information sharing. Security sector reforms after the 2007/08 post-election violence attempted to solve this, renaming the police force the police service. However, more needs to be done over and beyond nomenclature. It calls for


REINVENTION OF INSECURITY

a change in practice and perception. SHIFTING POLICY MEASURES There are characteristics of threats facing Kenya that must be noted. First, the enemy is a non-state actor. Unlike fellow states that are beholden to international treaties of war and “softer” obligations to each other, non-state actors answer to no authority. As such, they have the ability to launch a total war on a state with higher flexibility and maneuverability. Therefore, the responding narrative should be equally comprehensive. CRIMINAL JUSTICE SYSTEM Policymakers need to come up with a regulatory framework to address the complexities of asymmetrical warfare. Of great urgency is the procedure for dealing with suspects. Are they subject to police procedures, which means their rights are similar to those of any other criminal? Are they subject to military procedures, which makes them prisoners of war liable to a different set of rules and procedures altogether? Do they deserve a special category of their own?

Government security agencies still have colonial hangovers where the relationship between them and the public is characterised by fear rather than co-operation

Once they go through the criminal justice procedures set out for them, there should be a well thought-out solution for their incarceration .Radicalisation in prisons is a well-known and widely written issue. It is a good reminder though that the conception of ISIS can be traced to mixing radicalised elements with nonradicalised elements in prisons when the US invaded IraQ after 9/11.

to the population in business terms. Like the children of Hamelin, the population will follow the person who plays the most melodious tune. At the centre of asymmetrical warfare is the hearts and minds of the population. To the extent that the state has cordial relations with its population, it edges out the potential for asymmetrical elements to thrive within that space. However, being cordial should be nuanced. It calls for a rethinking of the development agenda of the state, with the government doing its duty to citizens though the provision of state services. GEOGRAPHICAL EXPANSION AND REGIONAL CO-OPERATION Thirdly, by virtue of flexibility and maneuverability, new wars are not restricted by national territorial boundaries. They exploit the vulnerability and fragility of border spaces which allow them to build sanctuaries from where they can withdraw. This has been exploited by Joseph Kony’s Lord’s Resistance Army. The group has operated from Uganda, South Sudan, the Democratic Republic of Congo to the Central African Republic. The last three countries, with relatively weak governments, allowed the group plenty of space with no regulation to sustain itself.

As such, whether special facilities need to be set up or extradition agreements need to be inked for the convicts is another aspect to be addressed.

In more recent times, Al-Shabaab, a Somalia outfit has been carrying out attacks in Kenya with a frequency that suggests it respects no territorial borders. Nigeria’s Boko Haram Insurgents have attempted forays into Cameroon, Chad and Niger.

THE BATTLE FOR HEARTS AND MINDS Policymakers will be wise to appreciate unconventional warfare and its relevance

Internationally, the quick and relentless spread of ISIS across Syria into Iraq has made the Kurds have an uneasy alliance with their national governments – stange

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 27


REINVENTION OF INSECURITY

bedfellows indeed. And of course, there is the thawing of Iran-American relations. The spread of a threat through more than one territorial space shifts makes it a national threat then a regional one. As such, policy interventions need to shift from their national outlook and adopt more regional perspectives. This calls for a radical shift from the normal way of doing things. The belief that security is a public good which is provided by the state inherently assumes that any threats to the state will either be internal - which will be managed by the police - or external which will be dealt by the armed forces. No one envisaged nonstate state actors operating on their own causing mayhem on a regional scale. The good news though, is that there is regional co-operation the world over. The tragedy of most regional blocs is that they are formed on a basis of trade and economics, with politics and security being afterthoughts. This is ironic, considering that the most fundamental reason for the formation of a state, if the social contract is to be believed, was to escape from the hopelessness of the state of nature, in essence a security concern. Therefore, blocs will simply give more attention to security issues in their regions

28 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

because if these are not threatened then all the economic dreams would be built on a flimsy foundation. Due to repeated exposure to the hazards of war, conflict and insecurity, eastern Africa has some promising solutions in place. The countries are keen to operationalise the East African Standby Force with Rwanda and Uganda having pledged troops already. Likewise the international conference of the Great lakes Region, born out of the conflict and strife is preoccupied with security. The Intergovernmental Authority on Development started out as a regional outfit mandated to deal with cross-border rustling. These efforts can only bear fruit if they are supported by member governments. In conclusion, security governance needs a reinvention. The inflexible and archaic governance frameworks need to be overhauled and replaced with responsive and dynamic ones that allow participation by all. Unlike research, which allows for examination of problems way after they have happened, policy formulation demands immediate answers. The insecurity of our time demands nothing less than innovative solutions.


INTEGRITY PAYS

By Vimal Shah @vimalafrica

INTEGRITY PAYS If business has an Achilles heel; then it is that it is run by human beings who from time to time are prone to mischief, shortcuts, greed and so on. IT’S THE HUMAN CONDITION-WE CAN DO NOTHING ABOUT THIS.

W

hen Uhuru Kenyatta was minister for Finance he put the cost of corruption in Kenya at 300 billion shillings annually. If you take that back to 2005 that’s 3 trillion shillings in just ten years and possibly more. Contrast that with the budget read a few weeks ago by Finance secretary Henry Rotich, its value? A mere 2.1 trillion. This is our operating environment; this is the Kenyan condition- we can do something about this.

30 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

Corruption is the number one vice in this country. This is a fact. What is also true is that the private sector is not just a victim but a player right at the heart of the action. If the public sector represents the demand side then the private sector is a part of the supply side. This is why corporate governance is important; not just to the us as the private sector but to the country too. Indeed it is possible to argue that the spread of corruption in this country is to


INTEGRITY PAYS

some extent attributable to the silence of the leadership of the private sector. Our silent disapproval is no longer enough. There are many ways to define corporate governance. I choose to define it as an opportunity for leadership-deliberate and focused direction on the ‘how’ of doing business. It is not enough to define the ‘what’ of your business but also the ‘how.’ It is the latter that will guide your employees, suppliers, associates and everyone who comes into contact with your operations. The ‘what’ of any enterprise is obviousto make money or profits. The ‘how’ defines what a business stands for beyond monetary terms-in both values and behavior-what is acceptable and more importantly what is unacceptable. It defines not just black and white but grey as well so that everyone is clear on the right way to do things is in every situation and particularly the trickiest ones. It goes without saying that these definitions must be codified and disseminated-the easiest way to do this a code of ethics. This is a document that tells the world-integrity matters.

This is because when a business has strong corporate governance mechanisms, it is easier to believe them when they say they can deliver, you can trust them to do their part. An enterprise of good repute can close more deals and at a quicker pace than one of questionable ethics. In my experience (and I am positive this is true for many others) there are more

One of my proudest moments as KEPSA chairman was the signing by many of our members the code of ethics developed in partnership with the UN Global Compact and Kenya Association of Manufacturers at the 4th Presidential Roundtable

One of my proudest moments as KEPSA chairman was the signing by many of our members the code of ethics developed in partnership with the UN Global Compact and Kenya Association of Manufacturers at the 4th Presidential Roundtable in April this year. Just days before the roundtable the President had announced a renewed war on corruption in the country, the signing was an edifying show of support from the private sector. The case for integrity in the private sector is self-evident-integrity pays. There are more ethical businesses and organizations looking to partner with other ethical enterprises than the reverse proposition. Investors will not partner or put their money into enterprises with weak corporate governance structures.

opportunities for businesses that are run with integrity because they are able to build durable relationships grounded on mutual trust. Losing out on these opportunities is a part of the cost of corruption. But we all know the true cost of corruption. We feel it in the economy every day; it is part of our operating environment: in the dilapidated roads that cost too much and break down after a few months; in the insecurity that make us spend on guards and in the investors who back out of deals because they won’t pay bribes. It’s in the delays in procuring building permits and clearance at the ports and the multiple roadblocks designed to facilitate deal making not security. Corruption reduces our competitiveness as an investment destination-which directly affects us in the private sector. I started by noting the human element is a part of business. In order to streamline procurement and reduce if not eliminate avenues and loopholes for temptation it is important to digitize procurement processes, systems and operations. When you reduce the human element in these processes you automatically whittle down the chances of improper behavior. Even the public sector has come to appreciate this distinction and is making a deliberate push to digitize procurement. When an enterprise reaches a certain level of growth, it is not just enough to show what you can do; it is imperative to show how you do it.

Vimal Shah is the C.E.O Bidco Africa and the Chancellor of Jaramogi Odinga Oginga University of Science and Technology and the immediate former chairman of KEPSA.

We have seen in Kenya private sector players struggle with integrity issues; Haco most recently, banks and I am sure other organizations whose cases did not make it to the mainstream media. Businesses exist because customers trust us; when they think that trust is gone or diluted-it’s the beginning of the end.

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 31


FRONTIERS OF GOVERNANCE IN KENYA

FRONTIERS OF GOVERNANCE IN KENYA Dr. Nicholas Letting, the Vice-Chancellor, MUA

32 I PRIVATE SECTOR I JULY - SEPTEMBER 2015


FRONTIERS OF GOVERNANCE IN KENYA

It is very important for all Kenyans to use the available resources carefully to enable as many Kenyans as possible get some kind of employment that would sustain their families. Empowering the larger population through availing opportunities for the young people is the best a country can do to its citizens. Kenya Private Sector Alliance (KEPSA), through the private public partnerships in Kenya have endeavored to address this by providing more opportunities for the young people to access employment, but more needs to be done by embracing the principles of good governance in all spheres of employment.

