Diplomat East Africa Special Report - EABC

>>Fostering Private Sector Interests PG 74

SPECIAL REPORT >> Bring Back Cement Tax, Manufacturers Urge EA Govts page 40 >> Poll: Investors See Political Risk as Priority Regional Concern page 42 >> Business Community at the Heart of EAC Integration page 46

EABC SPECIAL REPORT

Bring Back Cement Tax, Manufacturers Urge EA Govts Massive foreign dumping depresses the market for local product

By DEA CORRESPONDENT

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n July 2008, the East African countries abolished Duty on cement imports in their respective national budgets in a bid to meet the region’s growing demand for the building material, probably quite unaware of the detrimental effects the move would have on the sector.

Cement players in Kenya, Uganda, Tanzania, Burundi and Rwanda now urge the governments to move with speed to protect them from marauding foreign investors from, especially, Middle East and Pakistan which are now reportedly capitalising on the opportunity to monopolise East Africa’s once- lucrative cement market by a deliberate dumping, particularly in Tanzania.

According to the East African Cement Producers Association (EACPA), the Pakistani Government extends heavy subsidies to its cement sector, a move that has

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made their products cheap on the market. In Pakistani, says EACPA, it costs between $11 and $17 to transport one tonne of cement from the Asian country to East Africa, with the government footing 35 per cent of the total cost.

With Pakistani's Free on Board prices ranging between $50 and $56 depending on the location of the cement plant, the government subsidy amounts to between eight and 11 per cent discount per tonne. Cement players say the subsidy is “quite substantial”.

“This subsidy is expected to increase Pakistani's export earnings by $322 million at the expense of other economies in East Africa,” the EACPA says, adding: “Besides increasing imports, the subsidy also envisages reducing the competitive pressure within Pakistan and allows for a price recovery after the drastic drop in prices.”

Pakistani has an installed capacity of around 44 million

tonnes of cement against the local demand of 20 million. The local sector remains with an exportable surplus of over 13 million tonnes of cement after exporting to Afghanistan and India by the land route. The surplus is exported to the Middle East and Africa, especially East Africa, where current annual demand for cement stands at 7.1 million tones.

As a result of the risk posed to the industry, the association is demanding the 35 per cent tariff for imported cement products be restored. EACPA chairman David Njoroge says there should be a $50 per tonne charge to supplement the 35 per cent tariff but the higher of the two should be charged.

Says a grim-faced Njoroge: “The specific rate has been proposed to counter dumping and subsidies by the exporting countries as well as the under-invoicing of cement at the ports of entry.

To avert the imminent collapse of

EABC SPECIAL REPORT

the seven cement manufacturing plants in East Africa, which employ more than 5,000 people, the Community must intervene and restore sanity in the sector.”

EACPA also wants Uganda's request to import Duty- free cement products from Asia revoked.

Njoroge says since the establishment of the EAC Customs Union protocol in January 2005, cement has been classified as a sensitive product with a Duty rate of 55 per cent: 25 per cent Common External Tariff (CET) and Suspended Duty of 30 per cent. The partner states also agreed that the CET on cement should be reduced by five per cent each year for the subsequent four years to stabilise at a target rate of 35 per cent by 2009.

The tariff was designed to safeguard the cement industry in the region from the threat of dumping by low-cost producers. It would also cushion local cement prices from subsidies given to importers by their respective governments.

“The EACPA is deeply concerned att these thes th ese e developments and is worried about the sur vival i l survival of tthe he ccem emen em entt in en indu dust du stry st ry iin n the e EAC cement industry if tthe he p arrtn tner er sta sstates tate ta tess do te d not tak ke partner take corr co rrec rr eccti tive v a ctio ct tio i n, n,” Mr Nj N joroge joro ge corrective action,” Njoroge said sa id id. d. said.

