Annual Report 2016
KENYA ASSOCIATION OF MANUFACTURERS
Our Mission
Our Vision
To promote competitive and sustainable
To be a World Class BMO that effectively
local manufacturing
delivers services to its members
Goal
Values
To transform KAM into a sustainable
▪ Responsiveness
member-focused association delivering
▪ Integrity
relevant, quality, timely and effective
▪ Innovation
services to its members
▪ Inclusiveness ▪ Teamwork ▪ Excellence
About Kenya Association of Manufacturers Kenya Association of Manufacturers is the representative organization for the manufacturing sector in Kenya. Established in 1959 as a private sector body, KAM has evolved into a dynamic, vibrant, credible and respected business association that unites industrialists and offers a common voice for businesses. KAM provides an essential link for co-operation, dialogue and understanding with the Government by representing the views and concerns of its members to the relevant authorities. In pursuit of its core mandate of policy advocacy, KAM promotes trade and investment, upholds standards, encourages the formulation, enactment and administration of sound policies that facilitate a competitive business environment and reduce the cost of doing business. In 2009, KAM unveiled a new corporate image as it observed 50 years since its establishment.
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ANNUAL REPORT 2016
TABLE OF CONTENTS PAGES Chairlady’s Statement
4
Chief Executive’s Report
6
Board of Directors
8
Leadership Team
10
Organisational Structure
11
Policy, Research and Advocacy
14
KAM Consulting
18
Membership Recruitment and Development
27
Communication 41 Finance, HR, Administration and Projects
46
Corporate Governance
49
Financials 53
KENYA ASSOCIATION OF MANUFACTURERS
Chairlady’s Statement Dear Fellow Members, It is my pleasure to welcome you to this year’s Annual General Meeting and to provide a full report of the organization’s performance and achievements. Competitive manufacturing is all about creating an enabling business environment and that is what KAM strives to achieve. A healthy business environment has trickle-down effects such as job creation and sustainable economic growth and this has formed the basis for our advocacy over the years. In line with this, KAM Board of Directors last year reviewed the organization’s Business Development Plan, in a bid to strengthen the raison d’etre for our organization, ensuring that we embed broad-based inclusivity and sustainability in everything that we do. We realize that beyond the service we provide to our membership every day, KAM has to take up its rightful space in driving the industrialization vision from the boardrooms into a national agenda. Our BDP looks at how we can strategically, demystify manufacturing and make it a staple for national discourse in order to ensure that our country achieves the economic goals it has set. The Manufacturing Priority Agenda that was laid out in 2016 set the pace for the development of our BDP 2017-2019 with a view to situate ourselves within the bigger picture. The MPA whose theme was ‘Promoting Industry in Kenya for Shared Prosperity’ outlined five pillars from which our advocacy would stem. The pillars were as follows; development of a general policy framework, Ensuring a level playing field for all, promoting competitive local manufacturing, making Kenya a manufacturing hub for exports and securing the future of industry. Anchoring our policy advocacy on the above and our overall vision, we sort breakthroughs in these areas in order to gain meaningful and long-lasting change for the country. The high level buy-in for the Buy Kenya Build Kenya campaign, by the President and the Government as a whole, was truly a big score for the local
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ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS manufacturing sector. Government as the largest
renewable sources, the cost of energy in Kenya
procuring entity in the country needs to invest
has since dropped from US¢ 18.7/kWh to the
in local products in order to ensure that industry
current US¢ 15/KWh. Courtesy of the relentless
thrives. The commitment is being actualized
efforts by the Government, Kenya now sits in the
through incremental implementation in some
league of the top 10 world’s largest producers of
of the on-going mega projects like the Standard
geothermal energy. Our partnership with Kenya
Gauge Railway (SGR) and this is being monitored
Power continues to grow as we seek solutions
very closely. We are keen on working very closely
to the current challenges faced by our members’
with the Government towards the implementation
country-wide.
of this policy, with special focus on the monitoring and evaluation aspects to ensure its effectiveness.
Going forward I encourage you to make full use of your membership by actively participating in the
It is on this premise that the KAM secretariat and
working committees, Chapter and Sector meetings
board conceptualized and spearheaded the first-
that are organized by the secretariat. Without you
ever Kenya Manufacturing Summit and Expo with
it is not possible to achieve the above and we can
the theme ‘Manufacturing Growth Opportunities
only achieve more with your help and continued
Through Local Content’. The purpose of the event
commitment to our vision. I would like to thank
was to showcase quality local made products
you for seeing us this far we have come and for
and skills to a wider demographic, backing the
your contribution towards making these profound
Government’s move on the Buy Kenya Build Kenya
changes to our economy.
Policy and even more importantly, proving to the Kenyan citizens that we can indeed be proud of our
Specifically, I would like to sincerely thank the
own innovations. Thanks to you, our dear members,
KAM Board of Directors and the leadership of our
this event was a resounding success and it is for
Working Committees, Chapters and Sectors for
this reason that we have decided to make it an
their exemplary stewardship, dedication to our
annual occurrence to culminate every end-year.
work and towards achieving economic excellence for this country.
In order to ensure a level-playing field for local manufacturers, we partnered with the Judiciary
I would also like to thank the Secretariat, who
in the development of the Illicit Trade Manual to
under the leadership of the CEO Phyllis Wakiaga,
combat counterfeits and unfair trade practices
have delivered immensely for the membership
which have plagued our environment for long. This
and for the sector. I commend the Government
manual will act as a guide to enable the commercial
of Kenya, who through the Ministry for Industry,
courts successfully prosecute those who continue
Trade and Cooperatives have been a great partner
to benefit from illicit trade.
in bringing a lot of these efforts to fruition and we indeed look forward to another fruitful year
KAM also acknowledges and appreciates the work
together.
that has been done so far by the Government of Kenya in supplying reliable and cheap energy. We are not exactly where we want to be in terms of pricing but clearly, great strides have been taken
Thank You,
and inspire confidence that we are on track. With
Flora Mutahi,
a major component of the energy mix being from
Chairlady
ANNUAL REPORT 2016
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KENYA ASSOCIATION OF MANUFACTURERS
Chief Executive’s Report 2016 was a year of many great strides. As an Association, we remained steadfast in our service to our members through our core mandate. We strived to propel manufacturing sector in its contribution towards the country’s economic growth. We recognize and laud the key milestones made by the government in 2016 such as the signing and ratification of the EAC - EU Economic Partnership Agreement (EPA) securing duty-free access of Kenyan exports to the EU market under the current EU Market Access Regulation (MAR) regime and until such time that the EPA is signed and ratified by all 5 EAC Member States. As a country, we moved up 21 positions in the Ease of Doing Business Index to achieve position 92 out of 190 countries worldwide. Starting a business was one of the indicators in which we showed improvement as a country and this means that we are sending a message to both local and global investors that we are ready to move our economy to the next level. We have also seen strengthened dialogue between the Government and the industry leading to achievements such as access to markets and passing legislations of business related laws such as the Company Act, Insolvency Act and Business Registration Service Act. Working with the Ministry of Industry, Trade and Cooperative, a taskforce for promotion of good business practice between suppliers, retailers and manufacturers was formed in October 2016. The Chair of the taskforce is the Principal Secretary, State Department of Trade. KAM will continue to work with the government and other stakeholders towards formulating the right policies and regulatory frameworks for local businesses to achieve profitability. Some of the focus areas for the association that have helped track and evaluate our wins include: Manufacturing Priority Agenda (MPA) Great progress was made in advancing the five-point manufacturing Agenda 2016 aimed at promoting industry in Kenya for shared prosperity. KAM focused on addressing issues with regards to the cost of doing business, market expansion and reduction of regulatory burdens that affect business. The environment in which business operate in is highly regulated, and one of KAM’s objective is to ensure that business environment remains competitive by providing services that ease this burden. In 2017, the Manufacturing Priority Agenda will be centered on driving industrial transformation for job creation and inclusive economic growth. A 5-point agenda will be pursued by the Association on behalf of the manufacturing sector; Policy, Legal and Regulatory Reforms, Level playing field for manufacturing in Kenya, Competitive Local Manufacturing Sector, Make Kenya a manufacturing hub for Exports and Securing the future of Industry.
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ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS
We are happy to that the 2016/2017 National Budget sought to address a number of issues that were raised by KAM. About 70 per cent of our proposals went through and for this, we appreciated the support received from the Ministry of Industry, Trade and Cooperatives and the National Treasury. Other fruitful engagements we had include a trade mission to Goma, DRC. We also hosted the first ever Kenya Manufacturing Conference and Expo, Clean Energy Conference and 12th Annual Energy Management Awards. Partnerships KAM continued to strengthen its partnership and remained a partner of choice for various institutions, both governmental and non-governmental. I am grateful to all our partners; The Government of Kenya, The Government of Denmark, British High Commission, The German Embassy, GIZ, TradeMark East Africa, Business Advocacy Fund, UK Department for International Development, The World Bank, Kenya Power, United Nations Development Programme, and European Union through the COMESA Regional Integration Implementation Project, for your continued support. We are grateful for our partners who continue to walk with us on the journey towards creating an enabling business environment for business to operate in. Sustainability Through the Global Compact, KAM continued to encourage the business community to implement the 10 principles of UN Global Compact in their business operations to ensure sustainability. The Global Compact Network Kenya, which is housed at KAM, was in October 2016 awarded the 2016 Local Networks Award for promoting Responsible business in the annual Local Networks forum held in Dubai. The Kenya Network was among 12 UN Global Compact Networks around the world out of 85 countries assessed.
Most notably, the Kenya Network has rallied the Private Sector to join in the efforts to fight corruption through the Code of Ethics for Business in Kenya - a call to companies to put in place measures at firm level to fight the vice - and the drafting of the Bribery Bill which was signed into law in January, 2017. Technical and Vocational Education and Training (TVET) Kenya Association of Manufacturers (KAM) in partnership with German Corporation for International Development (GIZ) launched a Technical and Vocational Education and Training (TVET) project aimed to provide technical jobs and economic opportunities for Kenyan youth. We are committed to addressing the gap in the system by working together with technical training institutions and the manufacturing industries in ensuring that skills’ training is demand driven. The Association also celebrated the election of its Chairlady, Ms. Flora Mutahi as the Vice Chairperson of the Common Market of Eastern and Southern Africa (COMESA) Business Council. Ms. Mutahi was elected after a highly contested election in Lusaka, Zambia. COMESA Business Council (CBC) key role is to provide a platform for advocacy in the development and progress of the private sector in respective economies. 2016 was a year we won on issues that have long hindered our ability to do business competitively, and although not all our battles were won, we remain proud and happy to have made this a better business environment.
Thank You, Phyllis Wakiaga, Chief Executive
ANNUAL REPORT 2016
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KENYA ASSOCIATION OF MANUFACTURERS
Board of Directors
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Flora Mutahi Chairlady
Sachen Gudka Vice Chairman
Pradeep Paunrana Ex Officio
Pankaj Bedi
Kaushik Shah
Bharat Shah
Stephen Brooks
Lutaf Kassam
Bimal Kantaria
ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS
Board of Directors
Rita Kavashe
Mahul Shah
Jane Karuku
Mucai Kunyiha
Peter Arina
Palu Dhanani
Joe Muganda
Helen Kimani
Rajan Shah
ANNUAL REPORT 2016
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KENYA ASSOCIATION OF MANUFACTURERS
KAM Management
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Phyllis Wakiaga, Chief Executive
Dalmas Okendo, Head of Operations
Tobias Alando, Head of Membership
Joyce Njogu, Head of KAM Consulting
Zipporah Maina, Finance Manager
Paul Mutambuki, HR and Administration Manager
Sally Kahiu, PR, Communications and Marketing Manager
Walter Kamau Ag. Head of Policy, Research and Advocacy - Trade & Policy
Miriam Bomett Ag. Head of Policy, Research and Advocacy - Legal & Regulatory, Research & Fiscal Policy
ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS
Organisational Structure Annual General Meeting (AGM)
Advisory Council
Executive Committee
Industrial Sectors 8 Working Committees Secretariat
Chief Executive PA to Chief Executive
Head of KAM Consulting
ENERGY SERVICES MANUFACTURING ACADEMY
SME SERVICES
BUSINESS INFORMATION SERVICES TVET SUNREF SBSECC
Head of PRAU
Head of Membership
TRADE LEGAL & REGULATORY TAX STANDARDS POLICIES RESEARCH INFRASTRUCTURE BUSINESS FACILITATION SERVICE
DEVOLUTION & COUNTY AFFAIRS ETHICAL BUSINESS COMMITTEES SECTORS
Head of Operations
PROJECTS FINANCE HUMAN RESOURCE AND ADMINSTRATION
PR, Marketing & Communications Manager
Internal Audit & Risk Manager
COMMUNICATIONS CORPORATE AFFAIRS MARKETING ANNUAL REPORT 2016
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KENYA ASSOCIATION OF MANUFACTURERS
Business Development Plan (2017 - 2019) Using the New BDP to Position Our Country The Industrialization agenda has been featuring
institutions to ensure transparency and efficient
strongly in many government and business
implementation of policies and regulations also
community development narratives across the
formed the crux of these discussions.
country and the Association is in a better position than any other BMO to drive it to fruition. Strategies
The successes of neighboring countries in attracting
on how to drive and own the industrialization vision
FDI and their impressive growth rates per annum
in the country and region were interrogated by
as is the case with Ethiopia, were also examined.
looking at case studies all over the world that have
Key questions were raised on how whether it is
succeeded in building a strong industrialization
possible to increase our competitiveness despite
policy.
the fact that our country is very political. Centering this discussion around the implication of the latter,
In order to situate our BDP within a global context
issues of cultural attitudes towards corruption,
for the next three years and in the spirit of thought
justice and general moral values were also brought
leadership, the Board of Directors invited Dr. Ken
to the fore. There was also focus on the increasing
Ohashi, a Special Advisor to the Presidency of Kenya
the role of the Association in engaging the
on economic matters, a part-time advisor for the
government and contributing toward long-term
Japan International Cooperation Agency (JICA) and
solutions for our country’s overall development.
a former Country Director for the World Bank, to
How can business play its part to shape social
make a special presentation on, ‘Positioning Kenya
norms and attitudes?
to be the next economic miracle: lessons from Asia and what they mean for Kenya. The presentation
PESTLE Analysis
shed light on the existing gaps in our national
An analysis of the Political, Economic, Social,
planning that stand in the way of an industrial
Technological, Legal and Environmental factors
revolution and consequently an economic miracle.
that will shape the future of industry in Kenya and
A comparative analysis with countries like Thailand
globally, underlined the importance of looking
and the Philippines underlined pivotal areas of
at our future with regard to sustainability should
focus such as inclusivity, equitable distribution
there be any momentous changes in the world.
and quality education that are key ingredients for any economy to grow sustainably. There was
Trade agreements influenced by global and
repetitive emphasis on the need for industry to
regional forces such as TFTA, EPAs, AGOA – what
play an active role in capacity building for state
are the pros and cons? World organizations and
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ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS their influence in politics and business such as
country. Devolution has so far been very costly
the WTO and the World Bank would also have
for businesses but if done right promises great
an impact on national and regional governance
rewards especially if the laws and regulations
structures and policies and these would in turn
are harmonized. Recurrent issues such as the
affect our business environment.
inhibition of free movement of goods and the employment of frivolous levies by various county
There are also occurrences such as BREXIT, EAC
governments were identified as priority areas to
Regional integration - How we adapt and position
be addressed and some of the proposed actions
ourselves to take advantage of these changes will
moving forward were as follows
be the key differentiator between us and other BMOs and will also guarantee the sustainability and longevity of the organization.
