This archive report was first published on 14 May 2020.
Kenya's economy is heavily reliant on imports from China, its biggest trading partner. However, the coronavirus outbreak has disrupted the supply chain, leading to a significant decline in imports from China. According to a recent survey by the Kenya Association of Manufacturers (KAM), about 82% of manufacturers source their inputs from China, making them vulnerable to supply chain disruptions.
China accounts for about 21% of Kenya's imports, worth over Sh200 billion. This has raised concerns about the country's ability to source alternative products or substitute them with local production. To address this challenge, the business community must explore alternative locations for sourcing raw materials and production.
Umesh Bhojwani, brand owner at Vision Plus Kenya, a small-scale importer of LED TVs, believes that local production is possible and can make Kenya a supply hub for East Africa and parts of Central Africa. However, he notes that the country faces challenges such as high business costs and a lack of skilled labor.
"The opportunity even extends to all COMESA states where there is duty-free trade," Bhojwani said. "However, the challenge in Kenya has always been the high cost of conducting business and lack of proper skilled labor."
He suggests that the government should streamline import processes at the port, provide leniency on port storage costs, and consider reducing levies such as the KDRL levies and increased excise duties. Additionally, he recommends that the government should reconsider tax reforms that may make Kenya less attractive for foreign investment and production.
"If we could work together and reduce the above costs of importing amongst others, it could go a long way," Bhojwani said.
He also emphasizes the need for a 360-degree proactive approach by all stakeholders involved, including the education sector, to develop innovation incubators that come up with ways to break the status quo and bring new ideas to the table.
"Local businesses need to form strategic partnerships and leverage each other's strengths for mutual benefits," Bhojwani said. "All of it can be achieved through innovation, local insourcing, government support/reliefs, automation, and supplier development."
He notes that the perception that foreign goods and products are of higher quality than locally manufactured products is a major challenge to overcome. However, he believes that educating the consumer through the right marketing channels, product testimonials, and initiatives such as "Buy Kenya, Build Kenya" can help change this perception.