Eco Ec on nomis om mis ists ts argue arg rgue ue that tha hatt the the inin in Economists flux ux of of ch chea eap ea p ce ccement ceme eme ent nt iimports mp por orts ts wil w illl il cheap will

in the long run have a negative impact on the local industry. They argue that the local cement industry is faced with high production costs resulting from high energy and labour costs and a poor distribution network.

Although the EAC Common External Tariff is in three tariff bands — zero per cent for raw materials, 10 per cent for intermediate goods and 25 per cent for finished products — goods considered sensitive, like cement, often attract a higher tariff.

At the establishment of the EAC in 2004, cement producers negotiated the CET and agreed that cement was to be considered a sensitive product due to its capital intensive investment requirements.

EACPA says Tanzania is one of the worst-hit countries in the region, having received substantial subsidised cement imports from Asia, Pakistan in particular, flooding its local market sometimes at prices below those charged on locally produced cement.

“S Som ome e factories factori t ies have been “Some rodu duct du ctio ion. n. forced to cut down p production.

So hav have e st stop oppe ped d production,, Some have stopped send se ndi ding ing workers work rker k rs on n leave. lleave ve. Th The sending lo loca oca call ce ceme ment ment nt ccom ompa p ni pa nies ess a and nd tthe he local cement companies nati na tion ti onal on al e cono co nomy no my y iin n ge g ne era al wi will ll national economy general come ed dow own ow n cr crum umbl um blin bl ing in g un unle less le ss tthi hiss hi come down crumbling unless this

situation changes,” says EACPA. But even with the challenge of dumping, the sector stills seems lucrative to players with the recent entry of the world’s largest cement producer, the Sanghi Group of India, which has won a tender to extract limestone in West Pokot. Its subsidiary, Cemtech Limited, is already on the ground to establish an ultra-modern cement plant.

The landmark mining rights were wholly granted to the cement giant on October 31, 2008, by the Industrialisation Ministry and the County Council of Pokot According to the Sanghi Group director in charge of Africa investments, Mr Rajesh Kumar Rawal, the proposed plant will look at various grades of lime, marble stone production and “investigate the possibility of exploring for further limestone, volcanic ash and gypsum deposits” in the surrounding areas.

“We expect to produce more 0 ,0 00 , 00 ttonnes onness off ccem on emen entt than 6 600,000 cement h se. We per annum in the initial pha phase. will then expand to over one million ton ttonnes onne on ness in sub ne ssubsequent ubse ub sequ se quen qu entt ph p ases as es. lion phases. bject to t However, this will be subj subject avai av aila l bi biliity y of of additional ad addi ddi diti tion ti onall limelliimeime availability ston st o e usable for ccement em mentt manustone facturiing, fact g”R Ra awa wall sa said id d facturing,” Rawal said

May - June 2010

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EABC SPECIAL REPORT

Poll: Investors See Political Risk as Priority Regional Concern Synovate carried out a study in EA and Ghana and came up with remarkable data

By DEA CORRESPONDENT

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usiness leaders in East Africa are raising the alarm over the region’s political instability, claiming that it may haunt investor confidence.

So serious is the matter that in Kenya more than 76 per cent of business leaders perceive politics as one of the major risks facing them. According to the Business Leaders’ Confidence Index Report released last week by Synovate, political instability tops the list of risks facing the investment community, followed by competition and poor infrastructure at 38 per cent and 24 per cent respectively.

As a result, businesses in Kenya are devising strategies aimed at countering political risk. Among the measures being implemented to enhance corporate growth are development of new products, expansion to other markets, mergers and acquisitions as well as cost cutting. The strategies are a significant departure from those that were being pursued only six months ago, such cutting back on capital spending and restructuring.

The report says more than 66 per cent of company leaders in Kenya are planning to venture into new products in the next 12 months as a business growth strategy, while 47 per cent would expand their businesses to foreign markets. On the

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other hand, 43 per cent would expand to the local market as 34 per cent engage in cost-cutting measures. Only six per cent are considering a capital spending slash.