▪ The Gazettement of the Transitional Authority guidelines. This will be expedited by organizing a meeting between KAM (Led by the Chair
Benchmarking
of Legal and regulations Committee) and
In order for KAM to achieve a world class ranking
the Attorney General or Solicitor General in
with regard to its operations, influence and quality
October 2016.
of services, the organization needs to intensify its commitment to benchmarking exercises that will
▪ Engagement with the Council of Governors
inform its vision as pertains to its role in Kenya’s
on issues of accountability in the counties.
development. By analyzing some outstanding
This will be driven by information from the
BMOs around the globe and looking at their best
chapters to the secretariat to establish a portal
practice, the organization’s leadership dissected
that will track action points for the counties,
KAM’s current strengths and how they can be
to drive quick response and aid in monitoring
leveraged to achieve this status with regard to
and evaluation.
quality, longevity and inclusive business practices. An interrogation of the organization’s Strength,
▪ Pursue Collaborations between KAM Chapter
Weaknesses, Opportunities and Threats, explored
offices and other BMOs, and Country Assembly
the ways in which we can improve on our service
forums by equipping them with strategies for
delivery, research for fact-based advocacy and
both public and private sector participation.
more importantly, embrace inclusivity to broaden our reach and impact, and play a key role in
Conclusion
poverty-reduction and sustainable economic
KAM needs to be a champion for business
development.
integrity to improve not only the competitiveness of our country and attraction for FDIs, it will also
County and Devolution Affairs
guarantee better lives for all citizens of this country.
But even as we focus on global and regional
Therefore it is important to emphasize the need
issues, urgent intervention is needed within our
for its members to adhere to the Global Compact
own borders. County government engagements
Code of Ethics and take leadership for better
should be our focal points in the immediate
business operations and governance structures in
term because counties are the future for this
the country.
ANNUAL REPORT 2016
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KENYA ASSOCIATION OF MANUFACTURERS
Policy, Research and Advocacy
Walter N. Kamau Ag. Head of PRAU - Trade & Policy
Miriam Bomett Ag. Head of PRAU - Legal & Regulatory, Research & Fiscal Policy
“We remain steadfast in policy advocacy to serve the interests of our membership” @KAM_kenya Global Strategic Objective: Fact based Advocacy for the creation and sustenance of an enabling market and environment at regional, national and county level to support competitive manufacturing in Kenya.
This year, KAM continued to focus on addressing issues with regard to the cost of doing business, market expansion and reduction of regulatory burdens that affect business.
The
environment
in
which businesses operate in is highly regulated and one of KAM’s main objectives is to ensure that the business environment remains competitive by providing services that ease this burden. Manufacturing Priority Agenda 2016 launched
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ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS In March 2016, KAM launched its Manufacturing
between county governments and KAM, which
Priority Agenda (MPA) 2016 at an event graced by
facilitate
Mr. Adan Mohamed the Cabinet Secretary Ministry
challenges experienced at the County levels.
effective
addressing
of
members
of Industry, Trade and Cooperatives. The MPA themed ‘Promoting Industry for Shared Prosperity�
In order to support ease of business through
guided the Association in focusing on the most
expeditious and efficient resolution of disputes,
burdensome challenges facing Industry. The
KAM supported the actualisation of the Business
priority areas were driven under five key pillars:
Court Users Committee (BCUC) and several meetings
General Policy Framework; Ensure a level playing
during the year. The Committee brings together the
field; Competitive Local Manufacturing; Make Kenya
Judiciary, private sector and relevant government
a manufacturing hub for Exports; and Securing the
agencies to discuss deepen discussions on
future of Industry.
resolution of disputes in the country.
I. General Policy Framework
Counterfeiting of products still remained a
The main focus under this pillar was to engage
challenge to manufacturers not only in Kenya but
counties and to ensure that the devolution
within the EAC. One of the key causes of this has
framework
macroeconomic
been the lack of harmonised Intellectual Property
indicators were supportive to industrial growth
Rights (IPR) regime within the EAC region. In order
and regulatory environment at the County level
to address this, KAM initiated a study on the IPR
was supportive to industries and long term
regime jointly with the EAC Manufacturers Network,
investments.
with a view to provide fact based proposals to
was
completed,
relevant government agencies on how to address The enhanced cost of doing business remained
IPR and counterfeit issues within the region.
a key concern at the county level caused by
Awareness trainings within the country were
duplication of fees, levies and charges as well as
also held in collaboration with Anti Counterfeit
increased compliance requirements. To address
Agency(ACA) in Kisumu, Nairobi, Nandi, Uasin
this, KAM held several engagements with relevant
Gishu, Elgeyo Marakwet and Baringo counties.
government agencies, which have contributed to a number of Counties adopting single business
II. Ensure a level playing field
permits to ease compliance such as Nairobi County.
In 2016 and 2017 several fiscal discussions related
Structured engagements were also established
to the manufacturing sector were held with
Lilian Odhek Trade & Policy
Halima Khalla Tax & Research
Joseph Wairiuko IPR & Illicit Trade
Caroline Mutuku Legal & Regulatory Affairs
ANNUAL REPORT 2016
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KENYA ASSOCIATION OF MANUFACTURERS government agencies with a view to inform their
permits and 1437 AGOA visas processed on behalf
review to ensure a level playing field and enhanced
of members. 261 duty remission applications
competitiveness. About 70% of the proposals that
were processed during the year and some of
KAM presented to government in 2016/2017 budget
the products that benefitted from the scheme
were addressed for Sectors such as plastic sector,
included, matches and matchboxes, trigger spray
motor vehicle and cycle, beverages. Other products
and lotion pumps, solar equipment, industrial
that were considered included, increase of import
sugar and automobile leaf springs.
duties on iron and steel products, fishing nets, oil and petrol filters, smart cards and milk cans, Clean
IV. Make Kenya a manufacturing hub for Exports
Stove Jikos.
Export Development Strategy: The lack of a coherent National Export Development Strategy
III. Competitive Local Manufacturing
to improve Kenya’s export performance and link
In 2016, KAM focused on several issues that
the industries to global supply value chains has
contribute to the high cost of doing business and
been a major factor hindering Kenya globally
some of the successful engagements included
competitiveness. KAM supported national efforts
operational issues affecting members on the new
to develop the National Export Development
Pre Shipment Verification of Conformity Certificate
Strategy to bring in new thinking to trade and
(PVOC) requirements were held in Mombasa,
export practices in the country and to focus on
Nakuru, Kisumu and Nairobi; Regular meetings
creation of an export culture geared towards global
were on classification and valuation concerns were
participation, provision of assistance and capacity
held which has seen a decrease in the concerns;
building.
and Outstanding VAT payment meetings were held to address concerns on backlog of refunds. The
Special
refunds were fast tracked and payments continue
establishment of the Special Economic Zones
to be made.
Authority, product value chain by new industries
Economic
Zones
(SEZs):
With
the
has been encouraged and backward and forward Trade facilitation Services: KAM also continued to
linkages for new investments are being created.
offer business facilitation services to its members
KAM enhanced awareness of manufacturers on the
on processing of AGOA visa and work permits
SEZs in order to inform on the incentives available.
and duty remission applications. Over 175 work
Irine Iroto AGOA Visa & Permits
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ANNUAL REPORT 2016
Peninah Soko AGOA Visas & Permits
Maria Limo Customs & Standards
Georgina Wachuka Regulatory Affairs
Jackson Wambua Research
KENYA ASSOCIATION OF MANUFACTURERS V. Regional Markets and exporting challenges
working group include, customs procedures
Elimination of non-tariff barriers: The EAC absorbs
and trade facilitation, rules of origin, non-
about 25 per cent of Kenya’s total export followed
tariff barriers and technical barriers to trade,
by EU which takes about 22 per cent and COMESA 16
trade in services, trade remedies, sanitary
per cent. KAM continued to advocate for resolution
and phytosanitary measures and legal and
of non-tariff barriers within the EAC, COMESA and
institutional affairs
Africa region in its capacity as the secretariat of the national monitoring committee on non-tariff
Trade and Investment missions: KAM facilitated a
barriers. Continuous engagements were held such
trade and investment mission to Goma, Democratic
as; Bilateral meeting between Kenya and Zambia
Republic of the Congo (DRC) in partnership with
on imposition of non-tariff barriers on palm oil and
the Ministry of Foreign Affairs in Kenya. Over 30
UHT milk manufactured in Kenya; In country visits
participants participated to explore Trade and
to all boarder stations in the country in partnership
Investment opportunities in the DRC market.
with EAC representatives and Kenyan regulators; Meeting by the Joint Commission for Cooperation
EAC Common External Tariff Review: The review
between Kenya and Tanzania to discuss NTBs; and
of the Common External Tariff commenced as per
Bilateral meeting was held between Kenya and
the requirements of the EAC for a five year annual
Tanzania food and drugs authorities to discuss
review. KAM led the EAC Manufacturers’ Association
emerging issues on food, cosmetics and drugs.
Network Forum to discuss EAC CET review, sectors inputs and other cross cutting issues affecting
Trade Agreements: KAM continued engagements in
industry in the EAC region.
the negotiations discussions on development of trade agreements, aimed at promoting exports at
VI. Securing the Future of Industry
the EAC, COMESA and in the wider tripartite region.
Low productivity has previously been identified
•
In the Tripartite Trade Agreement Twenty two
as
(22) out of twenty six (26) Tripartite countries
competitiveness and the need to bridge the skills
are in Free Trade Area in their respective
gap in the sector and raise the productivity levels
regional economic communities. Tripartite
to international standards. KAM commenced
member States are required to liberalize 60-
the Technical Vocational and Education Training
85% of their tariffs upon the entry into force
(TVET)
of the Tripartite FTA over a time frame of 5
aimed at increasing employment and economic
to 8 years. Negotiations on product specific
opportunities for the youths in Kenya. The
rules of origin are ongoing.
programme is being carried out through placement
In regard to continental free trade area
of technical skills graduates in the industries for a
negotiations (CFTA), technical working groups
period of three months to gain practical experience
have been formed operating on agreed terms
in their fields of training. Details of the TVET
of references. The thematic areas for the
program are explained under KAM Consulting
•
a
key
challenge
Programme
affecting
in
the
partnership
sector’s
with
GIZ,
section.
ANNUAL REPORT 2016
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KENYA ASSOCIATION OF MANUFACTURERS
KAM Consulting “We strive to enhance and diversify capacity building and skilled services to our members� @jnjogu @KAM_Kenya Joyce Njogu Head of KAM Consulting
Global Strategic Objective: Provide high quality demand driven and profitable services to drive industry productivity and competitiveness as well as generate revenue for KAM and support KAMs sustainability (Manufacturing Academy, SME Development, Technical Vocational and Education Training, Centre for Energy Efficiency and Conservation, SUNREF Programme, Strengthening Business Society Engagements in Climate Change, Business Information Services.
Manufacturing Academy The Academy offers high quality, relevant and timely training programs that will raise competency levels in industry to improve competitiveness and productivity across all industrial sectors. The Virtual Academy provides both in-house and open house technical/specialized and management trainings in various broad areas. KAM in partnership with the Embassy of the Federal Republic of Germany in Nairobi and the Delegation of German Industry held a workshop that sort to address skills gap in the country. During the forum, KAM
Nduta Ndirangu SME Development
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Catherine Mukoko Manufacturing Academy
ANNUAL REPORT 2016
Gloria Ocholla Business Information Services
David Sacotte SUNREF
Elijah Isabu SUNREF
KENYA ASSOCIATION OF MANUFACTURERS KAM’s Manufacturing Academy Training Catalogue Launched
launched the Manufacturing Academy Training Programme during the Delegation of German Industry Workshop. In addition, the Manufacturing Academy partnered with both local and international institutions. Among the programmes run in the various partnerships include: Unlocking Financial Blind Spots in partnership with Pearl Financial Services; Leadership and Conflict Intelligence Seminar in partnership with Mediation Training Institute and an awareness session with National Industrial Training Authority (NITA) Total number trained since Manufacturing Academy Inception: 1,370.
