Why Kenya has become supermarket for imports
Kenya is turning into a global supermarket for products produced elsewhere with retailers importing products amid little local production as population surges to hit 47 million people.
With the manufacturing sector suffering myriad of challenges, many companies have even stopped local production, choosing to import products which can be produced in the country given available ample raw material and manpower.
According to “Global Hunger Index 2018”, Kenya is a net importer of food with an estimated deficit of 19 million bags of maize in the national granary following the delayed March to May long rains.
Official government data further notes that the country imported six million pairs of shoes last year valued at Sh1 billion with Bata company, only making one million pairs of shoes in Kenya despite ample leather in the country.
Bata Kenya chief executive Alberto Ericco said the company is in the process of installing and expanding its manufacturing units. However, he added, through the company secretary that the footwear manufacturer is not in a position to comment on the progress until next year.
Last year, Ericco warned that the company will stop shoe imports and make every shoe in Kenya, but that has not happened. It has been importing shoes while only making police and military shoes, having received a government contract.
A spot check at leading online retailers confirmed this reality, with a peek at marketplaces such as Jumia and Kilimall showing that up to 50 per cent of the goods sold are imported.
The goods range from clothes, furniture, electronics and foodstuff. Retail Traders Association of Kenya (Retrak) CEO Wambui Mbarire, said firms such as Carrefour and Game “import up to 40 per cent of the products on the shelves”, adding that the others do 20 per cent.
Inquiry at Gikomba open-air market in Nairobi and reports from the Port of Mombasa, however, indicate an increase in the number of second-hand clothes imports from Europe, US and China.
“But increasingly, new clothes from China are finding their way into Kenya, going by the number of brokers dealing in imported shoes and clothes,” said Jane Njoroge, a veteran transporter of second- hand clothes. Analysts say global firms tend to exploit the economies of scale by making the products on a large-scale elsewhere where costs are low.
“It makes sense, you look at your operations around the world and your operations here, in terms of economies of scale, it makes sense to do it in one country in large scale,” said economist Robert Shaw.
“The ultimate issue is that cost of manufacturing in Kenya is high and the country needs to make itself more attractive for the manufacturing sector to be competitive globally and not just in Africa,” he added.
“Even here you go into shops and when you look at the imported products you find they are amazingly cheap,” said Shaw.
Locally-produced raw materials such as leather and hides are instead being exported, most of them in raw form.
In 2017, leather exports were estimated at 24,271 tonnes valued at Sh5 billion. This shows that local manufacturers have sufficient leather to help build capacity.
The leather sector is the second priority industry under manufacturing sector of the Big Four agenda.
Under Kenya Association of Manufacturers (KAM) membership base, there are 12 leather companies directly employing about 14,000 (during peak times) and indirectly between 10,000 and 14,000 people.
The association points at issues such as high cost of power compared to other Common Market for Eastern Africa (Comesa) countries such as Egypt.
KAM in a statement said firms choose to import from Comesa nations to sell in Kenya due to cost disadvantages.
“At present, Kenya is at a cost disadvantage of nearly 12 per cent on most of the goods it manufactures, compared to competitor countries,” it said in an email response.
Kenya seeks to tackle its massive youth unemployment problem with manufacturing but the sector has been characterised by small -scale activities with meagre exports.
Currently the sector has 15 tanneries out of which 13 are processing raw hides and skins to wet blue, eight tanneries processing raw hides and skins all the way to crust and finished leather.
Although Kenya served as a leather footwear hub for East Africa two decades ago, it is currently a very minor exporter of leather and leather products, the World Bank says.
Kenya’s leather exports consist of semi-processed tanned “wet blue” leather 89 percent, raw hides and skins 5 percent, finished leather 2 percent and leather footwear and handbags, travel ware, and other leather products 4 percent.
Kenya is also significantly less competitive than global Leaders including China, Italy, and Vietnam in all competitiveness indicators, except availability of and access to raw materials.
This means that the government may not achieve its manufacturing pillar in Agenda Four to create the much needed jobs as local manufacturers continue to import finished products while blaming the high cost of doing business.
Under the Agenda Four which includes food security, universal health coverage, manufacturing and affordable housing, only manufacturing can deliver the jobs to cure Kenya’s unemployment time bomb.