The cost of production in Kenya is high and it is not decreasing fast enough with the expectation of the manufacturing sector, said Betty Maina, CEO, Kenya Association of Manufactures (KAM) during the International Finance Corporation (IFC) and Kenya Private Sector Alliance (KEPSA) open day.
Eng. Patrick Obath, Chairman, KEPSA, said the cost of energy is the greatest contributor to this high cost of production. “In Egypt and South Africa energy costs 3 to 5 US cent per kilowatt hour (kWh) according to the type of fuel, while in Kenya its cost ranges from 12 to 14 kWh.”
Obath said for the cost of production to be favorable in Kenya energy cost is supposed to be at 7 US cents kWh in consideration with the availability of cheap labor in Kenya - geothermal and wind energy hold the key to unlock Kenya’s quagmire in energy cost.
According to Maina, bad infrastructure across the country, poor manufacturing regulation, tax administration and the burden of a big government affects the competitiveness of Kenyan products locally and internationally hence many investors shying away to invest in the country.
The CEO pointed out that illicit trade of counterfeit, substandard and un-taxed goods are pushing the standards of living high compared to other developing countries across the world.
She warned Kenyans to refrain from the culture of buying cheap good at the expense of their quality.
She said increasing wages without deducing prices of basic products such as food will not curb inflation the additional 10 percent tax increases the cost of food produced locally with an inclusion of those imported is biting Kenyans.
The government’s inadequate support for local products – in procurement of local supplies with its regulation that takes long to be implemented adversely affects the consumers coupled with poor linkages within the local supplies in different sectors.
The KAM, CEO said: Inadequate or weak negotiation skills in regional trade agreement are rampant thus Kenya gives in on critical areas of trade to its long term disadvantage.
IFC called upon Kenyans to embrace innovative and best practices in the manufacturing sector for their products to compete on the same footing with those of the rest of the world.
Mr. Peter Ladegaad, program manager, IFC Investment Climate Advisory Services said they are working with the Kenyan manufacturing sector to improve its strategic partnership with competitors.
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