G The collaborative effort between private, public partnership is believed to possibly results in very effective systems of service delivery to the public, through observance of ethical values in governance.

overnance in Kenya determines who has power, who makes decisions, how other players make their voices heard, how the account of all the above is rendered; and how the application of good governance serves to realize organizational goals. Governance may be complex because it involves multiple players, not a single helmsman. These multiple actors are the establishment’s investors. They articulate their interest which influence how decisions are made; they also take active role in who the decision-makers are and what decisions are taken. Decision-makers therefore, must absorb their input into the decision-making processes. Decision-makers are then accountable to those same investors for the establishment’s output and the process of creating it. Governance is also highly contextual; it is an area where one size does not fit all, it comes in various aspects depending on the establishment’s way of operations. Through various dialogue platforms, KEPSA members have been able to drive Kenya’s economic growth through collective effort in order to attain impact on wealth creation and socio-economic development. KEPSA’s main focus has been policy and legislative advocacy by engaging with all arms of government in addition to other stakeholders, to ensure a stable and favorable environment for doing business. If KEPSA can implement ‘Mwongozo’ Code of Governance, it can quickly be adopted by majority of

Kenyans and this will increase efficiency and accountability in every business that Kenyans engage in. This Code is implemented on a “comply or explain” basis which allows the upcoming organizations to learn from others experiences. Full compliance with the Code is required but in the event of non-compliance, reasons should be given with a detailed and acceptable action plan for achieving full compliance with the code of governance that is anchored on the Constitution of Kenya, 2010. Article 10 of the Constitution establishes national values and principles of governance whereas Article 73 highlights public trust, honor and dignity of public offices. There is need for Kenyans to be sensitized and trained on these articles because the constitution requires that all Kenyans practice personal integrity as indicated on Article 232. The collaborative effort between private, public partnership is believed to possibly results in very effective systems of service delivery to the public, through observance of ethical values in governance. For this to take effect there is need of KEPSA members to exercise the Codes of Ethics and Conduct and cascade it to the County level businesses. As a leader of a knowledge institution, I wish to submit that it is high time the KEPSA members underwent customized

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 33


FRONTIERS OF GOVERNANCE IN KENYA

training on Codes of Ethics & Conduct, and Transformational Leadership to better respond to increasing expectations from ordinary citizens, business leaders and Civil Society. The training will explain a set of values, principles and moral standards that prescribe how a group of people should behave in an organization. It is important to strengthen mechanisms to support ‘professional ethics’ in delivering higher standards of the Code of Governance in reducing corrupt practices and systems of the past in Kenya. The private sector in private public partnerships, should initiate innovative techniques as necessities to institutionalize appropriately proficient result in governance matters. This practice can yield some ultimate ‘ethical culture’ which gives individuals ability to make objective decisions, exercise responsibility, self-discipline, and support for the rule of law. The President His Excellency Uhuru Kenyatta launched the ‘Mwongozo’ Guidelines and Executive Order No. 6 on integrity which requires the new parastatal Executives to make a public declaration on fighting corruption. The private sector needs to follow this order as well. The “corruption eradication” criteria has been renamed “Corruption Eradication / Governance” to accommodate the ‘Mwangozo’ Code of Governance. This explains that a performance indicator named ‘Mwangozo Code of Governance’ has been included and the corruption eradication framework has also been appraised. This goes to further explain why there is need for training starting from the Executives so they can embrace corruption risk assessment, leading them to develop and implement a program to promote and protect whistle blowing and whistle blowers. This clarification would help the workers understand the real-world fact that situations faced by various categories of workers differ in all aspects.

34 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

PRINCIPLES OF GOOD GOVERNANCE Good Governance is grasped when the organization has adopted high standards and applies strict rules of behavior, based on the best corporate practices. As part of this commitment, the Board adheres to good corporate governance by embracing the following principles of Good Governance:

The private sector in private public partnerships, should initiate innovative techniques as necessities to institutionalize appropriately proficient result in governance matters.

1. To observe high standards of ethical and moral behavior 2. To act in the best interest of the organization 3. To remunerate and promote fairly and responsibly; 4. To recognize the legitimate interest of all stakeholders; and 5. To ensure that the organization acts as a good corporate citizen 6. Transparency 7. Accountability 8. Disclosure 9. Integrity 10. Trustworthiness 11. Responsibility 12. Respect for people 13. Prevention of conflict of interest


FRONTIERS OF GOVERNANCE IN KENYA

SUGGESTIONS OF THE DETAILED PLANS FOR ACHIEVING THE INNOVATIVE TECHNIQUES WOULD INCLUDE: 1. Need of sensitizing the workers on the practical know-how to recognize an ethics problem for what it is. 2. Making efforts to explain all the principles the organizations expect the workers to abide by.

strong stand for honesty and against bribery. 4. Creating awareness on the connection between the code of ethics and the core values of an organization, and linking that with the professional roles of the workers.

5. Explaining that codes of Ethics covers broad high-level values such as Integrity, Trustworthiness, Responsibility and Accountability, etc., therefore, illustrating how these values are useful in specific circumstances, will assist the workers appreciate the ethics as guided by the codes.

3. Engaging the workers to develop personal interest in their professional activities that lead them to take a

DR. NICHOLAS LETTING’ is currently the Vice – Chancellor at The Management University of Africa (MUA). MUA was established by KIM in 2011. Dr. Letting’ has over 19 years of work experience in industry and academia in senior positions in the private sector mainly in Capacity Building, Finance, Human Resources and Governance having worked with the British American Tobacco Kenya LTD (BATK) and The Kenya Institute of Management (KIM) for a total of 13 years. Dr. Letting’ is a member of ICPSK, ICPAK, KIM and IHRM. He has been a member of the Institute of Certified Public Secretary of Kenya, ICPS (K) in good standing since 2006. He joined ICPSK Council in May 2011 where he chaired the Institute Innovation, Research and Development Committee for three years. In May 2014, Dr. Letting’ was elected the Chairman of ICPSK Council for two years (2014 – 2016). Dr. Letting’ holds a Doctor of Philosophy (PhD) in Business Administration in Strategic Management, a Master of Business Administration (MBA) in Strategic Management and a Bachelor of Commerce (B.COM) in Marketing. All the degrees are earned from the University of Nairobi, Kenya. Professionally, he is a Certified Public Accountant, CPA (K) and a Certified Public Secretary, CPS (K). He is also a Council member of Kenya Institute of Curriculum Development (KICD) and Chairs Finance Committee. His interests are in Corporate Governance, Performance Excellence, Transformative Leadership and Strategic Management.

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 35


FRONTIERS OF GOVERNANCE IN KENYA

THE MANAGEMENT UNIVERSITY OF AFRICA A critical milestone occurred to The Management University of Africa (MUA) in September 2011, when Kenya Institute of Management (KIM’s) concerted efforts and determination to establish a University were crowned with the award of Letter of Interim Authority (LIA) by the Commission for University Education, granting MUA the mandate to operate as a University. Initially, MUA was founded for the needs of the working professional managers; today, MUA is premier private University providing innovation, leadership and management solutions to industries and communities in Africa and beyond. MUA seeks to produce graduates who are avatars of innovative leadership that will provide solutions to industry and community. MUA has deliberately chosen to create a conducive learning environment where executives discover their inherent skills and capacities in handling governance issues. MUA trains business and community leaders

that will transform Africa.MUA has a list of options that includes a wide portfolio of undergraduate, postgraduate, Executive programmes and Doctorate options that are tailored towards effectively meeting the management needs of the current and future industrial growth on the continent. More courses include Masters in Management and Leadership, Doctor of Philosophy in Management and Leadership. MUA executes the programmes through a two-pronged approach that puts the necessary account on both the practical and experiential dimensions. To set MUA apart in a crowded University market, MUA has introduced courses in Entrepreneurship; it has also embraced logic and thinking course including governance. The Association with Kenya Institute of Management and the experience gathered over the past 60 years in management training, has stood MUA in good stead. MUA uses adjunct faculty from relevant

industry who have experience to add value for students. MUA also has visiting professors who come in, according to a pre-arranged schedule and conduct lectures. The arrangement works well for students who are prepared in advance to take time off their normal duties and attend a shortened lecture, then follow up with assignments and case studies through the internet. The other causes that MUA plan to offer are: Computing and Informatics, Institute of Public Policy, the School of Journalism and Media Studies. The positive feedback MUA gets from the third parties confirms to MUA that it is achieving what it set to do. Employers and institutions that provide internship for MUA students say that there is a marked difference between those trained at MUA and those from other places. MUA students show a lot of commitment in what they do; they perform well and remain committed, consistent and reliable as they exercise integrity.

Enabling Futures, Impacting Progress

ACADEMIC PROGRAMMES Undergraduate Programmes 1. Bachelor of Commerce (B.Com) 2. Bachelor of Management and Leadership (BML) 3. Bachelor of Arts in Development Studies (BDS)

Postgraduate Programmes

Doctor of Philosophy in Management and Leadership Philosophy of the programme 7KH'RFWRURI3KLORVRSK\LQ0DQDJHPHQWDQG Leadership is an inter-disciplinary programme designed for those who intend to advance their careers, to more complex leadership positions in ERWKLQGXVWU\DQGDFDGHPLD

1. Master of Business Administration (MBA) 2. Master of Management and Leadership (MML)

Target Group

Executive Masters Programmes

Minimum Entry Requirements

1. Executive Masters of Business Administration (EMBA) 2. Executive Master of Science in Applied Management & Leadership (EMScAML)

Holder of any other relevant masters’ degree LQ DQ\ RWKHU UHOHYDQW ÀHOG SURYLGHG PHDVXUHV ZLOO EH WDNHQ RU KDYH EHHQ WDNHQ WR UHGUHVV GHÀFLHQFLHV LQ EXVLQHVV DQGRU PDQDJHPHQW and leadership education.