In a clear signal that the business community is ripe for the merger of the East African Community economies in July, 56 per cent of Kenya’s

of TZ’s business leaders told Synovate that competition is the major risk facing them businesses are intending to expand into Tanzania and Uganda, while 50 per cent want to invest in Rwanda.

32 per cent are planning to invest in Burundi and 18 per cent in South Sudan. Interestingly, some investors are also planning to put their funds in West African countries such as Liberia and Senegal.

Even as other East African countries eye investment opportunities in Tanzania, that country’s business fraternity seems to appreciate the fact that the increased competi-

May - June 2010

EABC SPECIAL REPORT

EMOTIVE:

Kenyas take the law in their hands

POLLS CHAOS:

A Kenyan policeman battles rioters' inferno

tion is posing a great danger to their business returns. Over 27 per cent of TZ’s business leaders told Synovate that competition is the major risk facing them. 18 per cent of the leaders consider cheap imports and poor state of roads and communication network as the main risk facing their businesses currently.

Despite elections scheduled before the end of the year, many of the businesses — 95 per cent — think the polls will not have a major impact on their operations. It is due to this stability that apparently over 22 per cent of business leaders say the country is a “very attractive” investment location.

Democratic Republic of Congo is the most-sought-after investment destination for Tanzania’s investors — at 57 per cent — followed

by Sudan, Burundi and Rwanda at 29 per cent.

In Uganda, which goes to the polls next year, competition is the biggest business risk facing the country at 49 per cent, followed by political instability at 35 per cent.

25 per cent of the business leaders interviewed by Synovate say Uganda’s poor state of infrastructure is still a major issue that hampers the country’s business climate. Despite these challenges,

more than 65 per cent of business, leaders perceive Uganda as a “moderately” attractive business destination while 25 per cent say it is “very” attractive.

Unlike Kenya’s businessmen, more than 47 per cent of Ugandans see Rwanda as the most viable place to establish their subsidiaries, followed by Burundi at 35 per cent. Only 12 per cent perceive Kenya, Southern Sudan and Tanzania as an investment destination.

According to Synovate’s Managing Director George Waititu, Uganda’s hotel and tourism sector enjoys the highest confidence level at 91.7 per cent, followed by the financial services sector at 73.3 per cent and telecommunications sector at 66.3 per cent.

Overall, the country has a business confidence level of 66.3 per cent. In Kenya, the financial services sector leads with a 73 per cent confidence level, services sector at 70 per cent, manufacturing at 69 per cent and hotel and tourism at 67 per cent. On average, the country’s confidence index stands at 69 per cent, the highest in the region.

Tanzania has 61 per cent.

In the coming six months, Tanzanians — about 50 per cent — project that the telecommunications sector will play a substantial role in propelling the country’s economic growth, 35 per cent say the manufacturing sector will lead the way while 33 per cent expect the financial services sector to enhance national growth.

11 per cent of Ugandans, on the other hand, say the country’s economy will perform “substantially better” in the next six months, 48 per cent predict a “moderate” growth while 29 per cent say the status will remain the same.

The study, targeting top business leaders, was carried out in Kenya, Uganda, Tanzania and Ghana between March 21 and March 25 this year May - June 2010

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EABC SPECIAL REPORT

High Energy Costs in Economic Powerhouse Kenya Hamper Region’s Potential Vimal Shah, one of EA’s foremost industrialists, warns of major impediments to foreign investment in the Community nations in a conversation with JOHN NDIEMA

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he East African governments are being urged to create a more businessfriendly environment that will catalyse business growth in the region. The Kenya Association of Manufacturers Chairman, Mr Vimal Shah, says the region risks losing huge investment opportunities unless radical measures are taken to enhance EA’s business operations.