Aggrey Mujera Business Development - DI
Jude Songok CEEC
Trevor Isika Business Development - DI
Anne Kariuki CEEC
Paul Mburu TVET
Victor Gathogo CEEC
SandraGlory Moenga TVET
David Njugi SBSECC
ANNUAL REPORT 2016
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KENYA ASSOCIATION OF MANUFACTURERS
SME Development Services These services attract, develop and build capacity of SMEs towards competitive sustainable growth. Partnership Development for SME During
the
year,
KAM
partnered with COMESA Business Council (CBC) to
build
sustainable
sourcing
partnerships
between
SMEs
Corporate
and
Companies.
Subcontracting between SMEs and large companies is a key priority in SME Development
for
job
creation and economic development. Key SME policy advocacy work included local sourcing, subcontracting, SME regulatory compliance, market and financial linkages. For more information on these trainings and on KAM SME services please contact: kamconsulting@kam.co.ke.
Technical Vocational and Education Training Program (TVET) Kenya’s Vision 2030 through the Medium Term Plan, 2013-2017 singles out education and training as the vehicle that will drive Kenya into becoming a middle-income economy. In addition, the Sessional Paper, No.1 of 2005 on policy framework for education, training and research and the legislative framework aims to achieve the human capital development needs of the country towards sustainable economic growth and development. The Kenya Industrial Transformation Master Plan (KITP) has also identified human capital investments as key to Kenya’s transition to a higher middle income. These Terms of Reference set forth an understanding for conciliation of internship for TVET certificate & diploma holders in the industry commissioned by GIZ (SOGA Initiative Kenya) and conducted by the Kenya Association of Manufacturers to attach recent TVET certificate & diploma graduates to industry, for hands-on training to improve employability and for staff of the industry to attend three weeks refresher
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ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS courses to boost productivity. The program will run for 2 years beginning January 2017 to December 2018. The main objective is to place 500 technical skills graduates into the industry by December 2018 and to upgrade participating industry employees’ skills. Program Core Activities 1.
Desk Study including GIZ Skills Audit
2.
Program Awareness Creation
3.
Recruitment and Selection of Industries
4.
Recruitment and Selection of graduates
5.
Work Readiness Training
6.
Job Fair/Bazaars
7.
Placement of interns into the industries
8.
Mentors Training
Centre for Energy Efficiency and Conservation (CEEC) KAM in conjunction with the Ministry of Energy and Petroleum Development established the Centre for Energy Efficiency and Conservation (CEEC) in 2006. CEEC offers subsidized energy auditing services with the support from the Government of Kenya (Ministry of Energy and Petroleum Development) and the Danish International Development Agency (DANIDA). The Centre runs energy efficiency and conservation programs designed to help companies identify energy wastage, determine saving potential and give recommendation on measures to be implemented. The energy audit program is open to all companies doing business in Kenya and interested in reducing their energy consumption. During the year, CEEC carried out a total of 67 Energy audits. The audits carried out are categorised as follows; Type of Audit
Number
General Audit (SME’s)
16
General Audits (GA’s)
31
Investment Grade Audit (IGA’s)
20
Total
67
ANNUAL REPORT 2016
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KENYA ASSOCIATION OF MANUFACTURERS
Energy Management Awards
Chandaria Industries take top spot in Energy Management
Energy Management Award (EMA) was launched in 2004 as collaboration between the Kenya Association of Manufacturers, Global Environmental Facility and the Government of Kenya. EMA is a forum where all the stakeholders in the energy sector converge so as to auspiciously celebrate excellence in energy management. Participation in the award is open to all industrial, commercial and institutional enterprises. In addition, individuals can participate in the innovative category. Organizers receive application forms and assessment tools, which are completed and submitted for evaluation by the technical committee. This team then conducts visits for verification of the submitted data. The assessments are then presented to the panel of judges, who adjudicate and nominate the winners and runners-ups, based on the set criteria. EMA is organized and managed by the Kenya Association of Manufacturers through its Centre for Energy Efficiency and Conservation (CEEC). Email: ema@kam.co.ke
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ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS Category
Winner
Overall Energy Management Award
Chandaria Industries
Overall Energy Management Award - Very Large Consumers
East African Breweries Ltd
Overall Energy Management Award - Medium Large Consumers
Chandaria Industries
Overall Energy Management Award - Small Medium Consumer
Gitugi Tea Factory
Category Best energy Management Team Award
Sarova Lionhill Game Lodge
Fuel Savings Award (Very Large Consumers Category)
Athi River Mining Ltd
Fuel Savings Award (Medium Large Consumers Category)
BAT Thika
Fuel Savings Award (Small Consumers Category)
Premier Foods
Electricity Savings Award Large Consumers)
East African Breweries Ltd
Electricity Savings Award (Medium Large Category)
Finlays Tea Extracts-Saosa
Electricity Savings Award (Small Very Large Consumers)
Kisima Farm
Best New Entrant
Trianium Hospitality (Kolobot Gardens)
Technical Committee’s Award - Best presentation
BAT Nairobi
Best Energy Management – Tea Sector
Gitugi Tea Factory
Recognition in Water Efficiency
Osho Chemicals; Unilever Kenya Nairobi; Bata Shoe Company; James Finlays- Kitumbe Tea Factory; East African Breweries Ltd
Students Category Award
1st Position Timothy Ndaa & Michael Ondoro - The Poseidon Pump System, Technical University of Mombasa 2nd Theordore Mwangi & Cleopas Barwareng - Stacked indoor LED Farming, Jomo Kenyatta University of Agriculture and Technology 3rd Vincent Wasonga & Caroline Wambui - PLC Controlled Energy Saver for Commercial, Kabete National Polytechnic
ANNUAL REPORT 2016
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KENYA ASSOCIATION OF MANUFACTURERS
Sustainable Use of Natural Resources and Energy Financing (SUNREF)
AFD & Chase Bank sign Credit Line for Green Energy financing Kenya Association of Manufacturers has hosted
So far, the programme has so far signed up with five
SUNREF East Africa from 2011. In partnership with
partner banks in the three countries to implement
Agence Française de DÊveloppement (AFD, SUNREF
the credit facility. This include; Cooperative Bank of
has been providing credit facility to private
Kenya, Commercial Bank of Africa (CBA), Diamond
developers who wish to implement renewable
Trust Bank (DTB) Kenya, Diamond Trust Bank (DTB)
energy and energy efficiency project and to provide
Uganda and Bank of Africa Tanzania (BOAT).
technical assistance in Kenya. The programme implementation stages are: In addition, KAM has entered into agreements
1.
Project Origination
with Uganda Manufacturing Association (UMA)
2.
Project Preparation
and Confederation of Tanzania Industries (CTI)
3. Communication
to implement the programme in Uganda and
4.
Capacity Building
Tanzania.
5.
Project Verification
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ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS
Strengthening Business Society Engagement in Climate Change (SBSECC) Through the SBSECC project, Kenya Association of
resilience and mitigation; capacity building of
Manufacturers has partnered with StARCK+ (DFID
county authorities in the development and
funded programme) to promote energy efficiency
embracing of policy and regulatory instruments on
and alternative energy awareness and investment
climate sensitive initiatives; and, technical support
among the business community.
to the business community to develop bankable projects and linkages to financial institutions for
The programme aims to develop county legislative
subsequent funding.
bills and policies geared towards climate change
SBSECC completed the following projects last year: 1. Detailed feasibility study for the Mt. Elgon small hydro project. 2. Commenced the process of retrofitting Harambee House Annex to be more energy efficient. 3. Supported seven counties where KAM is present (Nakuru, Uasin Gishu, Nairobi, Machakos, Mombasa, Kisumu & Kiambu) develop Clean energy policies and plans to catalyze private sector investment in clean energy. 4. Held five clean energy awareness forums in Kisumu, Mombasa, Uasin Gishu, Nairobi and Nakuru counties. Clean Energy Forum
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KENYA ASSOCIATION OF MANUFACTURERS
Business Information Services
Inaugural Kenya Manufacturing Summit & Expo launched BIS provides relevant and timely Business Information Services to increase Productivity Compliance and Market Competitiveness across all industrial sectors in Kenya. The main highlights for the year were: ▪
15 National seminars held with a total of 500+ members participating.
▪
12th Kaizen Annual Conference 2016 held on 27-28 July 2016 with 63 members in attendance
▪
Export Market Promotion
▪
Trade mission to Eastern DRC was conducted on 10-14 October 2016 .26 Companies participated with 35 delegates visiting DRC Goma.
▪
Trade mission to Ireland for the Agribusiness Sector done in Mid-June 2016 where two KAM members participated in partnership with KEPSA, KNCCI, MITC and Irish Embassy.
▪
Kenya Manufacturing Summit & EXPO 2016 took place on 16-18 November 2016 in partnership with Ministry of Industry Trade and Cooperatives and UNIDO. The expo attracted 122 exhibitors whose objective was to showcase locally manufactured goods and promote Buy Kenya Build Kenya initiative.
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ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS
Membership “We Strive not to be a success, but rather to be of value to our Members” @tobiasalando @KAM_Kenya
Tobias Alando Head of Membership Development
Global Strategic Objective: To be the most effective and Influential BMO representing the Value-Add Industries in Kenya
The 2016 recruitment & retention strategy
The secretariat strengthened the use of the
focused on enhancing the Association’s
Members Help Desk in attending to member’s
service delivery platforms with a wider focus
queries. The aim of the Members Help Desk is
on the small & Medium Enterprises. In order
to track members’ issues and improve on the
to enhance service delivery and to develop
response time and resolution of the same.
systems to cater for members’ different needs, KAM embarked on membership visits to
In 2016, we received more issues compared to the
understand the operations of our members.
previous year. We received 956 queries of which,
During the year, the Association visited over
824 were closed and 122 issues were pending
100 members.
for action and closure. Among the challenges that faced by members include County fees
Induction sessions for all new members
& charges, power outage, KRA & KEBS related
as well as KAM Working committee, sector
issues and immigration enquiries.
and chapter chairmen and external boards’ representatives were also done.
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KENYA ASSOCIATION OF MANUFACTURERS KAM’s quest is to grow the manufacturing sector by empowering KAM sectors for the prosperity of the nation. We endeavor to align our aspirations with Government's long term policies for the benefit of industrial growth in Kenya.
KAM Members Sundowner
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ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS
Devolution and County Affairs KAM considers a predictable macroeconomic
ensure that remaining key counties also prioritize
and
removal of the distribution permit from their
regulatory
environment
that
supports
long term investment at the county level. KAM
revenue laws.
has established a strong policy and legislative advocacy desk with the responsibility of ensuring
KAM has also engaged the Senate and County
that regulatory framework at the County is
Assembly Forum (CAF) with an aim of improving
improved in the interest of KAM members.
county policy and legislative framework. The latest engagement of the Senate and the County
In the past one year, KAM’s continuous lobbying
Assemblies was during this year’s CAF legislative
for conducive business environment at the
summit in Mombasa. KAM is proud to have realized
County level has led to drafting of the Policy
quite a number of relevant county revenue policy
on County Governments Own Revenue and
and legislations of interest to KAM members which
Tax Regulation process Bill by the government
in turn, avert arbitrary charges and fees to KAM
to address challenges faced by the business
members.
community at the County level. KAM’s lobbying through this desk has also seen reduction of
In the past one year, KAM has impeccably
the number of permits and licenses required
strengthened its regional presence in the seven
by
Remarkable
(7) regional chapters based in Industrial Area –
reduction/amendment in the permit issue, is
Nairobi, Coast, Nyanza/Western- Kisumu, Central,
the distribution permit which through KAM’s
Nakuru, Machakos & surrounding, Counties and
advocacy has been proscribed in 5 key counties
Uasin Gishu- Eldoret. KAM’s Gongoni satellite office
being, Nairobi, Kiambu, Kisumu, Migori, Busia
has also registered great milestone especially in
Counties. Bilateral deliberations are ongoing to
the salt-sub sector.
the
county
governments.
COAST
Key advocacy issues for the Coast Chapter in the past year have been; engaging Kenya Power to address spasmodic power outages and interruptions in the region, levying of entry fees charges for business owners in the Chapter. Key wins for the Chapter is the Kenya Power Initiative to embark on addressing Power outages, Boresha Stima Viwandani and new power lines being put for members in Malindi and Mtwapa.
Jinal Shah Chapter Chair
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29
KENYA ASSOCIATION OF MANUFACTURERS MACHAKOS & SURROUNDING REGION
The Chapter’s key challenges were water and delays in issuance of Single Business Permit in the County. The chapter engaged Mavoko Water and Sewerage Company (MAVWASCO) to address the water shortage and Revenue Director to address the delay on SBP issuance in Machakos County. Other advocacy issues for the Chapter was infrastructure development and involvement of the business community in relevant county committees. The Machakos Chapter has continuously engaged KURA, NTSA, KeNHA on various infrastructural development needs to address the dilapidated road network which is slowly gaining traction.
Mureithi Regeru Chapter Chair
Key wins registered include the development of the rest of Quarry Road by KURA after the NAMSIP 600 project, expansion and Rehabilitation of KMC and EAPC DAMs in Machakos and development of tanks project by MAVWASCO
to curb water
shortage issue.
CENTRAL KENYA
The Central Chapter’s main advocacy issues in the past year have been business regulations, trade licenses and distribution permits especially on inter-county trade. The chapter engaged Murang’a and Embu counties, the hotspots on trade licenses and distribution permits issues. The two counties are now ready to work with KAM on the trade licenses issue and subsequent investment forums. In addition, the Chapter submitted a memorandum to Kiambu county government on the 2017/2018 Finance Bill with the key highlight being consideration of industrial development in physical planning.
