The government has prioritised the Manufacturing Sector in the Big 4 Agenda primarily because, through local content provision, it functions as a support provider and catalyst for achievement of other pillars. In order to implement this efficiently, the President instructed all public procurement entities to increase the quota of locally produced goods towards effecting the Buy Kenya Build Kenya Policy.
Long short
However, what we are currently witnessing is an unfortunate increase in imported goods being procured by public entities. Government is reported to have tripled its imports to nearly Sh41.72 billion from 10.09 in 2013 to Sh18.15 billion in 2014.
So on one hand, we have an ambitious goal to increase the output of the manufacturing sector from the current 0.2 per cent annual growth to 36 per cent to achieve the Big Four agenda, but on the other hand our actions are contradictory and pulling in the opposite direction.
If we are to realize our development goals, we must stop being a consumer nation; we must produce. There is an urgent need for public entities to be deliberate about promoting local content beyond public declaration.
Local content
One way to do this is to develop a local content policy framework and a criteria to determine what is actually classified as locally manufactured or produced- as well as the methods through which this will be determined.
Critically, the scope of the above should consider, for instance, how much value addition should go into such a product? What policies should inform development of local content and what local value threshold should we adopt? The local content policy framework would address this and effectuate the Public Procurement Disposable Act which provides for 40% local preference.
The undisputed effect of a progressive local content policy is that it will stimulate use of local factors of production such as labour, capital, supply of goods and services, as well as create value in the domestic economy. This will, in turn, attract foreign investments stimulating employment creation, which is desperately needed in our country.
Key ingredients
The ingredients to achieving this already exist. For example, manufacturers publish a list of locally available goods bi-annually.
This list should be adopted by Government and published in the Gazette each financial year for all ministries to adopt. Secondly, the Public Procurement and Asset Disposal Regulations were developed jointly with private sector but have been pending for the past one year.
The Regulations had proposed margins of preference and reservations for local manufacturers and unbundling to enhance local sourcing. These need to be fast tracked.
Third, the realisation of local content in procurement should be included in the performance contracting of senior government officials to ensure commitment and monitoring. Lastly, and very important, prompt payment by National and Country Governments is paramount. Local, are discouraged from supplying to Government, due to late payments which disadvantage them and sometimes cripple their operations.
Unfair competition
Other challenges on local procurement include, unfair competition from cheap imports, illicit trade and counterfeits, lack of information on tender opportunities, high bid bond on government tenders and a general misconception on the quality of locally produced goods.
Kenya needs to curb the current import Bill of over Sh1.2 billion and increase the export value from Sh600 billion to Sh1.8 billion in the next three years in order to expand the industrial sector and stabilise the economy. This is not possible if we do not immediately reverse the current importing trend. To do this, local content policy development and effective implementation of the Public Procurement and Disposal Act will need to be fast-tracked.
Ms Mutahi is the Chairlady of Kenya Association of Manufacturers and can be reached on info@kam.co.ke