The programme targets master’s degree holders RULWVHTXLYDOHQWDQG3K'KROGHUVLQDQ\RWKHU UHOHYDQWEXVLQHVVGLVFLSOLQHV

Programme Duration

All our Programmes are now available in Distance Learning.

7KH SURJUDPPH VKDOO EH RIIHUHG LQ WKUHH   academic years. A student must complete the doctorate degree within a minimum of three (3) years or a maximum of seven (7) years.

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Good

Governance & Ethics Trajectories in Private Sector


GOOD GOVERNANCE & ETHICS

THE FADS OF ETHICAL QUESTIONS AND GOOD GOVERNANCE SHROUD PRIVATE SECTOR FORA. The scope of two is undeniable in achieving intended goals and objectives. They lie at the heart at which the private sector runs.

By Hamilton Omollo & Nick Magak

38 I PRIVATE SECTOR I JULY - SEPTEMBER 2015


GOOD GOVERNANCE & ETHICS

T

hey denote the rule of law, transparency and accountability. The protection of the rights of investors, productivity and profitability improvement without offending the moral, ethical and regulatory framework in the global completive market milieu is entrenched in good governance and ethics. Despite its high ranking, private sector has not been devoid of scandals, abuse of power and criminal activities. Doing the right things and not doing the right things are the two conundrums that make the difference of performance in the private sector.

and informal rules that regulate the private realm, the arena in which sector interacts to enhance key growth factors and promote effective management, participation and development. Good governance in the private sector is embedded in clarity of vision, plan of action and execution of the plan. The Policy framework and guidelines aids decisions that shape the private sector and development processes or growth of the segment. Acts of self-interest, greed and excess leverage in roles of managers, staff and those in positions are delimited by ethical conduct and participatory governance.

Uphold the right ethical code and conduct coupled with good governance and you excel. Ignore the two and you perish.

Private sectors even though are institutions built on individual or partnership, business formations need not be personalised.

Ethics is the cornerstone of any successful private sector, where its seeds are sown in beds of trust fruiting into thriving sustainability.

Everyone must play a sacred responsibility to deliver and accept criticism without getting unduly overawed or paranoid.

Ethics promotes participation which in turn prevents and controls fraud through shared responsibilities.

Environment of accountability, integrity and responsibility should be cultivated as essential behavioural traits that enhance sectoral equity and sustainable growth.

THESE ARE INGREDIENTS THE SECTOR HAS BUILT ITS CITADEL. Ethics is not alienable from governance. The border of failure and success in private sector is ingrained in governance. Distinguishing features of good governance are full respect for human rights, the rule of law, effective participation, multi-actor partnerships, political pluralism, transparent and accountable processes and institutions, and efficiency and effectiveness, legitimacy, access to knowledge, information and education, workers empowerment, equity, sustainability, attitudes and values that foster responsibility, solidarity and tolerance. Governance is about decision making, formation and stewardship of the formal

Self-reflection and auditing - both internal and external - does not need a cry that reminds one of a coyote when storm is brewing to undertake. They must come from within. One must be reminded that “private� does not mean autonomy of other’s rights and obligations. The sector must be prudent in creating an enabling environment conducive to the enjoyment of rights and exercise of freedom within the limits of universal and egalitarian laws. Freedom and rights, in turn, ingrains reforms and participation purportedly aiming to reduce costs and maximise productivity and thus profitability.

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 39


GOOD GOVERNANCE & ETHICS

Four major themes must be upheld in private sector ethics and governance: Democratic institutions, service delivery, rule of law and anti-corruption. The private sector structure should embrace open, non-bureaucratic, limited red-tapism format that creates room for participation in policy-making and inclusion of groups in major decision making process. Devoid these and you concoct a recipe for disaster that will deform the very face of noble objectives; corruption, lack of morale, mistrust, suspicion, low performance, self-interest and no-care attitude. How can the private sector enhance and uphold ethics and good governance? An enabling and conducive environment and culture that respects human rights, obeys the rule of law, encourages effective participation, multi-actor partnerships, flexibility, transparency and accountability is what is neede. Workers should have access to correct and updated information, regular knowledge upgrade, empowerment, equality and equitable practices. Fair legal frameworks and impartiality not only protect all involved in the sector but also builds confidence and trust in the system. Transparency counters corruption that plunders and diverts resources meant for objectives attainability. Systems should be in place to promote openness and service delivery without bias. The private sector should be on the forefront in pursuing provisions for civil or criminal prosecution of individuals who

conduct unethical acts in the name of the organisations.

People aspire to join organisations that have high ethical values.

All men and women, youth and elderly should be given equal opportunities to improve or maintain their well-being without discrimination.

The private sector is able to attract the best talent. When employees are well taken care of, they too, take good care of their employer.

Equity ensures that everyone in the private sector feels part of their existence and are not excluded from the mainstream segment. For example, even though some institutions in the private sector promote youth participation, experienced, mature, and skilled older persons should be used as mentors.

Investors look for ethics, reputation and social responsibility. Today, more than ever, investors are interested in the ethical climate, efficiency foundation, productivity and profitability capacity.

On that note, a gender based institution should not be sex-autonomous. Men do not exist in isolation and so do women. This is the reality the society and the same should be translated in the private sector. Effectiveness and efficiency should be maintained to produce results that meet needs while making the best use of resources at their disposal. They enhance sustainable use of available natural resources, the protection of the environment, economic growth and availability of amenities and services. The private sector is known for its easy adaptability, identification of opportunities and tapping into them fast enough. An example is the realisation of talents within young people. Many segments have adopted the policy of employing young people with potential. Even though this could be read by some as a costcutting measure since the youth do not have many demands, overall, the benefits outweigh the counter arguments.

IT IS OUR COLLECTIVE RESPONSIBILITY TO ENSURE ETHICAL STANDARDS AND GOOD GOVERNANCE.

40 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

This is not isolated from customer satisfaction. Enduring relationship of mutual respect and repeated purchases or inquiries are signs of good sector. This is achieved by a private sector that adopts ethical practices. When the name of such a sector gains trust and respect, any crisis along the way can be tolerated by the clients as a minor aberration. Ethics and governance are thus the bedrock of an effective private sector. The rest are remedial factors. The two surpass rules and regulations. Their absence will, lead to questionable practices and failures. Trust, must prevail within and outside the private sector. Synergy must mesh vision and mission statements, core values, general principles and code of conduct. Employers must make their workers imbibe the institution through reinforcement of strong values. Employees should reciprocate through excellent maximised performance. Ethics and governance, thus, without much stressing, are unequivocally a must for any progressive private sector. They must be upheld at all costs lest we are humiliated. They are not winds of fate that we can’t control. It is our collective responsibility to ensure ethical standards and good governance.


• • • •

Improving cross border trade East and Central Africa trade hub Create New Jobs Now Innovation : The key driver driver of prosperity • The creative financing GAP

TRADE


IMPROVING CROSS BORDER TRADE

IMPROVING CROSS BORDER TRADE Kenya’s economy has improved remarkably in the last five years, maintaining a robust growth rate. The Gross Domestic Product growth stood at 5.4 per cent in 2014, an improvement over the recorded real GDP growth of 5.1 per cent in 2013 and 4.6 per cent in 2012. GDP growth is projected to reach seven per cent by 2017.

A

fter rebasing in 2014, our $55 billion (Sh1.2 trillion) is ranked the ninth largest in Africa and the fifth largest in Sub-Saharan Africa.

By Carole Kariuki CEO, Kenya Private Sector Alliance

There is global recognition of the reforms taking place in Kenya that point towards a positive economic outlook. According to Bloomberg, Kenya is the third fastest growing economy in a global survey of 57 countries. This ranks Kenya alongside China, India, the Philippines and Indonesia. They are the only economies that will hit a five per cent growth this year. UNCTAD in its World Investment Report 2014 said Kenya was becoming a favoured business hub. Oil and gas exploration, manufacturing and transport are projected lead investment attractions.

42 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

The Fortune Magazine rates Kenya as one of the seven top investment destinations to watch in the emerging markets, ahead of continent giants Nigeria, South Africa and Egypt. Kenya accounts for 40 per cent of the EAC regional GDP and is well linked to these economies in terms of investment flows and trade. The country’s competitiveness index as measured by the World Economic Forum is rated at 3.9 (2014 - 2015), making it the sixth most competitive economy in SubSaharan Africa after Mauritius, South Africa, Rwanda, Botswana and Namibia. Kenya has experienced an influx of Foreign Direct Investments (FDI) inflows i.e a 98 per cent increase from $259 million (Sh25.9 billion) in 2012 to $514 million (Sh51.3 billion) in 2013. This capital primarily went into the oil and gas


IMPROVING CROSS BORDER TRADE

and manufacturing industries. A report released by the African Development Bank in Abidjan, Côte d’Ivoire, says Kenya is ranked among the top 10 destinations for FDI in Africa. This is after attracting investments valued at $1.2 billion (Sh120 billion in 2014. For the last two years, the country has been aggressive in implementing a series of reforms under the ease of doing business approach and generally working on the infrastructure as well as improving security. FDI inflows are expected to grow in 2015. Among the companies set to invest include: Carrefour (a French multinational retailer), Radisson Blu, Park Inn Hotel, Business Connexion (an ICT service provider based in South Africa) and Imperial Health Science. The country is fast becoming a business hub, not only for oil and gas exploration, but also for manufacturing, transport and ICT. Kenya is the world leader in usage of mobile phone payments platforms, bringing millions of unbanked people into the formal economy.