As a step to ironing out the perennial high-to-prohibitive costs of power that have stalled business growth, Shah proposes that the Ke-

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nya Government introduce a twoyear tax window plan during which consumers will enjoy power at half the current cost. Kenyan manufacturers pay up to KSh35 per unit of electricity while their counterparts in Uganda and Tanzania pay only KSh6 per unit. The high power costs have eroded Kenyan competitiveness, hence the need for strategies to address them. Sources indicate that serious talks have already started between the Energy Ministry and Treasury for the introduction of the tax holiday, especially in the manufacturing sec-

tor. The move seems to have been chiefly driven by Kenya’s EAC counterpart, Uganda, which has over the years extended a direct subsidy to the manufacturing sector.

Kenya’s high power costs have in the recent past resulted from the prolonged drought that caused a major drop in water levels in the country’s hydropower stations.

With reduced output, Nairobi resorted to expensive emergency power sources as well as intermittent power rationing.

To create a business-conducive environment and attract foreign di-

CLEAN ENERGY:

East Africa enjoys long solar spells

servation. The CEEC estimates that the 200 firms that participated in the recently-held sixth edition of the Energy Management Awards to recognise firms for their contribution to energy conservation saved $26,315,789 worth of energy last year and avoided carbon emissions of up to 530,000 tonnes.

But even with the energy cost challenge, Shah says the year started on a positive note for the business community, especially with the coming into full effect of the EAC Customs Union in January.

The protocol, which is also expected to spur economic growth, will allow for the free movement of goods, services, and labour within the region opening up a bigger market estimated at 126 million people and a Gross Domestic Product of $60 billion in 2008.

Says Shah: “Kenya, considered the most industrialised economy in the region, will be among the key beneficiaries. This will however only happen if the business community takes the regional market seriously.

What this means is that there will be a greater volume of trade among the five member states with the elimination of Customs tariffs on all traded goods and services between the Community’s member states.”

Shah, whose day job is Bidco Managing Director, is credited for championing a better business environment in the region and says the establishment of the Customs Union is a major plus for businesses since they will be able to set up operations in any member state so long as they are East Africans,

Amount paid by Kenyan manufacturers per unit of electricity while their counterparts in Uganda and Tanzania pay only KSh6 per unit

rect investment, Kenya is currently pursuing a combined exploitation of hydropower, wind and geothermal energy sources. The Ministry of Energy says that by the end of 2011, Kenya will be able to meet the rising energy demand at affordable rates, and even export some to neighbouring countries. The current costs of energy have led to firms coming up with strategies to improve efficiency in consumption. So far, these firms have made savings of up to $36 million in energy bills, according to the Centre for Energy Efficiency and Conservation.

As part of its approaches to encourage energy efficiency, the CEEC has introduced the Energy Management Awards to recognise firms for their contribution to energy con-

without being subjected to the prohibitive taxes currently charged on foreigners.

Shah warns Kenya risks losing out on the benefits of the Union unless radical steps are taken by the government to invest in more and better roads, railways and power stations which will help reduce the cost of doing business, currently a major hindrance to doing business in the region’s economic powerhouse.

“Indeed the private sector both in Kenya and within the region has the potential to unlock and increase trade volumes within the East African region, which currently stands at a mere 13 per cent. This is a pale comparison to Europe, which stands at 60 per cent and Asia at 40 per cent,” Shah points out.

With the coming into effect of the EAC Customs Union, the trend of intra-EAC trade is likely to change but until the correct measures are put in place, the movement of goods within the Community will continue being constrained by cross-border controls.

Other reforms the manufacturing guru says need to be addressed by the partner states are the review of transit procedures and treatment of goods destined inland, review and adoption of a harmonised single bond guarantee system and the establishment of a mechanism for the treatment of re-export duty from one partner state to another.