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ANNUAL REPORT 2016
Anup Bid Chapter Chair
KENYA ASSOCIATION OF MANUFACTURERS NYANZA/WESTERN
Key advocacy issues in the Chapter has been roads, security and Fees & Charges. The Chapter registered key wins in the elimination of distribution fee in
Migori County, scrapping of
multiple Single Business Permit by Kisumu County for businesses operating same type of businesses on different plot numbers and partnership between Kenya Police and the business community for peaceful elections (during and post). In a spirited effort to promote stakeholder participation, the Chapter engaged the Head of Budget, Kisumu County on Chapter’s participation in budget making process as a proactive strategy in ensuring that KAM views are comprehensively mainstreamed in the annual county Budget.
Joyce Opondo Chapter Chair
UASIN GISHU
The main advocacy issues in the Chapter included water shortage, power/energy related issues, InterCounty trade challenges and Infrastructure issues. The Chapter scheduled advocacy meetings with Kenya Power and with the Managing Director for Eldoret Water and Sewerage Company (ElDOWAS) to address these issues. Some of the key wins for the Chapter include the closure of KAM/ELDOWAS case which had been going on since 2010 and the Chapter Officer incorporated
Bryan Cuthbert Jnr. Chapter Chair
into the County Transport and Safety Committee (CTSC) which is chaired by the CEC Roads and Infrastructure.
ANNUAL REPORT 2016
31
KENYA ASSOCIATION OF MANUFACTURERS NAKURU
The main advocacy issues in the Chapter have been dilapidated road networks, poor supply of water for members and power fluctuation in member’s premises. The Chapter has struck an agreement with Kenya Power to have quarterly status brief meetings to address emerging power issues and improve service to KAM members. The Chapter also held meetings with the County Assembly clerk to lobby for the passage of the Disaster Management law. Nakuru Chapter is happy to report that NAWASSCO has improved water supply which has seen all companies to receive water 3 days per week.
Jayen Dodhia Chapter Chair
INDUSTRIAL AREA
There is still need to harmonize all fees and levies in all the 47 counties. Harassment by County Officers during Inspection is still an issue. The chapter believes that the introduction of the Unified business permit will stop this. The Chapter has registered significant wins in the introduction of the Nairobi County Unified Business Permit. The UBP is convenient since application of specific permits and payment is done online. The Chapter hosted the Nairobi Governor and his entire CEC team. The team toured and saw first-hand various infrastructure challenges and his promise to address the
Manoj Shah Chapter Chair
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ANNUAL REPORT 2016
infrastructural challenges has come to fruition. A number of roads in the Chapter are currently being improved in Industrial Area.
KENYA ASSOCIATION OF MANUFACTURERS
Sectors KAM members are categorized into 14 sectors, 12 of which are in processing and value addition while the other two offer essential services to enhance formal industry. Sub-sectors are defined by the type of raw materials companies import or the products they manufacture. KAM members in a particular sector form a cohesive group of competitors but with common issues of concern, and have continued to engage on common policy positions for joint advocacy and negotiation with relevant government institutions in addressing issues of grave concern. In 2016, Food & Beverage Sector was voted the best performing sector based on the advocacy engagements initiated by the sector on behalf of the sector Members. Metal & Allied sectors was the runners-up under the same category.
Sectors and subsector pie chart with membership per sector
Samuel Matonda Sectors Manager
Brendah Wawire Edible Oils
Abel Kamau Textiles and Apparel
Heizoh Machira Membership Help Desk
Rose Okoth Membership Recruitment
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KAM Kenya Power Forum - Industrial Area & Machakos Chapters
Kiambu County Deputy Governor Mr. Gerald Kithinji visits the Kenya Manufacturing Expo Stands
KAM Nakuru Chapter - Kenya Power Members Forum
KAM Chairlady, Ms. Flora Mutahi, KAM CEO, Ms. Phyllis Wakiaga with Kenya Power's General Manager, Business Manager, Eng. Peter Kinuthia
Annual Law and Ethical Conference held
KAM CEO Ms. Phyllis Wakiaga with Mining CS, Dan Kazungu
Industry PS, Mr. Julius Korir meets Sector chairs on KAM Budget (2017/2018) Proposals
KAM Team Meets Director of Immigration
The first ever Kenya Manufacturing Summit and Expo Launched
KAM CEO, Ms. Phyllis Wakiaga hosts Swedish Ambassador to Kenya
Nairobi County Governor Dr. Evans Kidero engages Nairobi business community
12th KAM-KAIZEN Conference
KAM Chairlady, Ms. Flora Mutahi with Trade PS, Dr. Chris Kiptoo
KAM meets Agriculture CS, Mr. Willy Bett
KAM Trade Mission to Goma, DRC
Enhancing SMEs capacity for Local Sourcing
Energy CS, Mr. Charles Keter in Nyanza/Western Chapter
KAM meets Parliament Committee on Finance
KAM ICT Sector meets Ministry of Information, Communication and Technology CS, Mr. Joe Mucheru
Kiambu County Executive Commissioners Roundtable
KAM, East African Trade and Investment Hub sign MOU
Regional Anti-Illicit Trade Conference
Energy CS, Mr. Charles Keter meets KAM on Energy issues
KAM CEO's Multinational Caucus
Climate Change Awareness Forum
KAM Uasin Gishu Chapter Sundowner
PS Infrastructure, Eng. John Mosonik meets Industrial Area Manufacturers over poor roads and drainage
Productivity through skills development workshop
12th Annual KAM KAIZEN Conference
Ms. Flora Mutahi takes over KAM Leadership mantle
KAM Meets CBK Governor, Dr. Patrick Njoroge
Global Green Growth Forum (3GF) held in Copenhagen, Denmark
KENYA ASSOCIATION OF MANUFACTURERS
Global Compact Network Kenya Judy Njino Global Compact Network Kenya Coordinator @GlobalcompactKE
To improve industry competitiveness, KAM has continued to partner with the Global Compact Network Kenya to support Kenyan firms integrate sustainability into their business strategies and operations in line with universal principles on human rights, labour, environment and anti-corruption, and take actions that advance societal goals. In 2016, Global Compact Kenya focused its strategy on mobilizing high-level corporate commitment for ethical business conduct. This resulted in over 600 companies signing up to the Code of Ethics for Business in Kenya and the UN Global Compact Principles.
Elijah Ambasa Chapter & County Affairs
Edith Moroti Machakos Chapter
Susan Gitau Coast Chapter
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ANNUAL REPORT 2016
Erick Ochieng’ Nyanza/Western Chapter
Robert Juma Industrial Area Chapter
Edith Koske Uasin Gishu Chapter
Kenneth Ndung'u Central Kenya Chapter
John Kamau Nakuru Chapter
Lilian Gikandi Global Compact
KENYA ASSOCIATION OF MANUFACTURERS
Business against Corruption
During the year, Global Compact Kenya members singled out Corruption as an area of concern and opportunity for business to work collectively towards addressing its negative impacts on business and sustainable development. To this end, the Kenya network and its members spearheaded a number of initiatives aimed at raising awareness, building capacity of companies to enhance their compliance, supporting the drafting of the Bribery Act, 2016 and providing a Network Representative Phyllis Wakiaga and Attorney platform for collective action. General Hon. Githu Muigai The Network held a High-level dialogue to raise awareness on the role of the private sector in fighting corruption with specific guidance on practical measures companies can adopt at firm level. The event, graced by the Attorney General, Hon. Githu Muigai saw the launch of the Business Ethics and Integrity Compliance training program. Global compact also partnered with a number of institutions such as Safaricom Ltd, Kenya Commercial Insurance,
Bank,
Jubilee
Kenya
Bankers
and
Nairobi
Association
Securities Exchange to raise awareness and secure greater corporate ethical
commitment and
for
sustainable
business practices in Kenya.
Panel discussion on the role of business in advancing Anti-Corruption Collective Action to achieve the Sustainable Development Agenda A notable achievement from this engagements was the signing up to the Code of Ethics by the five institutions and their partners bringing a total of over 600 signatories and drafting of the Bribery Bill, 2016. Global Compact Network Kenya participated in the 2nd High Level Meeting of the Global Partnership for Effective Development Cooperation at KICC, the network co-hosted a business forum dubbed Advancing Anti-corruption collective action to achieve the Sustainable Development Agenda – The role of Business. The panel explored topics around collective action approaches to dealing with corruption ANNUAL REPORT 2016
39
KENYA ASSOCIATION OF MANUFACTURERS
Peer learning
In supporting the growth of Global Compact networks in Africa, the Kenya network mentored a group of companies in the Democratic Republic of Congo (DRC) to set up their local network. The Kenya network provided tools and facilitated a full day workshop for the companies with support from the local Dutch Embassy The Network also partnered with NestlĂŠ Kenya- a signatory to the UN Global Compact to host ten signatory company representatives on a case study trip to its Nyeri farm.
Recognition
Good practice case study at Nestle’
Global Compact Network Kenya was among 12 country networks out of 85 countries surveyed to win the 2016 Local Network Awards for its contribution to promoting Responsible and Sustainable Business at the Annual Local Network Forum in Dubai themed Making Global Goals Local Business.
Winners of the Local Network Awards 40
ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS
Communication
“Communication is the mouth-piece of any successful organization” @SalKahiu, @kam_kenya
Sally Kahiu PR, Communication & Marketing Manager
Global Strategic Objective: Positioning KAM as a world class organization that drives the National Industrialization Agenda The Association continued to position itself as the voice of industry inspiring global competitiveness. KAM has indeed concretized its position in the country as the authentic, credible voice of industry. The overall achievement was the positioning of KAM as a knowledge provider and champion for an industrial revolution in the country. As a result of the extensive media coverage, stakeholder engagement and strategic positioning that we engaged in we have been able to do the following; ▪
Re-establish and regenerate awareness of KAM’s position as a leader in development and Industrial transformation
▪
Raise KAM’s profile within and beyond Kenya emphasizing on its role in advocating for a competitive business environment and as an expert on industry related matters
▪
Articulate to stakeholders the critical role that KAM is playing in lobbying the Government and Government agencies for fair policies and incentives for business
▪
Reach out to potential members by articulating the company’s growth strategy
Mildred Mugambi Corporate Affairs
Grace Mbogo Communications
ANNUAL REPORT 2016
41
KENYA ASSOCIATION OF MANUFACTURERS
STRATEGIC BRAND MANAGEMENT
Over the course of last year KAM spokespeople penned over 25 opinion articles in top tier newspapers and news sites/blogs that offered commentary – industry perspective on national issues such as the Budget Process, Creating a conducive environment for business, The Anti-bribery Bill, Climate Change among others. The result of which positioned KAM as a knowledgeable thought leaders in matters of economic development for Kenya.
Strategic Interviews KAM was featured in over 40 interviews and live panel discussions on TV, Print and Online with the above mentioned spokespeople on different national, regional and international issues such as the impact of Brexit, The Economic Partnership Agreements, AGOA and many more.
Media Monitoring and Analysis The secretariat has been conducting media monitoring and coverage analysis in-house to inform the organization’s overall strategy in reaching out to different stakeholders. The analysis plays a key role in providing information on the perception of the organization and the impact of our advocacy in the industry. Overall in 2016 we had over 250 media appearances on TV, Print and Online which positively portrayed the organization’s advocacy work and its position in the business community.
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ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS
Targeted Communication to our membership The secretariat sent out timely notifications, announcement and relevant communication to members on a daily basis.
▪
Our daily News Highlights, not only picks out mentions of the organization in the media but also selects relevant industry-related news articles that will have direct impact on our members’ businesses.
▪
We introduced our Weekly Snapshot – which is a pictorial publication that gives a weekly summary of the activities and events executed by the secretariat in the course of our work
▪
We have been publishing the both the Monthly Wins and Monthly Mentions – The two to provide a recap of the goals we have achieved throughout the month as well as how accurately our issues were captured by the media.
▪
We published quarterly Chapter Newsletters – which were a round-up of our Chapter activities.
▪
At the end of the year we published and posted on our website the KAM Wins Brief 2016 – A publication that captures all the milestones we achieved throughout the year.
▪
Social Media Campaigns – continuous and relevant communications online.
New Website Last year we unveiled the newly revamped KAM website to our members during the end-of –year cocktail. The website is now faster and more interactive, mobile-phone friendly and easy to navigate. It offers up-to-date information on the organization’s activities, events, trainings and conferences and important announcements to our membership. The website is also an interactive platform where members can send in queries and potential members can sign-up – these are immediately picked up by our Members’ Help Desk. Please visit www.kam.co.ke to experience the website and give us your feedback.
ANNUAL REPORT 2016
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KENYA ASSOCIATION OF MANUFACTURERS
Stakeholder relations Over the course of last year, KAM continued to
meetings with partner organizations as well
maintain a good rapport with its stakeholders
as leaders in government to provide updates
in an endeavor to ensure that there is shared
on various projects and on-going areas of
value in our mutual quest to industrialize and
partnership. We organize several networking
create a sustainable economy for our country. To
platforms where our members can interact
this end, KAM organized courtesy calls to various
and share information of mutual benefit to
Departments in Government and parastatals to
their business and provide feedback to the
present position papers that outlined clearly the
secretariat on feedback on our services.
goal of our advocacy. We also held roundtable
End of year Members' Cocktail
Launch of KAM Website during the end of the year Members' Cocktail
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ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS
Corporate Social Responsibility KAM Team participated in the Standard Chartered Nairobi Marathon in Nairobi to raise
funds for
investment in eye care projects.
KAM Team participates in the Standard Chartered - Nairobi Marathon
ANNUAL REPORT 2016
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KENYA ASSOCIATION OF MANUFACTURERS
Finance, ICT, HR & Administration “Facilitating secretariat day-today affairs is at the core of our work.� @DalmasOkendo, @KAM_kenya Dalmas Okendo Head of Operations
Global Strategic Objective: Ensure KAM is financially prudent, sustainable, and has a highly motivated, professional secretariat that uses efficient and modern tools to deliver a broadened mandate.
