Interiors sector growing amid challenges

The high cost of doing business has made local manufacturers shy away from supplying the market with locally-made interior products, but some have taken the plunge, writes KEVIN OGUOKO

Kevin Njoroge and his mother have been operating a medium-sized company off Mombasa Road specialising in local interior doors for one year.

The idea came about after the two realised that most interior doors in Kenya or flash doors, as they are known, are cheaply made, have limited variety and not durable.

The technology used to make stronger and cheaper doors is readily available in Asian countries from where local developers source them.

But this is changing, thanks to Peak Industries started last year by Njoroge and his mother. They bought the special machine needed for work.

As they began operation and operating costs hit the roof, they started understanding why many investors have shied away from manufacturing interior goods.

For the $2 million dollar (Sh172 million) machine to function, Peak Industries must pay Sh200,000 to Sh250,000 in monthly electricity costs, while rent for the go-down they are currently working in is Sh30 per square foot for the 10,000 square feet they are occupying, which brings the total to Sh300,000 at the end of the month.

Before they began operating, they were also forced to install a transformer so as to control their electricity at their own expense. Because of the unpredictable nature of the County Council operated water system, they were forced to get their water from the borehole dug beside the go-down. The borehole contains fluoride, which is not good for machines as it makes them corrode.

Jubilee promise

“The Jubilee manifesto had a promise of go-downs complete with power and water connection that would be built by the government to encourage more Kenyan manufacturers. If it were to become to a reality, it would help us a great deal in reducing operating costs and thus provide cheaper quality goods to the market. This would help us compete favourably against cheaper finished goods from China,” says Njoroge, Director of Peak Industries.

Peak Industries is the example of not just what local interior companies go through but what industries in Kenya go through in the hostile economic environment.

Bureaucracy and lack of government support is yet another reason for the stagnation of the manufacturing interior industry.

According to the CEO of Kenya Association of Manufacturers, Betty Maina, licensing procedures are made without any systematic assessment of the impact such licences on businesses and Kenya’s competitiveness.

“Externally, though, Kenyan firms continue to grapple with challenges posed by subsidised imports, counterfeit and substandard goods. This would mean locally manufactured goods would be more costly than such imports. Over and above this, the average import tariff of 12 per cent for the EAC (East African Community) Customs Union is perceived not to be protective enough compared to, say, that of India, which is said to be at 60 per cent,” Maina says in speech on the association’s official website.

As a result, the local market is being flooded by imports from Asian countries and part of Europe because of their considerably low cost of production and favourable economic policies.

To demonstrate the ease of entry into selling furniture and profitability of the interior industry, let us take the example of Kevin Mureithi of Jabali Furniture located in Westlands.

Two years in business now, Mureithi got into this business by accident. Wanting to start a night club, Mureithi and his brother went out to source interior materials and products for the upcoming establishment, but they hit a glitch on realising that locally manufactured products were far off their budget.

“We decided to go to Malaysia instead to source our products and we found there were a variety of furniture and at cheaper prices compared to the local market. Then it hit us, ‘What if we could import these furniture and sell them to people just like us who are in dire need of quality furniture and are willing to pay a fair price for it?’ And just like that, Jabali Furniture was born,” says Mureithi.

He adds: “The presence of dealers and customs professionals make the shipment of goods from abroad a less stressful task and not as cumbersome as perceived.”

With an aggressive marketing strategy and incentives such as selling the products in installments, he is proud to say he is worth Sh20 million now.

There have been, however, arguments that Chinese products are substandard, thus the reason for their cheap furniture and fittings.

But as Rahul Haria, CEO of Furniture Palace argues, you pay for what you get in China.

China prides itself in providing various markets with alternative products that vary in quality and pricing. This gives the end-user the opportunity to choose and pick what they want, depending on pocket power. “The products are there. It is all about your budget when sourcing goods from China,” says Haria.

Another advantage of buying goods abroad is the convenience. “Local manufacturers tend to take too long with an order when they happen to be actually available. As a leading furniture company, we also look at standards that match the international market. Some of our suppliers who are local manufacturers have, however, proved to be efficient in the recent past,” says Haria.

Various interior companies, especially furniture companies, have in the recent past adopted a model of selling a variety of products with different prices all under one roof to attract various classes. These include Plysales, Victoria Courts and Furniture Palace.

“The interiors industry is not essentially lagging behind, and neither is it doing poorly. It is just that it has tended to be handled secondarily in most projects. Otherwise, it is probably the biggest sub-sector in real estate, commanding the lion’s share of the entire sector,” says Oliver Odhiambo, event coordinator of Ideal Interiors, organisers of the annual Ideal InteriorsExpo.

According to Odhiambo, statistics from industry players and the Kenya Bureau of Statistics indicate that the sector rakes in about Sh200 billion annually. That is almost 40 per cent of the real estate sector’s pie.

The Ideal Interiors Expo commands over 12,000 visitors during the three-day event. The expo has in the five years since its inception seen major players from some of the best interiors industry come out in large numbers to showcase their products.

In the furniture segment, there are local manufacturers like Quinn Peaks Furniture, Ramara Limited, Wood Products, Palacina Interiors and Mobil Casa, who have created a reputation for quality and durable furniture for homes, offices and hotels.Ramara, started in 2004, has won an international award for its Lily design on its furniture and currently has Safari Park and Serena Hotels as its clients.

In terms of other products such as lighting, flooring and other accessories, imports still rule the roost, but Antarc Furniture have recently launched engineered flooring, which is locally available and which is said to be of durable quality.

Rising demand

“Owing to the rising demand for aesthetically appealing interiors, the industry has had to evolve rapidly, with players seeking to embrace modern and contemporary designs that will match international standards in as far as interiors is concerned,” says Odhiambo.

The interiors sector has got several facets, including furniture and furnishings, flooring, walls cladding, sanitary ware and accessories, upholstery and fabric, lighting and fixtures, storage, kitchens and kitchen appliances, entertainment and related accessories and other closely related facets.

However, not all these can be sourced locally. Given the nature of the Kenyan market — different tastes and preferences — key distributors in the country have been forced to source products from countries with cultural aspects of these tastes.

Plysales stocks an array of over 1,000 home fittings in their showroom. The products range from doorknobs to light fittings. “We would love to source these products locally but the thing is that there are simply no such companies doing the full circle manufacturing here. And it is not always about the money; it is about the product. Items such as doorknobs are preferably sourced from India because of their stylish designs,” says Fatim Hassan, Director at Plysales.

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