VALUES AT A GLANCE $ 5.5bn ( Kshs 1.2 tr ) THE 2014 BUDGET THAT RANKED KENYA AS 9TH IN AFRICA & 5TH IN SUB-SAHARAN AFRICA

40% KENYA’S GDP IN THE EAC REGION

3.9 KENYA’S COMPETITIVE INDEX IN 2014 - 2015, MAKING IT THE 6TH LARGEST COMPETITIVE ECONOMY IN SUBSAHARAN AFRICA

$ 514 mn ( Kshs 51.3 bn ) THE RISE OF FOREIGN DIRECT INVESTMENTS ( FDI ) INFLOWS IN 2013, FROM $259 MILLION ( KSHS 25.9 BN ) IN 2012.

$ 1.2 bn ( Kshs 120 bn ) THE VALUE OF FOREIGN INVESTMENT THAT KENYA ATTRACTED IN 2014

The development of the private sector and creation of an enabling business environment are at the core of the Kenya Private Sector Alliance’s mandate. It is this enabling business environment that is critical to Kenya achieving sustained and inclusive growth. The government, through Vision 2030, seeks to speed up regional integration to facilitate cross border trade. Through some of KEPSA’s engagement platforms, we have pushed for key reforms, leading to an improvement in Kenya’s overall investment climate. The first significant reform is in the launch and implementation of the National Electronic Single Window System (NESWS) where time taken to comply with payment of taxes as well as facilitate cross border trade across the EAC has reduced. The NESWS is integrated with stakeholder systems involved in clearing cargo (such as Kenya Ports Authority, Kenya Revenue Authority, Kenya Plant Health Inspectorate Services, Kenya Bureau of Standards and 23 other agencies).

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 43


IMPROVING CROSS BORDER TRADE

As a result, the cargo dwell time at Mombasa port has also been scaled down from five days to three. The NESWS is also expected to double East African trade to $33.3 billion (Sh3.33 trillion) by 2016 and enhance transport along the Northern Corridor from the port of Mombasa to Uganda, Rwanda and Burundi. The System allows parties involved in the trade and transport sector to lodge standardised information and documents with a single entry point to fulfil all import, export and transit related regulatory requirements. This is seen as a solution to the manual, lengthy, inefficient and slow trade procedures which are prone to corruption and badly impact the business environment. Another reform is in the Mombasa Port Community Charter that was launched by President Uhuru Kenyatta on June 30. It aims at creating efficiency at the port in light of competition from neighbouring ports. The Port Charter, which was developed by public and private sector members, is important as it seeks to bind the port Community to specific actions, collective obligations, targets and time lines within which to facilitate the movement of goods in and out of the country. According to the charter, Kenya Ports Authority is required to outsource all stevedoring services to the private sector. The conventional cargo berths will be run by ‘footloose’ operators and will extend from ship loading (stevedoring) to shore handling services. This will cover operations in berths 1 – 10. The charter also provides that specialised berths, wharfs and facilities for handling specific cargo like soda ash, bulk grain and cement are to be handled

44 I PRIVATE SECTOR I JULY - AUGUST 2015


IMPROVING CROSS BORDER TRADE

by the private sector through licensing arrangements, thereby increasing investment opportunities. Over the years, the port has recorded significant growth in traffic volumes. In the last 10 years, traffic increased by more than six per cent per annum to 22.3 million tonnes in 2013. Container traffic grew faster on average by more than eight per cent yearly, rising to nearly 900,000 Twenty Foot Equivalent Unit in 2013 from 438,597 TEU in 2004. KPA projects that the port will handle 1,650,000 TEU by 2016. Development partners have also not been left behind in the support of these initiatives. For instance, TradeMark East Africa has mobilised more than $98 million (Sh9.8 billion) to support the port infrastructure. This breeds confidence that Kenya is the gateway into East Africa. The Port Charter will bring about regional economic growth through improved seaborne trade for the entire Mombasa Port corridor. The charter is also expected to reduce the time taken to clear goods by about 15 per cent as well as port to border travel by 30 per cent. Another noteworthy reform is the improvement in inland infrastructure through various interventions. There has been a reduction of weighbridges to four on the Northern Corridor namely Mariakani, Mlolongo, Gilgil and Malaba as well as introduction of weigh-in-motion weighbridges. A survey by the Shipper’s Council of East Africa reveals that the establishment of One-stop border posts and implementation of mechanisms to eliminate non–tariff barriers has led to an improvement in border clearance time of goods with a reduction from 27 hours to 3 hours at Malaba border post (KenyaUganda) and from three and a half hours

to an average one hour at Katuna border post (Uganda-Rwanda). These reforms greatly impact on the country’s Vision 2030 objectives and drive Kenya closer to achieving greater economic prosperity. With the economy showing remarkable gains over the last five years supported by investments guarantee; liberalised and stable economic atmosphere; abundant natural resources; readily available highly trained and affordable manpower; access to regional and international markets; fairly well developed infrastructure and onestop centre facility for project processing, the diaspora can take advantage of these to invest in stocks, bonds, education, health, ICT, insurance and banking and trade among other opportunities.

We therefore urge the investor community to take advantage of these opportunities with a promise that KEPSA and the government are working on reforms that will guarantee a conducive business environment.

We therefore urge the investor community to take advantage of these opportunities with a promise that KEPSA and the government are working on reforms that will guarantee a conducive business environment. Ms Carole Kariuki, HSC, MBS is Chief Executive Officer, Kenya Private Sector Alliance

JULY -SEPTEMBER 2015 I PRIVATE SECTOR I 45


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For More information contact us: Afya Centre 9th Floor,Tom Mboya Street P.O. Box 36089 - 00200 Nairobi, Kenya Cell: 0720 836 076 Head Office - Afya Centre 9th Floor,Tom Mboya Street 020Nairobi, - 2224290 P.O. Box 36089Tel: - 00200 Kenya Cell: 0720 836 076 Tel: 020 - 2224290 Office: 0710 145166 166 Office: 0710 145 Email: marcella.ogori@gmail.com Email: info@metropolcapital.co.ke Website: www.mcl.com Website: www.mcl.com


EAST & CENTRAL AFRICA TRADE HUB

Kenya’s harbours set to transform into East and Central Africa’s trade hub

Mombasa is the Northern Corridor’s principal port offering an essential international maritime linkage for Kenya and landlocked east and Central African economies of Uganda, Rwanda, Burundi and DR Congo.

T

hese countries’ imports and exports are served by extensive transport routes originating from the port of Mombasa, through Uganda then branching off to Rwanda, Burundi and eastern DR Congo. The corridor also serves the emerging economies of South Sudan and parts of northern Tanzania.

By Gilbert Langat CEO, East African Shippers Council ( EASC )

The port has 19 functional berths and can handle more than a million TEUs. There are two new container berths with a 1.2 million TEU capacity. Traffic grows at an average rate of 11 per cent per annum. In 2014, the number

of vessels calling at the port increased by 3.6 per cent, from 1,768 to 1,832. Imports rose by 8.3 per cent from 19.2 million tonnes to 20.8 million tonnes. Exports increased by 12.8 per cent to 3.4 million tonnes. Bulk liquid grew by 10.8 per cent from 6.5 million cubic meters to 7.2 million cubic meters. Total transit traffic rose by 4.2 per cent from 6.9 million tonnes to 7.2 million tonnes. Pipeline throughput expanded by 7.7 per cent from 5.2 million cubic meters to 5.6 million cubic meters while motor vehicle imports grew by 15.3 per cent from 136,815 units to 157,856 units. (Source, KPA 2014 Statistics)

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 47


EAST & CENTRAL AFRICA TRADE HUB

infrastructure): Berth Port in Manda BayLamu, a standard gauge railway line to Juba in South Sudan and Addis Ababa in Ethiopia, a road network, oil pipeline, crude oil refinery at Bargoni, three airports (Lamu, Isiolo and Lokichogio) and three resort Cities (Lamu, Isiolo and Lake Turkana).

Kenya Ports Authority has shortlisted 12 firms to bid for the tender to run the second container terminal at the port and accelerated the deadline to commission the facility from March 2016 to November this year. The chosen companies include APM Terminals, DP World, China Merchant Holdings, Cosco Pacific and as several consortiums. Joint venture bids include Toyota Tsusho Corporation, Grup TCB, Mitsubishi Corporation and Freight Forwarders Kenya. The first phase of construction at the new terminal is 75 per cent complete and is expected to be commissioned later this year, signaling immense growth of container traffic. This will also call for very advanced and efficient cargo handling systems to be employed at the port, which outsources some of this work to cargo freight stations. Development work comprises the construction of two main container berths of 300 metres and 210 metres. The former will be dredged to 15 metres while the latter will be 11 metres deep. The Northern Corridor artery is served by a combination of transport modes and infrastructure that include the maritime port of Mombasa, road network, rail network, rail-lake transport, inland water routes, inland container deports, an oil pipeline and private sector run cargo freight stations. INVESTMENT OPPORTUNITIES The Lamu Port Southern Sudan-Ethiopia Transport (LAPSSET) corridor, commonly known as Lamu port is an integrated transport infrastructure project. When completed, it will provide a second transport corridor linking the port city to South Sudan and Ethiopia. There are 32 components in the Lamu port project (including integrated

48 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

It has been envisioned as a flagship project under Vision 2030 and is expected to cost between $22 billion (Sh2.2 trillion) and $23 billion (Sh2.3 trillion).