Being the final year for the implementation of the 2014-2016 Business Development Plan (BDP), the focus in Operations was consolidation of steps taken towards institutional sustainability from a holistic perspective. We concluded the review of KAM operations policies and procedures in the areas of administration, human resource, procurement and ICT to bring them in tandem with latest developments and best practice. We also transited our finance management into sage evolution. We embarked on automation of processes which once fully done should facilitate smooth and timely service delivery to both our internal and external customers. The dividends of the improved financial management manifested in KAM maintaining its liquidity and financial stability in the year 2016 even after fully repaying the Barclays Loan facility long before term.
Zipporah Maina Finance
Paul Mutambuki HR & Administration
46
Walter Opiyo Accounts
Ann Kinoti Administration
ANNUAL REPORT 2016
Peris Kasae Accounts
Teresia Mumbi Office Attendant
Rechal Mwangi Accounts
Josephine Ngugi Records
Danson Ndetei IT Services
Geoffrey Chepkwony Driver
Everlyne Mutui PA to CEO
Stanley Langat Driver
KENYA ASSOCIATION OF MANUFACTURERS
Sustainability of KAM KAM is focused in building formidable foundations
unit continued providing support to other units in
for its sustainability. The generation of resources
the procurement of goods and services required
from own sources has allowed KAM the convenience
for work, guided by the policy. Strict adherence to
and flexibility to deploy the same to the service of
policy, prudent application of resources and value
members both in addressing on going long term
for money in every procurement sit at the heart of
policy concerns as well as responding to emergent
this.
issues affecting members within the shortest time possible.
Human Resources
The sustainability streams being pursued include:
KAM continually reviews its human resources policy
▪ Steadily ▪
and
progressively
growing
to assure a robust human resource management
membership which is KAM’s biggest asset;
system. In 2016, guided by the Human Resource
The milestone that is KAM House that is
Committee of the KAM Board, the Secretariat
now fully occupied with the rental income
continued with the review and updating of its
management separated from other KAM
Human Resource Policy Manual in line with the
income;
recommendations of the Human Resources Audit
▪ Paid services including resource audits
conducted in 2015. This exercise culminated with
(energy audits, water and waste water audits),
a HR Management framework that has produced
trainings, seminars and related firm level
a revamped organizational structure, aligned to
business facilitation services; all of through
KAM mandate and mainstreamed new elements
which KAM has been able and will continue to
like drug and alcohol abuse, harassment and
provide demand driven services to increase
discrimination in workplace, rehire policy among
competitiveness of local manufacturers;
others.
▪
Treasury Bills and Bonds - KAM keenly monitored and took advantage of the
Continuous recruitment of qualified experienced
opportunities therein and reaped good
professionals,
returns.
motivation, appropriate talent management and implementation
career of
progression,
competitive
staff
remuneration
This year KAM drafted an investment policy to
policy makes KAM one of the employers of choice.
guide and direct all investments. The policy is still
We have initiated the transition to a Human
under review by the Finance Management and
Resource
Projects Committee (FIMAPS) of the KAM Board.
that should see complete automation of the HR
Information
Management
System
management function. Procurements KAM’s
procurement
governance
framework
KAM is an equal opportunity employer, who does
comprises a procurement manual which lays down
not discriminate against
the process to be followed for all procurements. This
recruitment. The current workforce is made up of
clearly sets the limits of authority for procurements
both gender, local and international staff members.
and the approval process. This year, the operations
As at close of 2016, KAM had 65 employees and
gender or race in its
ANNUAL REPORT 2016
47
KENYA ASSOCIATION OF MANUFACTURERS 58% of these were female while 42% were male
in 2015, themed “UNITED: Unleashing the Force”,
and there was one male international staff.
yielded good results and this was evident from the improved performance and team spirit in the
KAM’s leadership team of eight, comprises 4
organization in 2016. Staff members are encouraged
women and 4 men.
to work as a team and to build synergies around KAM core values for effective delivery of the KAM
Performance Management
overall work plan.
The Association has a performance management system in place to monitor and evaluate staff
Information Communication Technology
performance. This is based on the Business
KAM
Development
and
Communication Technology platforms to improve
individual detailed implementation plans. It is
efficiency in its operations. Key milestones in
gratifying to note that in 2016, 85% of employees
2016 were: Review of the ICT policy; Installation of
met their set performance expectations. KAM has
security surveillance system for both KAM offices
a staff performance improvement plan in place to
and the entire Building; Initiated development of
ensure all staff meet their performance targets.
a Member's portal with support from Trade Mark
Staff Welfare
East Africa (TMEA) to help consolidate all members
Plan
(BDP),
annual
unit
continued
to
utilize
Information
information into a single platform for easy KAM provides staff members with a Medical cover
interaction amongst themselves and also for ease
benefit, Group personal accident cover, Group
of service delivery to them from the secretariat;
life accident cover and a contributory retirement
Initiated development of a devolution portal that
scheme. Staff are also allowed adequate annual
will make information from the counties easily
leave, sick leave, maternity /paternity leave,
available to members.
compassionate
leave
besides
other
support
and benefits necessary for a conducive working
Partners
conditions.
In driving its work, KAM immensely benefitted from mutually beneficial partnerships with the following
During the year, two staff members retired from
organizations that offered various kinds of support
service having attained the retirement age:
to KAM work:
1.
Mr. Johnstone Konji was a senior Company
1.
Business Advocacy Fund (BAF)
drive having served KAM for thirty three (33)
2.
National Treasury (EU COMESA RIIP)
years since 1982. He retired effective May 1,
3. DANIDA
2016
4. DFID
2. Mrs. Miriam Wambaa had served KAM for
5.
Ministry of Energy and Petroleum (MOEP)
6.
TradeMark East Africa (TMEA)
fourteen (14) years and retired effective April
7. GIZ
1, 2016.
8. AFD 9. DIPD
Team Building
10. Danish Industries (DI)
KAM holds a team building once every two years.
11. African Studies Centre, Laiden
The engagement from the last team building held
48
ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS
Corporate Governance Statement KAM is a company limited by guarantee without share capital. The Association is governed by a member’s Articles and Memorandum of Association and also operates within a member’s charter which members consent to upon joining. The charter has the following contents; 1.
Mission and vision
2.
KAM’s strategic objectives
3.
Equitable treatment of members
4.
Modus operandi
5.
Conflict of interests
6.
Declaration against corruption
7.
Corporate governance and social responsibility and ethical business practices
8.
Members’ special responsibilities (working within applicable laws & regulations)
9.
No misuse of office by board or members of staff
10. Impartiality of Executive Officers without giving undue advantage to any member 11. Decision making through working committees and the board 12. Amendment/Replacement of the charter by executive committee KAM’s core values of innovation, effectiveness, responsiveness and resilience guide the organization’s vision to be a world-class business membership organization effectively delivering services to its members. KAM is committed to promoting competitive local manufacturing in liberalized markets. KAM is owned, funded and managed by its members. At the apex of its governance structure is the member’s Annual General Meeting, which elects the Board of Directors to give strategic direction to the organization. The Board further establishes downstream organs for membership engagement in the advocacy process such as board committees and working committees, sector and regional chapter committees and an executive secretariat to oversee and execute the operational plan. KAM’s BOARD OF DIRECTORS KAM is led by an able Executive Committee who comprises the Board of Directors. The Executive Committee is made up of 18 Board members. The Executive Committee’s role is to manage KAM’s business. It may from time to time elect to the Executive Committee any person who qualifies for election under the organization’s Articles of Association. The
ANNUAL REPORT 2016
49
KENYA ASSOCIATION OF MANUFACTURERS members of the Executive Committee are selfless and highly dedicated to their work. They are determined to see KAM achieve its set goals through its mission and vision. For this reason, the Executive Committee members offer their services to KAM on voluntarily basis. Their dedication is seen in their attendance to Board meetings, which are held six times a year. The Board Committees and the Working Committees have four Statutory Meetings per year, held on a quarterly basis, to review progress and emerging issues, but they may have bilateral dialogue meetings with relevant government agencies as need arises. The Board Committees and the Working Committees are outlined in the following pages.
KAM BOARD COMMITTEES Name of Committee (Responsible Board Members) 1. Trade and Tax § Bharat Shah- Chairman § Rajan Shah § Kaushik Shah § Rajan Malde § Clifford Machoka
Main Areas of Coverage
i. ii.
Budget Proposals Tax Advocacy (policy and administration – refunds, directives) iii. Investment Climate iv. Tracking and Influencing Trade Negotiations v. Trade policy advocacy vi. Export promotion vii. Monitoring barriers to Increased trade Coverage – EAC, COMESA, ACP/EU, WTO viii. Standards and KEBS issues-Quality Standards, KEBS – PVOC, Standard Mark etc.
Physical Infrastructure i. Main oversight over Ports, § Stephen Brooks-Chairman ii. Railways, ICT and physical infrastructure iii. Cargo Movement & Flow § Rita Kavashe iv. Cost of transportation
2. Infrastructure
§ Peter Arina
Energy § Kevin Kariuki § Sylvester Makaka
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ANNUAL REPORT 2016
Energy (Incorporating AOLEC) i. Electricity tariffs & Availability ii. Fuel oils iii. Bio Mass
KENYA ASSOCIATION OF MANUFACTURERS
Name of Committee (Responsible Board Members) 3. Legal &Regulatory Affairs § Mucai Kunyiha- Chairman § Palu Dhanani
Main Areas of Coverage
§ § § §
Legislation Liaison with Parliament & Ministry of Constitutional Affairs Labour Regulations Local Procurement
§ Bimal Kantaria § Jane Karuku
Chair- Illicit Trade- Magdalene Munyao
Illicit Trade Sub Committee Anti-counterfeit Sub-standard products trade Environment § Environmental Regulations § Liaison with NEMA
Chair- Environment- Suresh Patel 4. Devolution and Affairs § Rajan Shah- Chairman § Rajen Shah
§ § § § §
Devolved Government Tracking Internal Trade Barriers Inter-governmental relations Liaison with Intergovernmental Coordination Secretariat Security Issues
§ § § § §
Membership Recruitment Membership Retention Communication Chapter Development Business information
§ § § §
Sustainability CSR Global Compact Responsible Business Practices
§ Hellen Kimani § All Chapter Chairs 5. Membership Development and Services § Joe Muganda- Chairman § Sachen Gudka § Bimal Kantaria § Justin Apsey § All Chapter Chairs
ANNUAL REPORT 2016
51
KENYA ASSOCIATION OF MANUFACTURERS
Name of Committee (Responsible Board Members) 6. Business Competitiveness Services § Helen KimaniChairperson
Main Areas of Coverage
§ Business Services § Firm level support § Export market access by companies (implementation)
§ Flora Mutahi § Peter Arina § Kevit Desai § Kevin Kariuki 7. Finance, Management and Projects (FIMAPS) § Mahul Shah- Chairman § Sachen Gudka § Lutaf Kassam
§ § § § § § § §
Budget preparation & oversight Review Annual Accounts Review Membership Fees Approve Cost Structure for services Subscription follow-up Approval of New Members Operational issues Fund raising and projects development and implementation
§ § § § §
Development of HR Structure and staff placement Staff development Appraisals and promotions Advice to CE on HR matters Governance matters of the Organisation
§ Mucai Kunyiha § Mihir Chalishazar
8. Human Resource and Governance Committee § Kaushik Shah- Chairman § Jane Karuku § Mahul Shah § Mihir Chalishazar § Mucai Kunyiha
52
ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS
Financials Statements
2016
ANNUAL REPORT 2016
53
KENYA ASSOCIATION OF MANUFACTURERS
Corporate Information EXECUTIVE COMMITTEE
Flora W Mutahi (Ms)
- Chairperson
Sachen Gudka*
- Vice Chairman
Pradeep Paunrana
- Ex-Officio
Bimal Kantaria
Kaushik B Shah*
Lutafali Kassam
Mahul J Shah
Bharat Shah
Stephen R Brooks
Perviz Dhanani*
Helen Wairimu Kimani (Ms)
Rajan Dalichand Shah
Mucai Kunyiha
Joseph L O Muganda
Rita Kavashe
Pankaj Bedi***
- Appointed on 17 June 2016
Peter Arina
- Appointed on 17 June 2016
Jane Karuku
- Appointed on 21 July 2016
Jasper W M Engel**
- Resigned on 25 May 2016
Polycarp K Igathe
- Resigned on 21 July 2016
Joseph Lithimbi
- Resigned on 17 June 2016
*British **Dutch ***Indian CHIEF EXECUTIVE
54
ANNUAL REPORT 2016
Phyllis Wakiaga (Ms)
KENYA ASSOCIATION OF MANUFACTURERS
CORPORATE INFORMATION (Continued) SECRETARY
Livingstone Associates
Certified Company Secretaries (Kenya)
P O Box 30029 - 00100
Nairobi REGISTERED OFFICE
LR 1870/1/553 – KAM Building
Peponi Road, Westlands
P O Box 30225 - 00100
Nairobi BANKERS
Barclays Bank of Kenya Limited
Market Branch
P O Box 30018 - 00100
Nairobi AUDITORS
Deloitte & Touche
Certified Public Accountants (Kenya)
Deloitte Place, Waiyaki Way, Muthangari
P O Box 40092 - 00100
Nairobi
LEGAL ADVISORS
Murimi and Company Advocates
2nd Floor, Electricity House
Harambee Avenue
P O Box 540052 - 00200
Nairobi
ANNUAL REPORT 2016
55
KENYA ASSOCIATION OF MANUFACTURERS
Report of the Executive Committee The Executive Committee presents its report together with the audited financial statements of Kenya Association of Manufacturers (the “company”) for the year ended 31 December 2016 which shows its state of affairs. In accordance with section 42 of the sixth schedule transitional and savings provisions of the Company’s Act 2015, this report has been prepared in accordance with section 157 of the repealed Company’s Act as if this repeal had not taken effect. PRINCIPAL ACTIVITIES The principal activity of the company continues to be the promotion of competitive local manufacturing in a liberalised market. FINANCIAL RESULTS Surplus before taxation Taxation charge
Sh 44,917,943 (12,499,395)
Surplus for the year transferred to the retained earnings
32,418,548
MEMBERSHIP OF THE EXECUTIVE COMMITTEE The present membership of the Executive Committee is shown on page 4 AUDITORS Deloitte & Touche, having expressed their willingness, continue in office in accordance with the provisions of the Kenyan Companies Act. BY ORDER OF THE EXECUTIVE COMMITTEE LIVINGSTONE ASSOCIATES Secretary 18th May 2017 Nairobi
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ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS
Statement of Executive Committee Members’ Responsibilities The Kenyan Companies Act requires the Executive committee members to prepare financial statements for each financial year that give a true and fair view of the financial position of the company as at the end of the financial year and of its operating results for that year. It also requires the Executive committee members to ensure that the company maintains proper accounting records that are sufficient to show and explain the transactions of the company and disclose, with reasonable accuracy, the financial position of the company. The Executive committee members are also responsible for safeguarding the assets of the company, and for taking reasonable steps for the prevention and detection of fraud and error. The Executive committee members accept responsibility for the preparation and presentation of these financial statements in accordance with the International Financial Reporting Standards and in the manner required by the Kenyan Companies Act. They also accept responsibility for: (i) designing, implementing and maintaining such internal control as they determine necessary to enable the presentation of financial statements that are free from material misstatement, whether due to fraud or error; (ii) selecting suitable accounting policies and applying them consistently; and (iii) making accounting estimates and judgements that are reasonable in the circumstances. Having made an assessment of the company’s ability to continue as a going concern, the Executive committee are not aware of any material uncertainties related to events or conditions that may cast doubt upon the company’s ability to continue as a going concern. The Executive members acknowledge that the independent audit of the financial statements does not relieve them of their responsibilities. Approved by the board of executive committee members on 18th May 2017 and signed on its behalf by:
KAUSHIK SHAH
MAHUL SHAH
Director Director
ANNUAL REPORT 2016
57
KENYA ASSOCIATION OF MANUFACTURERS
INDEPENDENT AUDITORS’
Report to the Members of Kenya Association of Manufacturers (A Company Limited By Guarantee) Report on the Audit of the Financial Statements Opinion We have audited the accompanying financial statements of Kenya Association of Manufacturers (the “Company”), set out on pages 9 to 29, which comprise the statement of financial position as at 31 December 2016, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company as at 31 December 2016 and of its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRSs”) and the requirements of the Kenyan Companies Act. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the financial statements section of our report. We are independent of the company in accordance with the Institute of Certified Public Accountants of Kenya Code of ethics (ICPAK Code of Ethics), which is consistent with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants, together with other ethical requirements that are relevant to our audit of the financial statements in Kenya, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other Information The executive committee members are responsible for the other information, which comprises the report of executive committee as required by the Kenyan Companies Act. The other information does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
58
ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS
INDEPENDENT AUDITORS’
Report to the Members of Kenya Association of Manufacturers (A Company Limited By Guarantee) (Continued) Responsibilities of executive committee members and those charged with governance for the financial statements The Executive committee members are responsible for the preparation of the financial statements that give a true and fair view in accordance with International Financial Reporting Standards and the requirements of the Kenyan Companies Act, and for such internal controls as Executive committee members determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the executive committee members are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. The Executive committee members and those charged with governance are responsible for overseeing the Company’s financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: ▪
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
▪
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
▪
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Executive Members.