For the free circulation of goods within the region, Shah says partner states are expected to fully implement the EAC Common External Tariff in order to avoid stay of application by some partner state, total commitment towards the elimination of Non-Tariff Barriers, simplification or elimination of rules of origin and addressing the multiple Custom Union memberships by some partner states May - June 2010

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EABC SPECIAL REPORT

Business Community at the Heart of EAC Integration The Chairman of the East African Business Council Mr FAUSTIN BUNDU makes a compelling case for the private sector’s key contribution to the Community

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he East African Community is one of the most progressive regional economic blocs in the world today.

EAC this year successfully transited to a fully-fledged Customs Union and is on course to begin implementing the Common Market in July 2010.

The deepened integration presents immense opportunities for the business community, in terms of larger markets, economies of scale and larger pools of human, financial, and physical capital. As the private sector, we are committed to continue playing our rightful role in the integration process, through increased trade and investment, enhanced competitiveness and increased employment, thereby accelerating the region’s economic growth.

As members of the business community in East Africa, through our umbrella organisation — the East African Business Council — we have actively participated in all stages of integration.

The private sector continues to enjoy unique interactive meetings with our Heads of States, other policy makers, as well as with the leadership of the EAC Secretariat, on how best our region can achieve competitive advantage and businesses can achieve returns on their investment.

This willingness to partner with the private sector in addressing challenges impeding the full

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realisation of the economic integration is a clear reflection of the resolve and commitment of the East African top political leadership to place the private sector at the heart of the EAC integration process.

The EAC Customs Union has opened up business opportunities in the region and has paved way for an improved business climate although challenges remain. It has generated a liberalised cross-border trade, through the adoption of common policies to minimise Customs clearance formalities as well as enhance the predictability of economic policies.

Since its inception, EABC has been very active in resolving impediments to the proper functioning of the Customs Union.

One of our biggest undertakings

May - June 2010

SECTOR LEADERS:

Chairman Bundu and Vice Chairman Kiilu at a regional function

has been the elimination of NonTariff Barriers to trade. EABC has been championing this issue and, in recognition of this, in 2005, EAC mandated us to develop the NTBs Monitoring Mechanism for reporting and elimination of NTBs. In addition, EABC carries an annual Business Climate Index to monitor the progress in removal of NTBs and look at improvement in perception on key business climate factors such as access to land, level of taxation and the legal and regulatory framework, among others.

Our other contributions, in the context of the Customs Union, include channeling of general policy issues to the EAC Summit and addressing the issues pertaining to rules of origin and double taxation.

Our efforts continue in tandem with the needed policies and initiatives to ensure smooth progress towards full implementation of the regional integration instruments.

However, challenges remain which include lack of structured engagement with policymakers at a regional level, frequent policy reversals, infrastructure bottlenecks and non-tariff barriers that increase the cost of doing business.

We continue to engage the EAC leadership in an effort to address some of these challenges and our expectation is that the EAC Heads of State will indicate their commitment to addressing these issues both in the short and long term

EABC SPECIAL REPORT

Fostering Private Sector Interests

AGATHA NDERITU Executive Director, East African Business Council, delineates how the EABC ensures the region's business sector's agenda is part and parcel of the Community's dynamics

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he East African Business Council (EABC) is the apex body of private sector associations and corporates from the five EA Community nations.

As the private sector representative, EABC has observer status in organs and activities of the EAC. EABC therefore participates in various sectoral meetings, meetings of the Coordination Committee, Council of Ministers meetings and meetings of the Heads of State, with a view to ensuring that the agenda of the private sector is well articulated.

Our Vision is to be an effective change agent for fostering an enabling business environment for a diversified, competitive, exportled, integrated and sustainable economy and our Mission is to promote private sector regional and global competitiveness in trade and investment.

OBJECTIVES

Our activities are focused not only on leveraging all issues that impede full realisation of potential benefits of regional integration, but also on providing a platform where the business community can regularly discuss and drive reforms to ensure the environment for business is conducive.