COMPONENTS IN THE LAMU PORT PROJECT Berth Port in Manda Bay-Lamu, A standard gauge railway line to Juba in South Sudan and Addis Ababa in Ethiopia A road network Oil pipeline Crude oil refinery at Bargoni Three airports (Lamu, Isiolo and Lokichogio) Three resort Cities (Lamu, Isiolo and Lake Turkana)

Lamu is in a naturally deep and sheltered harbour and will therefore require minimal dredging to receive large Post-Panamax vessels. A 2011 feasibility study indicated that the port could be expected to handle approximately 24 million tonnes of cargo per annum by 2030. Construction of the first three berths, whose contract has already been signed, presents a strong case and trigger for participation of the private sector in construction of the remaining 29 berths and other components of the corridor. The transport and logistics sector offers immense opportunities for investments as demonstrated by the growth and development focus that the government has put in place to improve the efficiency and capacity of the transport and logistics corridors. The areas of investment range from direct infrastructure development, Private Public Partnerships (PPP), service provision, specialised handling and value add services. The Lamu port will not only serve Kenya but almost all of its landlocked neighbours through the road, rail and pipeline components of the project. It will set the pace for the expansion of regional industries seeking to offer value added products to diverse to international markets.


JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 49


CREATING NEW JOBS

CREATE NEW JOBS NOW!

THE NEW MANTRA!

By Vimal Shah @vimalafrica

Are we are sitting on a ticking time bomb or a major population dividend and opportunity? This is the debate and rhetoric of choice for economists, politicians and journalists when making the occasional reference to the potent combination of our exploding population and high unemployment rate.

A

re we are sitting on a ticking time bomb or a major population dividend and opportunity? This is the debate and rhetoric of choice for economists, politicians and journalists when making the occasional reference to the potent combination of our exploding population and high unemployment rate. The time bomb phrase is normally deployed as some sort of halfhearted comfort or assurance that the worst is not yet upon us and we have time to find a solution. The truth is, time has run out. The bomb has stopped ticking. There is no grace period and not lead time. It is time for action. In order to move, we need to understand the scale of the mess of we are in. We must understand exactly what we are up against and how deep the hole we have dug for ourselves is. Here is the size of the problem. Every year, we welcome more than one million

50 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

Kenyans into the world, occasionally more but rarely less. In 2010 we were 40 million. In 2014, we were 44million and in 2030 we will be 67 million, possibly more. The country has a ‘youth bulge.’ About 80 per cent of Kenya’s population is below 35 years and the 15-35 age bracket accounts for 37 per cent. Now, for the heart breaking statistics; 70 per cent of the unemployed are aged 15 to 35. Given this, there are only two possible solutions: Create enough new jobs or stop reduce the birth rate. The latter proposal is supposedly too controversial to consider so we only have the first option. The country needs to create a million jobs in the next 10 years. Sounds decent enough but in reality it is unworkable, unhelpful and lacking in urgency. We do not have the luxury of waiting for 10 years. The correct position is we need one million new jobs annually!


CREATING NEW JOBS

About 1,350,000 million employable Kenyans coming of age every year. That means we require 112,500 new jobs every month or 26,000 per week. It means creating 5,400 jobs per day or 540 every hour. That is the diagnosis. Jobs matter. At the heart of every economy, at the center of the prosperity of every family, and every society; at the core of development and the epicenter of education, innovation and industry you will find one thing - a job. The more jobs there are in the country, the more prosperous and stable we are. Conversely, the less jobs the more problematic and impoverished we get. So how do we create a million jobs a year? We start by sharing the responsibility. If you were to share the target across all counties, then every governor and devolved government would have the task of creating 30,000 jobs per annum. Does that sound workable? A bit more practical? Yes. Let’s push this even further. There are 18 cabinet ministries. If we allotted each of them the task of creating 270 new jobs a day, that comes to 70,000 per year and bingo, we have hit our target. When viewed through this prism, it becomes clear that our biggest failure is not in creating jobs but in failing to appreciate the urgency of the situation and operating without focus. Every year, close to a million pupils sit for KCPE examination. Half that number sits for KCSE examination and almost 50,000 get admitted to university. Our education system conditions people to look for jobs and not create them. Entrepreneurship in Kenya is something you do when you have no other options. This is a wrong attitude. We teach millions of capable Kenyans

to play it safe to focus on risk and ignore opportunity yet entrepreneurship is the only way forward.

Our education system conditions people to look for jobs and not create them.

When we say jobs, we mean more than factory and office work. The future requires a different kind of worker - tech savvy, creative and ‘green’. How ready are we to produce the 2020 or 2030 worker? Can our education system produce this kind of person? Your answer is the same as mine. We need to take radical decisions to create the needed change. We are for the large part sleeping on the job. Our population boom represents an opportunity to create jobs. We need to attack the big ideas we have procrastinated on for years such as the 24-hour economy. This can create jobs yet all we have done for years is talk about it. Where is the urgency? We do not need to build Konza to maximise the technology sector. Let’s create green jobs now! Let’s expand our horizons. I hear people complain of brain-drain. I prefer to think of it as asset relocation. Every Kenyan who can get a job anywhere should take it. Let’s become a supplier of world class human capital! The bottomline is, we need a truckload of jobs daily and the only way to get them is to create a new generation of entrepreneurs. Every politician’s language ought to be jobs. The measure of our leaders should be jobs, jobs and more jobs. How many have they created this week, this month and this year?

WE ALL HAVE ONE JOB: TO CREATE JOBS. NOW! The Writer is the CEO of Bidco Africa @vimalafrica

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 51


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INNOVATION : THE DRIVER OF PROSPERITY

INNOVATION THE KEY DRIVER OF PROSPERITY The World Economic Forum's Competitiveness Report 2014/15 is the most comprehensive assessment of national competitiveness and its drivers. It emphasises on innovation and skills as the key drivers of productivity and economic growth. While the global economy tentatively recovers from the recent crisis, significant risks remain. In such an environment, innovation is needed more than ever. By Alla Tkachuk contact@creativity-gym.com

>>

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 53


INNOVATION : THE DRIVER OF PROSPERITY

THE 2015 WEF’S GLOBAL COMPETITIVENESS INDEX RANKS KENYA 90 OUT OF 144 WORLD ECONOMIES ON ITS COMPETITIVENESS. THE WEF DEFINES COMPETITIVENESS AS THE LEVEL OF PRODUCTIVITY OF A COUNTRY. PRODUCTIVITY, IN TURN, SETS COUNTRY’S LEVEL OF PROSPERITY.

K

enya needs a more holistic and competitive innovative culture and policy to ensure survival, growth and sustainability so as to compete in the current and future global environment. Dr Manu Chandaria, a founder member of the Kenya Private Sector Alliance said “Survival in the 21st century will be very difficult, and without innovation it is not possible.” According to US President Barack Obama, “in the 21st Century, the growth and competitiveness of any company has to be driven by its ability to innovate. By putting innovation at a centre of their strategies, successful CEOs know that profits are ‘paychecks’ for innovation.” INNOVATION MANAGEMENT It is one thing to understand the urgent need for innovation, but quite another to know how to implement it. By making changes around their margins, many companies struggle to invest strategically in innovation management. Very few firms include innovation in their business manifestos. This is dangerous. If company managers are at a loss - as innovation is not often associated with job of management - they will surrender their organisation to competitors. A leading authority on leadership, John Adar, said, “The graveyard of business is littered with companies that could not or would not innovate.” The process of innovation for many is still mystifying. Innovation is not about aesthetics, or even technology. It is a process of generating and implementing new or significantly improved products, services, business practices and

54 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

workplace or external relations. Thomas Edison, one of the World’s greatest innovators, said “Genius is one per cent inspiration and 99 per cent perspiration.” This means that innovation comes about through effort rather than by accident. This is good news. It means innovation can be managed. Managing innovation requires right tactics. Executives should view the innovation process as a series of steps: from clearly stating the problem that needs innovative solutions, to choosing the right level of innovation, building an idea-generation team, evaluating solutions and ‘selling’ them to stakeholders. In an environment where innovation becomes an indispensable tool for success. Training for innovation management can be an effective way to boost competitive positions. Exposure to a structured training in a range of powerful strategies and techniques can help managers and executives build their ‘innovation confidence’ and stay abreast of best practices. There are organisations that can provide a value-added training. Using effective tools, facilitators can skilfully unlock your company’s creative energy and motivation. INNOVATION LONG-TERM In order to survive and adapt, we are born creative. However, the ability to invent and innovate diminishes if it is not nurtured. The ability to create is neither a god-given ‘talent’ nor is it linked to high IQ. It is a skill that can be taught and learned.