ANNUAL REPORT 2016
59
KENYA ASSOCIATION OF MANUFACTURERS
INDEPENDENT AUDITORS’
Report to the Members of Kenya Association of Manufacturers (A Company Limited By Guarantee) (Continued) ▪
Conclude on the appropriateness of the Executive member’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
▪
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Report on Other Legal and Regulatory Requirements As required by the Kenyan Companies Act, we report to you, based on our audit, that: i)
we have obtained all the information and explanations which to the best of our knowledge and belief, were necessary for the purposes of our audit; ii) in our opinion, proper books of account have been kept by the company, so far as appears from our examination of those books of account; and iii) the company’s statement of financial position (balance sheet) and statement of profit or loss and other comprehensive income (profit and loss account) are in agreement with the books of account. The engagement partner responsible for the audit resulting in this independent auditors’ report is CPA Fred Aloo - P/No 1537.
Certified Public Accountants (Kenya) Nairobi, Kenya 22nd May 2017
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ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS
Statement of Profit or Loss and other Comprehensive Income for the Year Ended 31 December 2016
2016 2015 Notes Sh Sh INCOME 3 176,198,940 203,720,436 OTHER OPERATING INCOME 4 67,121,066 31,361,374 GRANT INCOME 17 250,382,619 318,829,493 493,702,625 553,911,303 ADMINISTRATIVE EXPENSES 5 (195,755,601) (177,784,735) GRANT EXPENDITURE (250,382,619) (318,829,493) FINANCE INCOME 8 12,367,876 15,540,965
FINANCE COST 6 (15,014,338) (17,484,847) SURPLUS BEFORE TAXATION 44,917,943 55,353,193 TAXATION CHARGE 9(a) (12,499,395) (30,049,109) SURPLUS FOR THE YEAR 32,418,548 25,304,084 OTHER COMPREHENSIVE INCOME FOR THE YEAR Items that may be reclassified subsequently to profit or loss: NET GAIN/(LOSS) ON AVAILABLE-FOR-SALE FINANCIAL ASSETS DURING THE YEAR
13
2,621,770
(3,404,523)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 35,040,318 21,899,561
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KENYA ASSOCIATION OF MANUFACTURERS
Statement of Financial Position AS AT 31 DECEMBER 2016
2016 2015 Notes Sh Sh ASSETS Non current assets Property and equipment 10 377,152,501 386,556,213 Treasury bonds 13 54,959,102 52,582,632 Corporate bonds 13 9,985,250 9,739,950 Term deposits 14 - 14,390,749 442,096,853 463,269,544 Current assets Receivables 11 70,155,473 85,271,084 Earmarked funds receivable 17 24,892,092 31,861,107 Tax recoverable 9(c) 3,040,156 7,763,597 Treasury bills 12 9,170,485 38,046,099 Term deposits 14 - 20,000,000 Bank and cash balances 122,152,450 36,746,679 229,410,656 219,688,566 Total assets 671,507,509 682,958,110 RESERVES AND LIABILITIES Reserves Capital fund 35,919,608 35,919,608 Investments revaluation deficit (2,538,703) (5,160,473) Retained earnings 173,037,743 140,619,195 206,418,648 171,378,330 Non current liabilities Borrowings 19 - 126,618,321 Deferred tax liability 15 23,329,472 21,324,856 23,329,472 147,943,177 Current liabilities Unexpended project funds 17 219,594,125 210,757,758 Subscriptions received in advance 4,945,053 4,592,867 Payables 16 217,220,211 148,285,978 441,759,389 363,636,603 Total reserves and liabilities 671,507,509 682,958,110 The financial statements on pages 9 to 29 were approved and authorised for issue by the Executive Committee on 18th May 2017 and were signed on its behalf by: KAUSHIK SHAH ) ) Members of the Executive Committee MAHUL SHAH )
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ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS
STATEMENT OF CHANGES IN EQUITY Investments
Capital
revaluation
fund*
Retained
deficit** earnings
Sh
Total
Sh Sh Sh
At 1 January 2015
35,919,608
(1,755,950)
115,315,111
149,478,769
Total comprehensive income for the year
-
(3,404,523)
25,304,084
21,899,561
At 31 December 2015
35,919,608
(5,160,473)
140,619,195
171,378,330
At 1 January 2016
35,919,608
(5,160,473)
140,619,195
171,378,330
Total comprehensive income for the year
-
2,621,770
32,418,548
35,040,318
At 31 December 2016
35,919,608
(2,538,703)
173,037,743
206,418,648
*The capital fund represents funds reserved for capital expenditure. **Investments revaluation deficit represent the (loss)/gain on the valuation of available for sale financial assets.
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KENYA ASSOCIATION OF MANUFACTURERS
STATEMENT OF CASH FLOWS 2016 2015 Notes Sh Sh CASH FLOW FROM OPERATING ACTIVITIES Cash generated from operations 18(a) 156,903,667 93,731,074 Taxation paid 9(c) (5,771,338) (8,777,768) Net cash generated from operating activities 151,132,329 84,953,306 CASH FLOW FROM INVESTING ACTIVITIES Additions to work in progress 10 - (24,038,938) Purchase of motor vehicles, furniture and equipment 10 (14,921,506) (2,337,075) Purchase of government securities maturing after 90 days (28,628,355) (95,481,230) Purchase of fixed deposits maturing after 90 days - (10,000,000) Proceeds on redemption of treasury bonds - 39,176,107 Proceeds on redemption of treasury bills 71,894,718 47,435,131 Proceeds on disposal of equipment 179,030 115,254 Interest received 12,367,876 15,540,965 Net cash generated from/(used in) investing activities 40,891,763 (29,589,786) CASH FLOW FROM FINANCING ACTIVITIES Repayment of borrowings 19 (126,618,321) (18,347,870) Net increase in cash and cash equivalents 65,405,771 37,015,650 Cash and cash equivalents at 1 January 56,746,679 19,731,029 Cash and cash equivalents at 31 December 18(b) 122,152,450 56,746,679
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ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 1
ACCOUNTING POLICIES
Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and the Kenyan Companies Act.
For Kenyan Companies Act reporting purposes, in these financial statements the balance sheet is represented by the statement of financial position and the profit and loss account is presented in the statement of profit or loss and other comprehensive income.
Adoption of new and revised International Financial Reporting Standards (IFRSs) and Interpretations (IFRIC) (a)
New and revised IFRSs effective in the current period
Several new and revised IFRSs became effective in the current period and have not affected the amounts reported in these financial statements.
(b)
New and revised IFRSs in issue but not yet effective
At the date of authorisation of these financial statements, several new and revised standards and interpretations were in issue but not yet effective. The executive committee members do not anticipate that these standards will have a significant impact on the company’s financial statements when they become effective.
(c)
Early adoption of standards
The company did not early adopt any new or revised standards and interpretations in issue but not yet effective.
Basis of preparation
The financial statements are prepared on the historical cost basis of accounting as modified to include the revaluation of certain assets. The principal accounting policies adopted are as shown below and remain unchanged from previous year.
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KENYA ASSOCIATION OF MANUFACTURERS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued) 1
ACCOUNTING POLICIES (Continued)
Income
Revenue is measured at the fair value of the consideration received or receivable.
Subscriptions and entrance fees are recognised when received. Subscriptions received relating to subsequent years is accounted for as deferred income. Income from services rendered to members is recognised when the services are rendered. Rental income and management fees are recognised when earned. Interest income is recognised on an accruals basis by reference to the principal outstanding and the interest rate applicable.
Grants
Grants are not recognised until there is reasonable assurance that the company will comply with the conditions attaching to them and that the grants will be received. They are recognised as income over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis. Grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the company with no future related costs are recognised in profit or loss in the period in which they become receivable.
Any unexpended grants are carried forward as liabilities. Excess of expenditure over receipts for specific grants are recognised as revenue and included in the financial statements as accounts receivable from donors.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible
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KENYA ASSOCIATION OF MANUFACTURERS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued)
temporary differences are utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from good will or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Retirement benefit costs
Company defined contribution association
The company operates a defined contribution association for eligible employees. The association is administered by Alexander Forbes Financial Services Ltd and is funded by contributions from both the company and employees. The employees contribute 5% of their basic pay while the employer contributes 7.5%.
Statutory defined contribution association
The company also contributes to a statutory contribution association, the National Social Security Fund (NSSF). Contributions are determined by local statute and are currently limited to a maximum of Sh 200 per employee per month. The company’s contributions to both associations are recognised in profit or loss as they fall due.
Gratuity
The company operates a service gratuity association for its contracted employees. Entitlements to service gratuity are recognised when they accrue to qualifying employees. A provision is made for the estimated annual staff gratuity payable as a result of services rendered by the employees up to the statement reporting date. Staff are entitled to their contributions on expiry of their contracts.
Foreign currencies
Transactions during the year which are denominated in foreign currencies are translated to Kenya Shillings at rates ruling at the transaction dates. Monetary assets and liabilities at the reporting date, which are expressed in foreign currencies, are translated into Kenya Shillings at rates ruling at the reporting date. Exchange differences resulting from the translations are dealt with in profit or loss in the period in which they arise.
Property and equipment
Property and equipment are stated at cost or valuation less depreciation and any impairment losses. Any revaluation increase arising on the revaluation of such property is recognised in other
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KENYA ASSOCIATION OF MANUFACTURERS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued)
comprehensive income and accumulated in the properties revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously expensed. A decrease in the carrying amount arising on the revaluation of such property and equipment is recognised in profit or loss to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous revaluation of that asset. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve is transferred directly to retained earnings. Buildings are revalued every 3 to 5 years on an open market value basis. Depreciation
Depreciation is calculated to write off the cost or valuation of the property and equipment over their estimated useful lives at the following annual rates:
Buildings Furniture Equipment
Gains and losses on disposal of property and equipment are determined by reference to their carrying amounts. On disposal of revalued assets, amounts in the revaluation reserve relating to that asset are transferred to retained earnings.
5% on straight line basis 12.5% on reducing balance basis 30% on reducing balance basis
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Payments to acquire leasehold interest in land are treated as prepaid operating lease rentals and amortised over the period of the lease.