We provide a platform which enables the private sector to speak

Our Vision is to be an effective change agent for fostering an enabling business environment for a diversified, competitive, export-led, integrated and sustainable economy and our Mission is to promote private sector regional and global competitiveness in trade and investment

with a single East African voice and, in that capacity, perpetuate the maintenance of a routine and institutionalised interaction with the EAC Secretariat and dialogue with governments of the EAC partner states.

We are also a key implementing agent for the EAC Private Sector Development Strategy that seeks to enhance a ‘people-centred’ but ‘private sector driven’ integration process.

Amongst others, this includes developing and promoting the EAC as a preferred investment location; developing and promoting the EAC as a reliable and quality source of products/services and an unrivaled destination of tourism.

The promotion of an enabling environment for business in East Africa, through addressing those factors that make the environment uncompetitive, such as poor infrastructure, high energy costs, poor access to finance, a poor legal and regulatory framework, among others.

Ensuring smooth implementation of the EAC Customs Union by engaging EAC leadership and partner states government on impediments such as non-tariff barriers, lack of harmonisation of laws, unpredictability of policy, among others.

Provision of information and sensitising the business sector in East Africa to the EAC integration

process and the opportunities it presents. Providing business-tobusinesses linkages, both locally and internationally, through various platforms such as trade missions, sectoral meetings, study tours, to name only a few.

FOCUS

A smooth implementation of a fully fledged Customs Union and Common Market.

Improved private-public sector dialogue and partnerships to ensure the private sector plays its rightful role in driving the integration agenda and the public sector plays the role of facilitating this.

Reduction — and ultimately the elimination — of non-tariff barriers and other factors of trade logistics that lead to increased cost of doing business, with a view to making businesses competitive, both regionally and internationally.

Leveraging the issue of energy, both in terms of cost, availability, quality of supply and investment by the private sector. This is based on the fact that energy is a key contributor to the region’s un-competitiveness.

Articulating the interests of the private sector in both the on-going EPA and Common Market negotiations.

Providing, in the right format and, in a timely manner, business and trade information to EABC members May - June 2010

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EABC SPECIAL REPORT

‘Mitumba’ Menace Must Go if Motor Industry is to Flourish — GMEA Boss MR BILL LAY, Chairman, Kenya Vehicle Manufacturers Association (KVMA) and CEO of General Motors East Africa Ltd., spoke to DEA’s BOB WEKESA DIPLOMAT EAST AFRICA: What are the implications of the rollout of the Customs Union?

BILL LAY: The EAC concept should be great news for the formal Kenyan motor industry — however, Duty-free market access for locally produced trucks and buses has been blocked by politicians who benefit from the uncontrolled importation of over-aged, undervalued mitumba imports. This is the case in all five EAC member states.

DEA: Speaking as Chairman of the Kenya Motor Vehicle Industry Association, has the operationalisation of the Customs Union been matched by the expectations the industry had?

BL: There has been no benefit from the Customs Union since it was launched January 1, 2005. In fact, the cost of advocating for EAC market access and fighting the corruption-based mitumba importers has increased our costs for lawyers, consultants and travel.

DEA: Share with us some of the teething problems and challenges that have been experienced despite and in spite of the rollout of the Customs Union? Kindly enumerate and explain some of the teething problems?

BL: Political jealousy and gamesmanship, the structure of the EAC, required all decisions to be unanimous.

Special interest groups, including both public and private sector, often suggest the use of ‘technical study teams’ to delay decisions and frustrate honest stakeholders.

Cancelled meetings, ministers and PSs departing Arusha before making decisions without delegation. Numerous CET violations by member states via national budget processes.

DEA: In your estimation, which is the biggest stumbling block to the motor industry realising the ideal level of competitiveness in the region?

BL: Mitumba importers and the political special interests generated from their excessive, under-taxed margins.

DEA: Do you have any proposals for tackling the challenges that have been experienced in the infancy stages

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of the rollout of the Customs Union?

BL: Yes, we have numerous proposals under review by EAC member states and in Arusha. In addition, we have submitted numerous budget proposals in support of a level playing field for investors in our industry.