INNOVATION : THE DRIVER OF PROSPERITY

A famous UK educationist, Ken Robinson, believes that current education systems educate children out of creativity. In Kenya, education that nurtures innovative thinking is unacceptably limited in schools. Art, for example, which is the most effective method for educating young children to think ‘outside the box’, is virtually absent. Young people are taught to ‘recognise’ and put information in boxes. Such teaching does not encourage development of innovative thinking. According to the Ernst & Young and PwC, employers worldwide report that the difficulty in recruiting employees who

in the 21st Century, the growth and competitiveness of any company has to be driven by its ability to innovate. By putting innovation at a centre of their strategies, successful CEOs know that profits are ‘paychecks’ for innovation. US President Barack Obama, “”

can think ‘outside the box’ constitutes a major threat to their companies’ survival. This is despite the fact that unemployment has hit all-time high in many markets. In Kenya, there are six million young people aged 18-25 who are unemployed. Significantly, according to the World’s leading expert on ‘outside box’ thinking, Edward De Bono, only five hours of creativity and innovation workshops given to unemployed youths increases their employment rate five times. I recently held innovation workshops to groups of 15-19-year-olds in Kenya. Most of did not know what innovation was. One boy thought innovation was a plant! This is the generation that we hope will become innovative leaders and entrepreneurs and improve Kenya’s competitiveness rank. There is an urgent need to address this problem. In 2008, I established MASK: School for Innovation and Creativity. It runs training in Kenyan schools, as well as organising an annual national creativity and innovation competition - the MASK Prize. Growing steadily in popularity, the MASK Prize builds creativity and innovation awareness amongst the young. Thousands of young people and dozens of schools have taken part since 2013. The Star is the Media Partner of this important event. More of the similar youth programmes - training, competitions and forums - are needed in close collaboration with businesses. If we won’t invest in innovative abilities of the young, we will forever lose the competitive business edge. Yes, there may be a few years before we see the results, but when we do, they will present an entirely different return on investment. Alla Tkachuk is an Innovation & Creativity consultant and advocate

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 55


Co mi

ng S

oo n

www.ole-sereni.com


KENYA PRIVATE SECTOR ALLIANCE

Membership Drive

Influencing PUBLIC POLICY through POLICY FORMULATION and IMPLEMENTATION

The Kenya Private Sector Alliance (KEPSA) is a limited liability membership organization registered in 2003 as the apex body of private sector in Kenya. KEPSA’s Mandate is “the voice of private sector in Kenya”, its Vision is “to become a world class private sector apex body” and Mission is to “ensure year-on- year improvement in overall business environment of Kenya by working together with the Government and other stakeholders”. KEPSA’s Strategic Focus is three fold: 1.

Conducting high-level advocacy on cross-cutting policyrelated issues and ensuring Kenya is globally competitive in doing business.

2.

Coordinating private sector in Kenya through various mechanisms to engage in advocacy to promote economic

growth. 3.

Developing and capacity building of business membership organizations (BMOs) to strengthen them to grow and represent their sectors adequately.

KEPSA attracts membership from a wide array of economic sectors among them Trade, Tourism, Agriculture, Manufacturing, Finance, insurance, real estate business, support services, Transport, communications, etc. Membership is purely from the private sector and currently there are approximately 90 Business Membership Organizations (BMOs) and over 200 corporate organizations. In total KEPSA membership (considering members of the BMOs) has a reach of over 100,000 business organizations in the country across all sectors.

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

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 57


KENYA PRIVATE SECTOR ALLIANCE Membership Application Form

MEMBERSHIP APPLICATION FORM Name of Organization Physical Address

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Sector Please check the field applicable Corporate Membership

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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


THE CREATIVE FINANCING GAP

THE CREATIVE FINANCING GAP

By Amal Mohammed

>>

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 59


THE CREATIVE FINANCING GAP

THE CREATIVE ECONOMY SECTOR HAS GAINED RECOGNITION AS A FRAMEWORK TO DEFINE THE CRITICAL CONTRIBUTION OF ARTISTIC AND CULTURE-BASED INNOVATION, CREATIVE ACTIVITIES AND PRODUCTS.

N

umerous studies globally have shown that design, music, craft, film and television, fashion, publishing, heritage, cultural festivals and related components of the creative and cultural industries as key drivers of job creation, foreign exchange earnings, income generation and catalysts and supporters of other industries like leisure, printing, tourism and transport.

From a general analysis of available industry data, our creative sector has been on a steady growth path in the last five years. This is in part due to an increased demand for original cultural products and experiences from the growing middle classes, increased broadcasting of local content, growing efficiency of mobile money transfer and deeper internet penetration.

The United Nations Conference on Trade and Development undertook studies and issued two definitive reports in 2008 and 2010.

These factors have allowed producers to exhibit and profile their work further and to a wider audience through online social platforms. It has extended the opportunity to source raw material and talent from the East African market.

The reports reveal that Africa’s share of the global creative economy stands at less than one per cent. The reports point to both underinvestment in the creative and cultural industries and its potential for growth. “The growth is a confirmation that creative industries hold great potential for developing countries that seek to diversify their economies and leapfrog into one of the most dynamic sectors of the world economy,” the 2010 UNCTAD report says. The creative industry in Kenya accounts for an estimated 5.3 per cent of the GDP (Kenya Copyright Board, 2013). This is equivalent to roughly $2.2 billion or Sh182 billion of the country’s $40 billion (Sh3.4 trillion) GDP.

60 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

In the absence of disaggregated data, the creative industry remains largely categorised within the informal sector, effectively obscuring it from any targeted commercial financing or public policy interventions. This aggregated sector as a whole contributes an estimated 25 to 34 per cent of the national GDP and accounts for 77 per cent of employment, with over 60 per cent of those working in the informal sector being youths aged between 18 and 35 with an even gender distribution. This means the creative sector accounts for about 3 per cent of Kenya’s workforce. This nascent industry has unique


THE CREATIVE FINANCING GAP

characteristics which present great levers for growth. The overreliance on the tourist and expatriate markets in fashion, crafts and jewelry value chains presents business opportunities for local market creation strategies. The limited commercial financing for the majority of creative sector startups presents an opportunity for the growth of new business in the provision of dynamic financing solutions. The enormous need for business advisory and logistics support presents a new business opportunity - towards assisting early stage businesses to reduce the costs of inefficiency, optimise value chains and improve their product portfolios. Upstream challenges around the sourcing, high cost of inputs and production skill gaps provide numerous opportunities for policy intervention to correct the industry ecosystems, expand our export portfolio as well as catalyse the growth of the sector to contribute 10 per cent of Kenya’s GDP by 2018. Following numerous studies in Kenya, Uganda and Tanzania, we identified priority entry points which include the provision of flexible financing options (debt and equity), unique nuances in understanding and managing risk, business acceleration and market creation strategies to unlock the potential of creative economy value chains.

This study also revealed, among other things, that most profiled businesses were in existence for an average of three years, were employing between one to five people and making an average annual turnover of Sh5,000,000. These mostly relied on self-financing and did not consider themselves bankable or able to access commercial sector financing.

Sh1,000,000 in the first application and up to Sh10,000,000 in the second.

As part of our commitment to these businesses, we have set up a flexible early seed finance facility targeted at dynamic creative sector startups looking to increase their production capacity, adoption of technology and logistics innovation, launching new products or entry into new markets. This facility should support the growth strategies of creative economy startups to become investor ready.

HEVA Fund believes that through concerted efforts of private sector players and government, the contribution of the creative sector to the country’s GDP has the potential to double in five years.

HEVA FUND HEVA Fund looks to draw upon its network of partners, subscriptions and service providers across East Africa to create a new ecology of learning and thinking for creative professionals to learn when to collaborate, compete and when to go it alone. Less than a month since its launch, HEVA Fund has received about 100 applications and expects more submissions by the July 31 application deadline. The Fund will make investment a bi-annual cycle, providing up to

To this end, HEVA Fund seeks to catalyse growth by investing about Sh50,000,000 in seed financing over the next year as well as provide debt and investment guarantees to encourage commercial sector investments.

HEVA Fund is passionate about the transformative social and economic potential of the East African creative sector. From Nairobi to Kampala, Kigali and Dar es Salaam, this sector is where new cultural products and experiences are being created. We are excited about being in the place where the highest potential for great profits, jobs and happy people will be found. HEVA Fund will be investing twice every year in March and September. It is set to announce selected creative businesses in August 2015. For more information, visit www.hevafund. com and follow www.facebook.com/ hevafund and @HEVAFund on Twitter or contact programs@hevafund.com

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 61


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• The makings of success

KYEP By Isaac Onyango


KENYA YOUTHS EMPOWERMENT PROGRAM

Kenya Youth Empowerment Program Cycle 5 Intern’s Success Story 25 year old David Juma Magambo’s journey from an out of contract ‘hustler’ to an entrepreneur is one of resilience and determination beyond his years. After the expiry of his contract with one of the top mining company in Kwale, despair set in. He had no job, no source of livelihood and nowhere to turn to, AS WRITTEN BY ISAAC ONYANGO

H

owever, as fate would have it, a window of opportunity opened up through the KEPSA- Kenya Youth Empowerment Program (KYEP) which was at the time recruiting for its fifth cycle. David applied to join the program along with thousands of other jobless youths hoping to enroll into the program and take advantage of its training and employment opportunities. He was among the lucky few who were absorbed into the program across the three counties (Nairobi, Mombasa and Kisumu) with David taking up a slot in the Mombasa county program. He was placed on internship at a Fumigation Company to gain hands on experience on the operations of the company.

while at the same time learning the tricks of the trade.

At the time the prospects of this internship catapulting him forward and inculcating in him the entrepreneurial skills that would later inspire a six-figure monthly return inform of a Pest Control Company that employs five permanent staff would have been a pipe dream. He devoted himself to the task at hand taking on various duties under his new employer

Six months on and Ngoru Pest Ventures is a big name in the Fumigation and Pest control industry within Mombasa County. With his sharp marketing and business prospecting skills, David has managed to secure lucrative contracts with top notch companies in the coast and Nairobi including hotel brands such as the Sarova White Sands and Carnivore

64 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

It was after his internship that entrepreneurial bug bit him and he in turn curved out a niche for himself within the fumigation industry. Upon completion of his four month internship and well equipped with basic financial management skills, business planning, product development and marketing skills, David got some advice from a friend and sought a bank loan against a 2 acre piece of land he had inherited from his parents. With the loan in hand David set up Ngoru Pest Ventures a pest control and Hygiene Company in January 2015.