Borrowings
Interest bearing loans and overdrafts are recorded at the proceeds received, net of direct costs. Borrowings are subsequently stated at amortized cost using the effective interest method; any differences between proceeds (net of transaction costs) and the redemption value are recognized in the profit and loss account over the period of the borrowings.
Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
Impairment
At each reporting date, the company reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued)
indication exists, the asset’s recoverable amount is estimated and an impairment loss is recognized in the profit or loss whenever the carrying amount of the asset exceeds its recoverable amount.
Impairment losses are recognised as an expense immediately, unless the relevant asset is at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses for assets other than goodwill, the carrying amount of the asset is increased to the revised estimate of its recoverable amount. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years.
Provision for employee entitlements
Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave accrued at the reporting date.
Financial instruments
Financial assets and liabilities are initially recognized when the company has become a party to the contractual provisions of the instrument.
Financial assets
Classification
The company classifies its financial assets into the following categories: Financial assets at fair value through profit or loss; loans, advances and receivables; held- to- maturity; and available-forsale. Management determines the appropriate classification of its investments at initial recognition.
Financial assets at fair value through profit or loss
This category has two sub-categories: Financial assets held for trading and those designated at fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management.
Loans, advances and receivables
Loans, advances and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the company provides money, goods or services directly to a debtor with no intention of trading the receivable. ANNUAL REPORT 2016
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued)
Held to maturity
Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that management has the positive intention and ability to hold to maturity. Where a sale occurs other than an insignificant amount of held-to-maturity assets, the entire category would be tainted and be classified as available-for-sale.
Available-for-sale financial assets
These are financial assets that are not (a) financial assets at fair value through profit or loss, (b) loans, advances and receivables, or (c) financial assets held to maturity.
Recognition
Financial assets are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss.
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Gains and losses arising from changes in the fair value of “financial assets at fair value through profit or loss� are included in profit or loss in the period in which they arise. Gains and losses arising from changes in the fair value of available-for-sale financial assets are recognized in other comprehensive income and accumulated in the revaluation reserve, until the financial asset is derecognised or impaired, at which time the cumulative gain or loss previously recognised in revaluation reserve is recognised in profit or loss.
Derecognition
Financial assets are de recognized when the rights to receive cash flows from the financial assets have expired or where the company has transferred substantially all risks and rewards of ownership.
Financial liabilities
All financial liabilities are measured at fair value net of transaction costs.
Cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash equivalents comprise cash in hand and short term liquid investments which are readily convertible into known amounts of cash and which are within 3 months of maturity when acquired, less advances from the banks payable within three months from the date of the advance.
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued) Comparatives
Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.
2
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision only affects that period or in the period of the revision and future periods if the revision affects both current and future periods.
The following are the critical judgments and key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date that have had the most significant effect on amounts recognised in the financial statements and that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year:
Held -to-maturity investments
The company follows the guidance of IAS 39 on classifying non-derivative financial assets with fixed or determinable payments and fixed maturity as held-to-maturity. This classification requires significant judgement. In making this judgement, the company evaluates its intention and ability to hold such investments to maturity. If the company fails to keep these investments to maturity other than for the specific circumstances – for example, selling an insignificant amount close to maturity – it will be required to reclassify the entire class as available-for-sale. The investments would therefore be measured at fair value, not amortised cost.
Impairment
This involves determination of whether assets are impaired and requires an estimation of the value of the assets.
Property and equipment
Critical estimates are made by The Executive Committee Members in determining useful lives of property and equipment.
ANNUAL REPORT 2016
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KENYA ASSOCIATION OF MANUFACTURERS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued) 3 INCOME Subscriptions Revenue from members activities Revenue from sale of members index and publications 4
OTHER OPERATING INCOME
AGOA Visa income Other operating income Rental Tender forms Loss on disposal of assets
2016 Sh
2015 Sh
90,144,682 85,913,758 140,500
84,197,533 116,258,858 3,264,045
176,198,940
203,720,436
9,236,966 4,401,875 53,597,395 - (115,170)
8,033,000 6,224,473 17,122,802 20,000 (38,901)
67,121,066
31,361,374
Staff costs (note 7) Other office expenses Travelling Accountancy services Postages and telephones Legal and professional Printing and stationery Office security Depreciation (note 10) Insurance Land rent and rates Annual General Meeting expenses Board expenses Audit fees Members’ functions/meetings Electricity Bank charges Motor vehicle Exchange losses Office relocation expenses Bad debts
104,283,124 34,261,709 5,417,646 3,510,000 1,932,220 3,542,084 3,113,556 1,271,160 24,031,018 1,423,953 330,868 2,149,102 1,984,280 864,800 1,924,471 3,505,133 403,378 1,707,436 99,664 - -
87,390,922 30,063,771 9,624,134 3,465,000 943,104 3,394,936 2,381,352 2,051,280 25,355,906 1,438,696 458,704 2,126,728 1,599,611 930,920 2,478,807 907,711 421,718 2,070,352 172,083 45,000 464,000
195,755,601
177,784,735
5
72
ADMINISTRATIVE EXPENSES
ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued) 6 FINANCE COST
Finance cost
7
STAFF COSTS
2016 Sh
Salaries and wages Senior executives Medical Staff training Staff bonus Retirement benefit costs Defined contribution pension Leave pay provision /(credit) Other staff costs 8
- NSSF contribution - Gratuity provision
2015 Sh
15,014,338
17,484,847
65,144,411 15,007,297 4,201,775 4,540,917 5,988,466 7,720,769 150,200 - 970,979 558,310
49,688,418 18,024,499 4,050,891 5,941,020 6,491,149 4,339,333 127,600 (1,543,895) (519,151) 791,058
104,283,124
87,390,922
FINANCE INCOME
Interest receivable from:
- Bonds held to maturity - Short term deposits held to maturity - Treasury bills held to maturity - Commercial paper held to maturity
9 TAXATION (a)
Taxation charge
Current taxation based on the adjusted surplus for the year at 30%
Current year charge Deferred taxation credit (note 15)
(b) Reconciliation of taxation charge to the expected tax based on accounting surplus
Accounting surplus before taxation
6,884,033 935,443 3,298,400 1,250,000
9,033,576 1,870,354 3,387,035 1,250,000
12,367,876
15,540,965
10,494,779 2,004,616
4,662,290 25,386,819
12,499,395
30,049,109
44,917,943
55,353,193
ANNUAL REPORT 2016
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KENYA ASSOCIATION OF MANUFACTURERS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued)
2016 2015 Sh Sh
Tax at the applicable rate of 30% Tax effect of revenue not taxable
10
(c)
Taxation recoverable
At 1 January Charge for the year Paid in the year
At 31 December
13,475,383 (975,988)
16,605,958 13,443,151
12,499,395
30,049,109
7,763,597 (10,494,779) 5,771,338
3,648,119 (4,662,290) 8,777,768
3,040,156
7,763,597
PROPERTY AND EQUIPMENT
COST/VALUATION
Furniture & Motor Work in Equipment Vehicles Buildings progress Total Shs Shs Shs Shs Shs’0
At 1 January 2015 Additions Transfers from WIP Disposals
22,788,320 5,395,000 - 370,604,148 398,787,468 2,337,075 - - 24,038,938 26,376,013 21,705,848 - 372,937,238 (394,643,086) (230,028) - - - (230,028)
At 31 December 2015
46,601,215
At 1 January 2016 Additions Disposals
46,601,215 5,395,000 372,937,238 14,007,779 - 913,727 (564,615) - -
- 424,933,453 - 14,921,506 - (564,615)
At 31 December 2016
60,044,379
5,395,000
373,850,965
- 439,290,344
11,748,511 5,697,481 (75,927)
1,348,750 1,011,563 -
- 18,646,862 -
- - -
13,097,261 25,355,906 (75,927)
At 31 December 2015
17,370,065
2,360,313
18,646,862
-
38,377,240
At 1 January 2016 Charge for the year Eliminated on disposals
17,370,065 5,359,457 (270,415)
2,360,313 910,406 -
18,646,862 17,761,155 -
- - -
38,377,240 24,031,018 (270,415)
At 31 December 2016
22,459,107
3,270,719
36,408,017
-
62,137,843
5,395,000
372,937,238
- 424,933,453
DEPRECIATION
At 1 January 2015 Charge for the year Eliminated on disposals
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued)
NET BOOK VALUE
At 31 December 2016
37,585,272
2,124,281
337,442,948
-
At 31 December 2015
29,231,150
3,034,687
354,290,376
- 386,556,213
11 RECEIVABLES
377,152,501
2016 Sh
2015 Sh
Other receivables 42,793,368 Prepayments 2,394,833 Deposits 1,376,861 VAT recoverable 23,590,411 70,155,473 12 TREASURY BILLS – Held to Maturity at amortised cost
37,101,443 2,541,132 1,214,659 44,413,850
Nominal Value Less: Unearned discount At 31 December
At fair value through Profit or loss: At 1 January Additions Disposals At 31 December
Maturing within 90 days Maturing after 90 days
The effective treasury bills interest rates as at year end were: – 90 days
85,271,084
10,000,000 (371,459)
40,000,000 (1,953,901)
9,628,541
38,046,099
38,046,099 28,628,355 (57,503,969)
85,481,230 (47,435,131)
9,170,485
38,046,099
- 9,170,485
19,763,300 18,282,799
2016 % 8.7
ANNUAL REPORT 2016
2015 % 12.7
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KENYA ASSOCIATION OF MANUFACTURERS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued) 13
AVAILABLE-FOR-SALE INVESTMENTS CARRIED AT FAIR VALUE
Treasury Bonds Sh
At 1 January 2015 Addition Disposal Fair value loss At 31 December 2015
84,197,776 10,000,000 (38,628,821) (2,986,323)
Corporate Bonds Sh
Total Sh
10,158,150 94,355,926 - 10,000,000 - (38,628,821) (418,200) (3,404,523)
52,582,632
9,739,950
62,322,582
At 1 January 2016 Fair value gain
52,582,632 2,376,470
9,739,950 245,300
62,322,582 2,621,770
At 31 December 2016
54,959,102
9,985,250
64,944,352
The effective interest rates as at year end were: – Treasury Bonds – Corporate Bonds 14
2016 %
2015 %
9.7 12.5
12.4 12.5
- - -
4,390,749 20,000,000 10,000,000
TERM DEPOSITS
CFC Stanbic Bank Limited Habib Bank Limited NIC Bank Limited
Maturity date 6 July 2016 3 February 2016 12 August 2016
Interest rate 12.5% 11% 11%
Maturity analysis: Long term deposits - Maturing within 90 days
-
34,390,749
-
20,000,000
Long term deposits - Maturing after 90 days
-
14,390,749
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued) 15
DEFERRED TAX LIABILITY
Deferred income taxes are calculated on all temporary differences under the liability method using the enacted tax rate of 30%. 2016 2015 Sh Sh
The net deferred tax liability is attributable to the following items:
Accelerated capital allowances General doubtful debt provision Leave pay provision
(24,403,191) 325,014 748,705
(21,930,641) 148,373 457,412
(23,329,472)
(21,324,856)
The movement in the deferred taxation account is as follows:
At 1 January Tax credit recognised in profit or loss (note 8 (a))
(21,324,856) (2,004,616)
4,061,963 (25,386,819)
At 31 December
(23,329,472)
(21,324,856)
16 PAYABLES Funds held in trust Export Association (KAMEA) Accruals Trade payables Other payables Leave pay provision Project payables
100,074,369 4,913,977 10,633,153 41,521,962 51,933,081 2,495,685 5,647,984
55,483,662 4,913,977 6,113,310 31,620,535 40,425,043 1,524,706 8,204,745
217,220,211
148,285,978
The amount due to Kenya Apparel Manufacturing Export Association (KAMEA) represents money collected from members of KAMEA and held on their behalf.
ANNUAL REPORT 2016
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KENYA ASSOCIATION OF MANUFACTURERS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued) 17
EARMARKED FUNDS RECEIVABLE/(UNEXPENDED PROJECT FUNDS)
Unexpended Grant Grant Grant Grants Unexpended grant receivable income income receivable Grant b/f b/f received recognised c/fwd c/fwd DONOR C.I.P.E project
-
6,998,704
4,004,279
4,279
2,998,704
-
Catalyst Fund (MESPT)
-
1,801,707
7,132,964
4,695,914
-
(635,343)
-
-
-
-
(2,657,337)
GIZ Project
(2,657,337)
CEEC GTZ Project
-
1,303,641
3,520
3,520
1,303,641
-
Business advocacy fund (B.A.F.)
-
13,020,386
30,977,448
32,528,088
14,571,026
-
CEEC MOEP project
-
6,176,731
52,500,000
15,639,629
-
(30,683,640)
Global Compact Fund
-
1,416,492
10,542,209
4,151,775
-
(4,973,942)
UNDP (3,071,911)
-
-
-
-
(3,071,911)
(12,247,146)
-
-
-
-
(12,247,146)
(4,876,125)
-
8,830,163
8,830,163
-
(4,876,125)
1,143,446
-
-
1,143,446
-
-
93,787,249
110,915,258
-
(129,571,116)
Pro Invest project Trademark East Africa BMO network project CEEC DANIDA AFD (13,057,576) KAM - FICCF project DIPD & Africanisation Project S&L Project COMESA Fund
- (146,699,125) - (2,686,019)
13,039,396 14,986,718
- (11,110,254)
-
30,211,904
37,749,737
4,875,274
-
-
4,987,240
2,509,159
-
(2,478,081)
(9,244,160)
-
-
-
-
(9,244,160)
(15,884,474)
-
10,195,090
18,368,379
-
(7,711,185)
-
(333,885)
Illicit Trade Manual (333,885) - - -
(210,757,758)
31,861,107 266,211,462 250,382,619 24,892,091 (219,594,125)
C.I.P.E. project is funded by the US-based Centre for International Private Enterprise (C.I.P.E). It was established to support KAM regional offices in realising devolved system of Governance through supporting sensitization forums, aspiring candidates debates, formation of county coalitions and driving the regional business agenda.