DEA: Have you presented suggestions for the streamlining of the Customs Union?

BL: One, implementation of approved ‘rules of origin’ to recognise the value addition of local assemblers to enjoy Duty-free access as promised on January 1, 2005. This must include the approved provision for ‘substantial transfromation’.

Two, proper evaluation and inspection of mitumba imports and a ban on used spare parts. URA, TRA and KRA should collect the proper tax on mitumba imports.

DEA: What’s your take on the Common Market Protocol?

BL: The Common Market deals with NTBs such as dual taxation, free movement of people and revenue sharing. I believe this phase of the EAC process will be filled with the same political hurdles and special interests as the Customs Union. As with many of the issues restricting private sector growth in East Africa, there is an overall lack of political will and leadership from member states and the EALA to do what is required to realise the potential growth.

DEA: Share with us figures and statistics on the current and potential contribution of the motor vehicle industry in the region as it becomes a single market.

BL: TZ, UG, RW and Bu together represent a market for locally produced commercial vehicles equal to the Kenya market. In other words, the Kenyan Industry in 2009 was approximately 6,000 locally produced units of which GMEA commanded over 40 per cent share or 2,400 ISUZU trucks and buses. With Duty-free access, the EAC market would be close to 12,000 units and GMEA share would increase to 50 per cent or 6,000 units. We would add a second shift, and hire 125 workers. Suppliers would also double their turnover. Only dirty politics and greedy, tax-avoiding mitumba importers stand in the way of that certain growth and success for both GMEA and the EAC motor vehicle industry

EABC SPECIAL REPORT

PHARMACEUTICALS

GlaxoSmithKline Launches Ambitious Marketing Offensive Product prices now pegged on buying power

By PATRICK WACHIRA

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laxoSmithKline has embarked on an ambitious programme to peg product prices on per capita income.

The strategic move to price products in three models now depends on whether they are being sold in least developed, middle income or high income states.

The net effect is that the same product is now being sold at different prices, depending on the market.

Though initially the multinational will lose revenue, it is envisaged that the move will spur more sales volumes and improve access to medicines.

The Managing Director and General Manager, Pharmaceutical Operations, East Africa, Mr John Musunga, says that although the move may suffer reduced profitability in the initial stages, “we may not recoup profits but we will see more innovative products”.

The largest segment is that of anti-biotics, which treat at least 50 per cent of infections in Africa.

GlaxoSmithKline recently reduced the prices of two of its flagship antibiotics — Zinnat and Augmentin — by between 30 and 40 per cent in the Kenyan market (prices went down from a high of Sh2,000 to a low of Sh800 on average).

“The objective is to achieve improved access to healthcare in the developing world” says Musunga.

The move will see 20 per cent of the profits channelled to the least developed countries (LDCs).

Musunga says the pricing policy has changed so that “those who

can pay help those who are unable to achieve the overall effect of better healthcare”.

He is optimistic that the positive changes that have taken place in the field of telephony and infrastructure to improve business operations for industry players will be continued for better performance.

He cites roads and connectivity in Nairobi as areas that have seen significant improvement in recent months.

However, he laments, a lot more needs to be done to improve the atmosphere of doing business in the East African region.

Musunga says the pharmaceutical industry, being a highly regulated one, requires a unified approach to the entire business of creating procedures and rules.

The extent of regulation varies from state to state, with Burundi having the least, while Kenya, Uganda and Tanzania have a lot

COUNTERFEITS:

Glaxo MD John Musunga explains the menace

more of the straitjacket.

Explaining, Musunga says, special requirements must be met before a medicine is launched.

Documents, in thousand-paged format, are submitted in triplicate, factory visits made, samples submitted and other procedures followed before it is registered.

If this is replicated in all states, business would be tedious and impossible.

One body is therefore needed to oversee all these processes in East Africa, as happens in Europe, where one registration in one state enables function in all EU states.