KENYA YOUTHS EMPOWERMENT PROGRAM

Restaurant. Not one to sit back and relax, David has set his sights on a nationwide presence and is currently working to secure a fumigation deal with Kirinyaga county government. “The programme helped me a lot” he says in a confident voice, reaffirming the impact that the Kenya Youth Empowerment Program has had in aiding the youth set up their own enterprises and opening up employment opportunities. “It furnished me with the skills to plan my business projects, manage my finances, how to recruit staff, relate with them and even handle my customers”

120,000 per month after paying up wages and all recurrent expenditure, David now sets his sights on becoming one of the top entrepreneurs affording other young people the opportunity to earn a living. With sheer determination, discipline and hard work David Juma Magambo has built on his training at the Kenya Youth Empowerment Program emerging as a successful entrepreneur and a model to be emulated by other youths within and without the KYEP program. The writer is a KYEP Cycle 6 intern

“The programme furnished me with the skills to plan my business projects, manage my finances, how to recruit staff, relate with them and even handle my customers”

With his venture raking in over Kshs

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 65


SUBSCRIPTION Powered by

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MAJOR ENGAGEMENTS


MAJOR ENGAGEMENTS

President Uhuru Kenyatta hosted the fourth Presidential Roundtable on the 2nd of April. It was organised by the Kenya Private Sector Alliance and focused on improving Kenya’s competitiveness and addressing governance challenges. The Roundtable addressed five thematic areas under the National Business Agenda II. During the Roundtable, President Kenyatta challenged the private sector to shift focus to regional competitiveness in light of the development of industries across East Africa. He said the region had seen an increase in the number of factories with Uganda, Tanzania and Rwanda manufacturing goods previously imported from Kenya. To boost local industry the President said the government would put in place

70 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

measures to ensure that Kenyan goods were given priority in procurement with a more policy shift in the 30 per cent local procurement quota. President Kenyatta said the shift was in support of the ‘Buy Kenya, Build Kenya’ policy. The private sector pledged its support to the government in the fight against corruption. KEPSA reintroduced the ‘Business Code of Ethics’ and encouraged companies to sign up. The president said the government would put in place additional measures that would extend to companies found to engage in corruption. The next presidential roundtable will be held in August.

THE MEASURES INCLUDE: 1. Freezing assets of those being prosecuted for corruption, seizure of the assets of those found guilty of corruption and blacklisting of companies engaging in corruption. 2. To ensure that the new measures along with the existing legal redress mechanisms are not used to stall government projects, the President said any party found guilty of abusing the legal framework to stall government projects would be blacklisted.


MAJOR ENGAGEMENTS

From left Eng. Patrick Obath, Industrialization CS Adan Mohammed, Deputy President Hon. William Ruto, President Hon. Uhuru Kenyatta, KEPSA Chair Mr. Vimal Shah, KEPSA CEO Ms. Carole Kariuki and Head of Public Service Mr. Joseph Kinyua, during the fourth presidential roundtable meeting.

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 71


MAJOR ENGAGEMENTS

SPEAKER’S ROUNDTABLE

SOCIAL INVESTMENT FOCUSED AGENDA In May, Deputy President William Ruto invited cabinet secretaries and chief executives of public and private corporations to a breakfast meeting, geared towards laying the framework for incorporation of Corporate Social Investments (CSI) into the National Development agenda. The meeting highlighted the important role played by the corporations in social development through CSI but recognised the need to co-ordinate these efforts to avoid duplication and wastage of resources in the deployment of various initiatives. The CEOs were introduced to the Social Investment Focused Agenda (SIFA) which is a public private partnership forum co-ordinated by the presidency and KEPSA. The goal of SIFA is to mobilise the private sector to contribute to the attainment of Kenya’s development goals and enhance the country’s global competitiveness by promoting the alignment of corporate and philanthropic investments to the SDGs through innovation, investment and mass customer and employee engagement.

72 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

National Assembly Speaker Hon. Justin Muturi addresses members of The Private Sector during the second speakers round table.

National Assembly Speaker Hon. Justin Muturi hosted the Second Speaker’s Roundtable on the 5th of June. The roundtable, organised by KEPSA, was attended by National Assembly Clerk Justin Bundi, chairpersons and vice-chairpersons of parliamentary committees, and members of the private sector under the leadership of sector committee chairs. During the Roundtable, Parliament promised to involve the private sector in the formulation of legislation to ensure that new acts of Parliament did not negatively impact on the business environment. The Speaker said the private sector was crucial to safeguarding the economic pillar and should therefore be allowed to operate in an investor-friendly regulatory

and legislative environment. The speaker urged parliamentary committees to work in sync with the private sector to ensure that bills and acts under review were streamlined to foster a better business environment. The private sector made a case for the ‘Private Sector Bill’ which seeks to entrench the economic pillar of the Vision 2030 into law by creating provisions for engagements between the private sector and various arms of government. The Bill will set the legal framework for public private dialogue on issues affecting the private sector through engagement structures designed to foster economic development.

The private sector made a case for the ‘Private Sector Bill’ which seeks to entrench the economic pillar of the Vision 2030 into law by creating provisions for engagements between the private sector and various arms of government.


MAJOR ENGAGEMENTS

NORTHERN CORRIDOR SUMMIT KEPSA coordinated the private sector’s participation in the 10th Northern Corridor Integration Project summit which took place in Kampala, Uganda. The summit held a special forum on the involvement of the private sector in the implementation of the Northern Corridor Integration Project. KEPSA hosted a regional dinner on 4th of June to harmonise private sector Investment proposals from Kenya, Uganda, Rwanda and Burundi. The private sector then presented its joint position to the council of ministers on the 5th of June for inclusion in the summit report. The Ugandan private sector, led by the Chamber of Mines, hosted a dinner attended by heads of state from Uganda, Kenya and Rwanda. During the dinner the private sector gave a brief highlight of the joint proposal. The NCIP summit was held on 6th of June with a select number of private sector representatives from the three countries attending the summit with the heads of state.

74 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

The presidents agreed to fast-track the implementation of Northern Corridor projects and form the Northern Corridor Implementation Authority (NCIA) whose role would be to keep focus on the project with a view to fast-tracking implementation. They also undertook to set a local content provision within the project to ensure that the private sector benefited from the project. Following the deliberations on the involvement of the regional private sector, the presidents and council of ministers granted the private sectors’ request to hold a full day session on private sector participation at the 11th Northern Corridor Summit to be held in Nairobi. The Summit was hosted by President Yoweri Museveni of Uganda and attended by President Uhuru Kenyatta of Kenya, President Paul Kagame of Rwanda while South Sudan, Ethiopia and Burundi were represented by senior ministers. The East African Community was represented by its Secretary-General Richard Sezibera while the East African Business Council Chairman Dennis Karera gave brief remarks on behalf of the private sector.


MAJOR ENGAGEMENTS

From left KEPSA CEO Ms. Carole Kariuki, former KEPSA Chair Mr. Vimal Shah, KEPSA Chair Amb , Dennis Awori, Industrialization CS Adan Mohammed and KEPSA Vice Chair Dr. Laila Macharia, launch the KEPSA foundation.

ANNUAL GENERAL MEETING KEPSA held its eleventh annual general meeting on the 7th of May at the PanAfric hotel. Mr Dennis Awori took over from Vimal Shah as chairman of KEPSA. The AGM honoured outgoing board members, sector governors and vicegovernors. The guest of honour was Industrialisation Cabinet Secretary Adan Mohammed. KEPSA Foundation was officially launched with Arch. Lee Karuri set to chair the board of 10 trustees.

76 I PRIVATE SECTOR I JULY - SEPTEMBER 2015

Eng.Patrick Obath will be the vicechairman. The other trustees are Amb. Dennis Awori, Ms. Gloria Ndekei, Mr. Bill Lay, Ms. Carole Kariuki, Mr. Polycarp Igathe, Mr. Arun Deveni, Dr. Manu Chandaria and Dr. Joe Wanjui. KEPSA Foundation will devote its resources to social programmes and activities with a focus on youth empowerment, peace and national cohesion alongside corporate social responsibility.