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued)
The Catalyst Fund project is funded by United Nations Development Program (UNDP) and Micro Enterprise Support Program Trust (MESPT) to improve the competitiveness of small and medium enterprises (SME) in Kenya. In the year under review MESPT has continued to support the SME program at Kenya Association of Manufacturers. GIZ project, the primary aim of the project promoted by the grant is to foster energy efficiency activities of Kenya’s industrial sector in a cost effective and environmentally sustainable manner. This overall objective is defined by the developing a strategy for collective action to establish a national energy efficiency accord in Kenya whereby the businesses are encouraged to voluntary adopt initiatives to improve energy efficiency by signing to the accord. Of these funds Sh 2,657,336 (2015 - Sh 2,657,336) had not been utilised as at year end. The B.A.F. project and illicit trade manual are funded by the Danish International Agency (DANIDA) and is designed to strengthen the capacity of Business Membership Organisations. The company received funds from the Government of Kenya through the Ministry of Energy which continues to support the association in pursuit of enhancing business competitiveness through energy efficiency and conservation initiatives like Energy Audits, Investment Grade Audits, training and creating awareness. CEEC-MOEP project aims in promoting energy efficiency and conservation measures within Kenyan industries and building capacity around energy efficiency. The Global Compact project was funded by the Danish International Agency (DANIDA) and GTZ to assist companies in Kenya to sign up for the United Nations Global Compact, which is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption. UNDP funds will be utilized to undertake pending activities in the development of a strategic plan for the Center for Energy Efficiency and Conservation (CEEC). This activities will include; a review and stakeholders workshop, institutional development, awareness creation. Of these funds Sh 3,071,911 (2015- Sh 3,071,911) had not been utilised at year end. Pro Invest project is funded by European Commission mainly to promote a business friendly East African Common Market. Of these funds Sh 12,247,146 (2015 - Sh 12,247,146) had not been utilised as at year end. Trademark East Africa is a non- profit organization which promotes regional trade and economic integration in East Africa by working closely with East African Community (EAC) institutions, national governments, and business and civil society organizations. Kenya Association of Manufacturers partnered with Trade Mark east Africa from July 2015 towards enhancing competitiveness of Kenyan Industries in the East African Market. Of these funds Sh 4,876,125 (2015 – Sh 4,876,125) had not been utilised as at year end. The BMO Network project relates to funds from the Danish Ministry of Foreign Affairs towards the support of Business Membership Organisations in Eastern and Southern Africa, of which the company is a grantee. The CEEC Danida project is a Danida funded programme, with the purpose of assisting developing countries with initiating activities to reduce carbon emissions and assist vulnerable countries, including small island states, to implement climate change adaptation, support for energy efficiency initiatives and ANNUAL REPORT 2016
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued)
energy-saving technologies in the manufacturing sector in Kenya. The four year financial support for the project is DKK 30 million (Ksh 450 million), implemented by Center for Energy Efficiency and Conservation (CEEC) under KAM interventions. Of these funds Sh 129,571,116 (2015-Sh 146,699,125) had not been utilised as at year end. The AFD Project has funds in place to extend lines of credit to institutions to support and implement renewable energy, energy efficiency and green field projects in East Africa. The total grant amount over a two year program is 2.6Million Euros administered under four different components. Of these funds Sh 11,110,254 (2015 – Sh 13,057,576) had not been utilised as at year end. KAM - FICCF project is a fund created and funded by Department for International Development (DFID) supporting KAM in strengthening business society engagement in climate change mitigation advocacy for improved policy and regulatory framework aiming at providing attractive & enabling conditions for increased investment in low carbon and climate resilient infrastructure in Kenya. Of these funds Sh Nil (2015 – Sh 2,662,559) had not been utilised as at year end. S&L project is funded by UNDP through Ministry Of Industrialisation. It involves organising sensitisation workshops with industry, academia and all relevant stakeholders who use or plan to use energy efficient equipment that come with clear standards and labels on energy consumption. Of these funds Sh 9,244,160 (2015 – Sh 9,264,160) had not been utilised as at year end. COMESA Fund is a partnership funded through the Ministry of Finance to assist KAM intensify regional integration activities through Research, Participation in various engagements forums, sensitisation meetings, workshops and Publicity. Of these funds Sh 7,711,185 (2015 – Sh 15,884,474) had not been utilised as at year end. 18
NOTES TO THE STATEMENT OF CASH FLOWS
(a) Cash generated from operations
Reconciliation of surplus before taxation to cash generated from operations:
Surplus before taxation
Adjustments for: Depreciation (note 10) Loss on disposal of equipment Interest income
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ANNUAL REPORT 2016
2016 Sh
2015 Sh
44,917,944
55,353,193
24,031,018 115,170 (12,367,876)
25,355,906 38,901 (15,540,965)
KENYA ASSOCIATION OF MANUFACTURERS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued) Changes in working capital:
Decrease/(increase) in receivables Decrease in earmarked funds receivables Increase/(decrease) in unexpended project funds Increase in subscriptions received in advance Decrease in gratuity provision Increase in payables
Cash generated from operations
(b)
Analysis of cash and cash equivalents
Short term deposits – maturing within 90 days (note 13) Bank and cash balances
2016 Sh
2015 Sh
15,115,611 6,969,015 8,836,367 352,183 - 68,934,235
(13,733,833) 20,448,545 (7,673,631) 105,912 (10,091,909) 39,468,955
156,903,667
93,731,074
- 122,152,450
20,000,000 36,746,679
122,152,450
56,746,679
19 BORROWINGS 2016 2015 Sh Sh As at 1 January 81,993,321 Borrowings received - 144,966,191 Loan repayment (81,993,321) (18,347,870) - 126,618,321 Amounts due for settlement within one year - (44,625,000) Amounts due for settlement after one year - 81,993,321
The company borrowed a term loan facility from Barclays Bank on 18 April 2014 for Sh 357,000,000 for purposes of financing the construction of the KAM Office Block L.R Number 1870/1/553. The loan is repayable over 96 months in equal monthly instalments with a 24 month moratorium after the first drawdown of the facility. The final repayment date is 120 months from the date of the first drawdown. The financing rate is set at 3.0% per annum above the Treasury Bill rate with a floor of the Central Bank rate. The facility is secured by a first ranking charge over the same building and land.
ANNUAL REPORT 2016
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued) 20 KEY MANAGEMENT REMUNERATION
2016 Sh
Salaries and other benefits
21
CONTINGENT LIABILITIES
The company did not have any contingent liabilities in the year (2015: Sh Nil).
22 CAPITAL COMMITMENTS
15,007,297
2016 Sh
2015 Sh
18,024,499
2015 Sh
Authorised but not contracted for
-
6,050,000
Authorised and contracted for
-
-
The capital commitments relate to office equipment to enhance company services.
23
FINANCIAL RISK MANAGEMENT
The company’s s activities expose it to a variety of financial risks including credit and liquidity risks, effects of changes in foreign currency and interest rates risks. The company’s 's overall risk management programme focuses on unpredictability of changes in the business environment and seeks to minimise the potential adverse effect of such risks on its performance by setting acceptable levels of risk. Risk management is carried out by the management under policies approved by the Executive Committee. Management identifies and evaluates financial risks. The Executive Committee provides principles for overall risk management. There has been no change to the company’s exposure to financial risks or the manner in which it manages and measures the risk.
82
Market risk (i)
Foreign exchange risk The company is exposed to foreign exchange risk primarily with respect to the US dollar. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities. Monetary assets and liabilities held in foreign currencies are closely monitored to ensure that they are not materially affected by adverse foreign currency fluctuations.
At 31 December 2016, if the Shilling had weakened/strengthened by 5% against the US dollar with all other variables held constant, the impact on surplus before taxation for the year
ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued)
would have been Sh 26,434 (2015: Sh 6,184) higher/lower, mainly as a result of US dollar bank balances. (ii)
Interest rate risk The company is exposed to interest rate risk arising from government securities, commercial paper and short term deposits that it holds.
At 31 December 2016, an increase/decrease of 5% on average interest rates would have resulted in an increase/decrease in surplus before taxation of Sh 2,245,897 (2015: Sh 2,767,660). Credit risk Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the company. The company has adopted a policy of only dealing with creditworthy counterparties. Credit risk arises from deposits with financial institutions, investments in government securities and trade receivables. The company’s finance department assesses the credit quality of each member, taking into account its financial position, past experience and other factors. The company only transacts with reputable financial institutions to mitigate credit risk from such institutions. Government securities are guaranteed by the government and are considered near risk free by the market. The company does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The company defines counterparties as having similar characteristics if they are related entities. The carrying amount of financial assets recorded in the financial statements that represents the company’s maximum exposure to credit risk without taking account of the value of any collateral obtained is as follows: Fully performing Past due Impaired Total Sh Sh Sh Sh 31 December 2016 Government securities 54,959,102 - - 54,959,102 Bank balances 122,152,450 - - 122,152,450 177,111,552 - - 177,111,552 31 December 2015 Government securities Term deposits Bank balances
52,582,632 34,390,750 36,816,679
- - -
- - -
52,582,632 34,390,750 36,816,679
123,790,061
-
- 123,790,061
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued) 23
FINANCIAL RISK MANAGEMENT (Continued)
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Executive Committee, which has developed and put in place an appropriate liquidity risk management framework for the management of the company’s short, medium and long-term funding and liquidity management requirements. The company manages liquidity risk by maintaining adequate reserves and by continuously monitoring forecast and actual cash flows.
The table below analyses the company’s financial liabilities that will be settled on a net basis into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table below are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant.
Between Between Less than 1 – 3 3 - 12 1 month months months Total Sh Sh Sh Sh 31 December 2016 Unexpended project funds 219,594,125 - - 219,594,125 Project payables 5,647,984 - - 5,647,984 225,242,109 - - 225,242,109 31 December 2015 Unexpended project funds 210,757,758 - - 210,757,758 Project payables 7,658,402 - - 7,658,402 218,416,160 - - 218,416,160
Fair Value of financial assets and liabilities
The table below shows an analysis of financial instruments at fair value by level of the fair value hierarchy. The financial instruments are grouped into levels 1 to 3 based on the degree to which the fair value is observable:
84
▪
Level 1 – Quoted prices in active markets for identical assets or liabilities. This level includes equity securities and debt instruments listed on the Nairobi Securities Exchange.
▪
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly as prices or indirectly as derived from prices.
▪
Level 3 – inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). This level includes equity investments and debt instruments with significant unobservable components.
ANNUAL REPORT 2016
KENYA ASSOCIATION OF MANUFACTURERS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued)
Note Level 1 Level 2 Level 3 Total Sh Sh Sh Sh 31 December 2016 Fair value through equity: Government securities Treasury bonds 13 54,959,102 - - 54,959,102 Corporate bonds 13 9,985,250 - - 9,985,250 64,944,352 - - 64,944,352 31 December 2015 Fair value through equity: Government securities Treasury bonds 13 52,582,632 - - 52,582,632 Corporate bonds 13 9,739,950 - - 9,739,950 62,322,582 - - 62,322,582 There were no transfers between levels 1, 2 and 3 in the period (2015: none). 24
CAPITAL RISK MANAGEMENT
The company’s objectives when managing capital are to safeguard the company’s ability to continue as a going concern and to maintain an optimal capital structure to reduce the cost of capital.
The capital structure of the company consists of a capital fund and retained earnings. The company monitors its capital risk using the gearing ratio which is calculated as total debt over total capital. Net debt is calculated as total of long and short term borrowings less cash and cash equivalents.
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 (Continued)
Gearing ratio
The gearing ratio at the year end was as follows:
2016 Sh
2015 Sh
Total borrowings Less: cash and cash equivalents
- (122,152,450)
126,618,321 (56,746,679)
Net debt
(122,152,450)
69,871,642
Equity
Gearing ratio
206,418,649
171,378,330
-
25 INCORPORATION The company is domiciled and incorporated in Kenya as a company limited by guarantee under the Kenyan Companies Act.
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41%
Chapter Contact Details KAM COAST CHAPTER Uni-Plaza House, 7th Floor, Off Moi Avenue P.O.90323-81000 GPO Mombasa, Kenya Tel: 0701 849 935 Email: Susan.gitau@kam.co.ke
KAM ELDORET CHAPTER 2nd Floor KCB Building Kenyatta Street Eldoret Tel: 0722 387 745 Email: Edith.koske@kam.co.ke
KAM NYANZA/WESTERN CHAPTER Reinsurance Plaza, Third Floor, Right Wing P.O. Box 3605-40100 Kisumu, Kenya Tel: 0721 654 108 Eric.ochieng@kam.co.ke
KAM NAKURU CHAPTER Vickers House, !st Floor Room F12 Nakuru Town Tel: 0713 336 631 Email: john.kamau@kam.co.ke
KAM MACHAKOS CHAPTER Kapa Oil Refineries Ltd Tel: 0725 091 266 Email: edith.moroti@kam.co.ke
KAM CENTRAL KENYA CHAPTER KVA Offices, Thika Tel: 0711 621 164 Email: Kenneth.ndungu@kam.co.ke
KAM INDUSTRIAL AREA Twiga Chemical Offices, Industrial Area Tel: 0722 415 387 Email: Robert.juma@kam.co.ke
P.O. Box 30225 - 00100 Nairobi, Kenya Location: 15 Mwanzi Road, Opposite Westgate, Westlands, Nairobi Tel: +254 20 2324817/8; 020 8155531/2, 020 2166657 Mobile: +254 722 201368, 0706 612384, 0734 646004/5 Email: info@kam.co.ke | Website: www.kam.co.ke @KAM_Kenya
Kenya Association of Manufacturers
Kenya Association of Manufacturers