“Patients will access innovative medicines at the same time across the board”, says Musunga.

In Kenya such a process would take a year, in Uganda one-anda-half and in Tanzania anything between eight months and five years. Uganda has fewer innovative products, though.

What is required is a unified approach to the supervisory function through one body, charged with the task of conducting post-market surveillance, border control and harmonising laws across the board. Such an authority should be domiciled in all the states.

As it is at the moment, deregistered outfits could simply get away with malpractices if detected in one state by escaping to another and starting the whole process all over again.

Musunga also feels that laws should be effected to protect local manufacturers against imports.

The proposed Non-Tariff Barriers (NTBs) would aptly serve this purpose uniformly.

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EABC SPECIAL REPORT

Patients, he says, should not be taxed over situations they have no control over and the 15-year period that it takes for patents to expire should be taken into account in implementing the NTBs. Governments, in addition, should have concerted efforts towards managing infrastructure, which is key in ensuring businesses flourish and citizens reap the attendant benefits.

It does not make sense, for instance, that a ship should take a week to cruise over the seas to get to the port of Mombasa but goods once received take between a week and two to get to Nairobi.

The cost of infrastructure is a problem that must be tackled as a matter of urgency, Musunga says.

In Egypt, such a process would take just two days, the MD says. As a result of such delays affecting business in East Africa, the industry loses up to 30 days of sales in a year, or roughly 10 per cent of profits.

Licensing is another area that poses a veritable headache for business operations in the region, with many licenses required from various authorities. For instance, in Kenya, one requires approval and licences from the Ministry of Trade, City Council, Kenya Revenue Authority, Ministry of Health, the Pharmacy and Poisons Board and quite a few others.

“If the issue is revenue, then let us have one process that takes care of all these bodies. This should be a one-stop shop”, says Musunga.

And GSK also suffered the global meltdown that swept across the world, with the West being the worst-hit.

Local operations of GSK and profitability were worst last year, what with the effects of persistent drought, dwindling exports and reduced tourism earnings. However, the adverse effects are being counterbalanced by emerging markets such as China, Brazil and Russia, among other regions and states

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May - June 2010

Safari Park Hotel & Casino ‘A world of Wonder …

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afari Park Hotel and Casino is a destination in a world of its own. A five-star luxury hotel located 15 minutes drive from the City Centre, Nairobi.

The Hotel stands in 50 acres of beautifully manicured gardens and offers a selection of 205 rooms, decorated and tastefully furnished with a taste of Africa with private rear and front balconies.

The luxurious rooms have high speed wireless and cabled internet connectivity, Safe and 24 hours room service. It’s considered as the leading leisure and conference hotel in East and Central Africa and reknown for its combination of business and relaxation.

The hotel’s five international specialty restaurants offer the finest dining in Nairobi and are the most inviting, each uniquely decorated in traditional themes ranging from the Far East to Europe. The Nyama Choma Ranch, the only African Restaurant in Nairobi is an ideal affordable stopover for tourists on Safaris to and from Mt Kenya or post conference tours.

The Arirang Café, the latest’s Safari Park Hotel’s coffee shop, operates from the heart of the Kenyatta International Conference Center offers delicious bitings, quality beverage, Ke-

nyan tea, coffee and a variety of juices.

A variety of great entertainment and leisure facilities is available; Sensual Safari Cats dancers & Acrobats, Paradise Casino, Cats Club Discotheque and Piano Bar. For relaxation and rejuvenation, The Safari Fitness Centre has ultramodern range of fitness facilities.

The hotel prides in its wide range of contemporary to traditional designed meeting and banquet venues with capacity for over 1200 delegates.

It is the home for the Meetings, Incentives, Conferences and Events (MICE) market. For that memorable wedding, ballroom or garden; ceremony, beautiful reception and to your honeymoon, the hotel is voted as the top wedding venue in Africa.