KEPSA MEMBERS

BUSINESS MEMBERSHIP ORGANIZATIONS (BMOs) African Women in Agribusiness Network – Kenya Chapter

Kenya Institute of Supplies Management

Agricultural Employers’ Association

Kenya IT & Outsourcing Services

Agricultural Industry Networks Limited

Kenya Motor Industry Association

American Chamber of Commerce of Kenya

Kenya National Chamber of Commerce & Industry

Aquacultural Association of Kenya

Kenya National Farmers’ Federation

Architectural Association of Kenya

Kenya Oil & Gas Association

Association of Chartered Certified Accountants

Kenya Property Developers Association

Association of Consulting Engineers of Kenya

Kenya Renewable Energy Association

Association of Gaming Operators-Kenya

Kenya Security Industry Association

Association of Insurance Brokers of Kenya

Kenya Ships Agents Association

Association of Kenya Insurers

Kenya Tea Growers Association

Association of Practitioners in Advertising

Kenya Water Industry Association

British Chambers of Commerce Kenya

Marketing & Social Research Association

Clean Cookstoves Association of Kenya

Marketing Society of Kenya

Delegation of German Industry and Commerce of Kenya

Matatu Owners Association

East Africa Venture Capital Association

Media Owners Association

East African Tea Trade Association

Mwongozo East Africa Limited

Eastern Africa Grain Council

National Potato Council of Kenya

Federation of Kenya Employers

Oil & Gas Contractors Association of Kenya

Federation of Women entrepreneur Associations

Organization of Women in International Trade

FEWA Sacco

Outdoor Advertising Association (K)

Institute of Certified Public Accountants of Kenya

Petroleum Institute of East Africa

Institute of Certified Public Secretaries of Kenya

Protective Security Industry Association

Institution of Engineers of Kenya

Pyrethrum Growers Association

Kenya Agribusiness and Agroindustry Alliance

Retail Traders Association of Kenya

Kenya Association of Air Operators

Roads & Civil Engineering Contractors Association

Kenya Association of Independent International Schools

Safaricom Dealers Association

Kenya Association of Manufacturers

Shippers Council of Eastern Africa

Kenya Association of Travel Agents

Telecommunications Service Providers Association of Kenya

Kenya Association of Women Business Owners

The Chartered Institute of Arbitrators

Kenya Association of Women in Tourism

The Kenya Chamber of Mines Company

Kenya Auto Bazaar Association

The Kenya Flower Council

Kenya Bankers Association

United Business Association

Kenya Healthcare Federation

Wide Vision Investors and Business

78 I PRIVATE SECTOR I JULY - SEPTEMBER 2015


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KEPSA MEMBERS

CORPORATES AAR Insurance Kenya Limited

Express Communications Company Limited

Actis Africa Limited

Fincom Technologies Limited

Advantage Financial S.A

Flowmatics Limited

AEA Limited

Freight Forwarders Kenya Limited

Africa Practice East Africa Limited

Frontier Investment Management Limited

African Banking Corporation

Fusion Capital Limited

Agri Experience

Gapco Kenya Limited

AIG Kenya Insurance Company Limited

GE East Africa Services Limited

Airtel Kenya Networks Limited

General Motors East Africa Limited

Akiira Geothermal Limited

Generics Africa Limited

Apec Consortium Limited

Gertrude’s Children’s Hospital

Ascent Capital Advisory Services

Good Testimony Junior School Limited

Avenue Healthcare Limited

Haco Tiger Brands Limited

Bamburi Cement Limited

Hewlett Packard East Africa

BAT Kenya Limited

Hospitality Systems Consultants

Bidco Africa Limited

House of Major Limited

Bio Food Products Limited

Housing Finance

Biogas Holdings E.A. Limited,

Human Capital Synergies Africa Limited

Bollore Africa Logistics (K) Limited

IBM East Africa Limited

Brookside Dairy Limited

ikapamedia East Africa Limited

Centum Investment Company Limited

Interconsult Engineers Limited

CFC Stanbic Bank

Interconsumer Products Limited

Coca Cola East and Central Africa

Ipsos Limited

Cooper-K Brands Limited

iWay Africa Kenya Limited

Davis & Shirtliff Limited

Jamii Telecommunications

Deacons Kenya Limited

Jungle Group Holdings Limited

Deloitte Limited

Kaluworks Limited

Eagle Africa Insurance Brokers Limited

Kenergy Renewables Limited

East African Cables Limited

Kengas Link Limited

Eastern Produce Kenya Limited

Kenwest Cables Limited

Engen Kenya Limited

Kenya Bus Service Management Limited

English Press Limited

Kenya Kazi Services Limited

Eveready East Africa Limited

Kenya Markets Trust

80 I PRIVATE SECTOR I JULY - SEPTEMBER 2015


KEPSA MEMBERS

CORPORATES CONTD' Kenya Power & Lighting Company Limited

responsAbility Africa Limited

Kenya Tea Development Agency

Riverside Place Limited

Kenya Toner & Ink suppliers Limited

RSM Ashvir Consulting Limited

Kenyatta International Convention Centre

Safaricom Limited

Keroche Breweries Limited

Sameer Africa Limited

Kinangop Wind Park Limited

SAP Africa Region (Pty) Limited

KPMG Kenya

Sarova Hotels

Lantech (Africa) Limited

Sasini Limited

Lee Constuction Limited

Savannah Cement Limited

Liaison Group (I.B) Limited

Scania East Africa Limited

Liquid Telecommunications Kenya Limited

Scion Real Estate Limited

L’Oreal East Africa Limited

Senaca East Africa Limited

Mabati Rolling Mills Limited

SGS Kenya Limited

Maersk Kenya Limited

Simba Corporation Limited

Mckinsey & Company

SP Advisory

MTN Business (Kenya) Limited

Steam Plant Limited

Nairobi Bottlers Limited

Stima Sacco Society Limited

NIC Bank Limited

Suraya Property Group Limited

Oakar Services Limited

The CMC Motors Group Limited

Oil & Energy Services Limited

The Copy Cat Limited

Ol Pejeta Ranching Limited

The Riara Group of Schools Limited

Optiven Limited

The Standard Group Limited

Oracle Corporation

The Wrigley Company (E.A.) Limited

Oxford University Press (E.A.) Limited

Toyota Kenya Limited

Pamoja Capital Limited

Transcentury Limited

PDM Kenya Limited

Tullow Kenya B.V.

Pewin Cabs Limited

Twiga chemical Industries Limited

Plateau Motors Limited

UAP Insurance Company Limited

PriceWaterhouseCoopers Limited

Ultravetis E.A. Limited

Prime Bank Limited

Verve K.O. Limited

Procter & Gamble

Vestas Central Europe (CEU)

QALAA Holdings

Vivo Energy Kenya Limited

R.K.Sanghani

JULY - SEPTEMBER 2015 I PRIVATE SECTOR I 81


BUY KENYA; BUILD KENYA

The ‘Buy Kenya; Build Kenya’ Policy is a culmination of sustained efforts by the Private Sector to promote the development of local industries. The efforts to promote local industry through government procurement first took shape in 2010 when retired President Mwai Kibaki issued a directive to all government ministries and agencies to only procure locally made furniture. Through the Presidential Roundtable convened by the Kenya Private Sector Alliance, local content has remained a key theme for discussion with government. The current government has set a local content requirement for all infrastructure projects including the development of the extractives industry at a minimum of 40%. This measure is meant to boost local participation in multi-billion shilling projects that in the past ended up benefitting foreign companies at the expense of local industries. The rollout of the local content requirement under the wider ‘Buy Kenya; Build Kenya’ Policy is already being implemented. Under the Standard Gauge Railway project for instance, the Private Sector SGR Consortium has already secured a 100% supply quota for Cement while five Steel Manufacturers have been shortlisted by the contractor. However the policy has often been misconstrued in its application through the procurement process. In reality the policy was aimed at the procurement of locally made goods and services, however the implementation of the policy has seen procuring agencies allocate tenders to Kenyans who then import the goods and services thus locking out local industries. During the fourth Presidential Roundtable held in April this year H.E President Uhuru Kenyatta directed that all government ministries and agencies ensure that goods and services procured under the ‘Buy Kenya; Build Kenya’ Policy are locally sourced and manufactured. The directive was reiterated by National Treasury Cabinet Secretary Henry Rotich during the 2015/2016 budget. 'I am putting on notice all those public entities that are yet to fully adhere to the requirements of Buy Kenya, Build Kenya. All MDAs are directed to strictly ensure that a minimum of 40 percent local content requirement is adhered to by the winning tenderers at the procurement and supply stage' Mr. Rotich said. KEPSA welcomes the renewed emphasis on the promotion of local industry through government procurement and notes that the government remains the biggest spender in the economy and any spending directed at local industries is a win, win scenario for the country. Key sectors set to benefit include; Manufacturers, ICT service providers, Financial Service providers, Local Airlines and Professional service providers. Monies spent on locally manufactured goods and services are an additional stimulus to the local economy as: 

Local industries can upscale their production which will result in job and wealth creation

Local industries will see an increase in profitability which in turn will result in additional tax revenue for the government

In up scaling production, local industries will require additional raw materials which in turn ripple down the value chain to other sectors of the economy

The policy will be an added stimulus to SMEs which account for 45% of national GDP and 80% of local employment by providing a ready market for their goods and services.

Sourcing locally for goods and services will stabilize the shilling by reducing demand for the dollar by importers of materials

As the Private Sector we view the implementation of the ‘Buy Kenya; Build Kenya’ Policy as a stepping stone towards the removal of existing barriers to local purchasing, such as the low public profile of local vendors and the complex bureaucratic requirements that often surround government and private contracting. In support of this policy KEPSA shall endeavour to sensitize its members to improve on the quality of their products and enhance their competitiveness. KEPSA will also impress on its members to support the local industry by buying locally manufactured goods and services. KEPSA continues to work with the entire business community to expand and enhance the quality of Kenyan products towards meeting increasing the uptake of local content under the ‘Buy Kenya; Build Kenya’ Policy. KEPSA is also working with the government to monitor the implementation and uptake of the policy as we continue to spur economic growth and wealth creation. Carole Kariuki, HSC, MBS Chief Executive Officer, KEPSA


Pewin Motors Ltd - Tel: 020 236 2900, 0710 347 004 0722 681 837, 0733 704 804, 0721 278 462, 0720 946 889

Private sector #6  

KEPSA is the apex body of the private sector in Kenya that provides a unified voice for the private sector. Through various dialogue platfor...

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