KAM Annual Report 2013

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1KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Contents

PAGES

Chairmans Statement 2

Board of Directors 4

Chief Executives Report 6

Leadership Team 8

Policy, Research and Advocacy 10

KAM Consulting 18

Membership Recruitment and Development 26

Communication 37

Finance, Administration and Projects 40


The elections ushered in a new National Government and 47 County Governments all keen to implement their programmes. The Association had to readjust its strategy to streamline it with the changes in the structures brought about by the implementation of the new constitution.

We especially welcome the focus of the Jubilee Government on the issues that matter to business and especially manufacturing. We note with excitement the focus on energy security, improvement of logistics and market development.

It was also pleasing to note that the Jubilee manifesto had plans geared towards resparking a manufacturing revolution which resonate well with the Industrial Business Agenda which KAM was pursuing in the year 2013. Plans for sparking an industrial revolution in the Jubilee Manifesto were focused on the following nine thematic areas:

Improvementofenergyinfrastructureandpromotionof alternative energy sources.

Improvement of other infrastructure services forbusiness, such as roads, rail and water supply.

Enactment of new Public Private Partnership (PPP)legislation.

EstablishmentofaKenyaDevelopmentBank. HelpKenyasbusinesssectorbecomeascompetitive

as possible by reducing business taxation, removing unnecessary regulation and encouraging competition through new enterprise zones in each County.

Introduction of tax incentives to encourageinvestment and growth in the manufacturing and service sectors, to enable creation of 1 million new jobs.

Pursuit of exchange rate stabilization, policy andmonetary policy that will lower interest rates.

Bolstering funding for theAnti-Counterfeit Agencyto fight counterfeiting.

Provisionofloansandgrantstonewsmallbusinessesthrough the new development agency Biashara Kenya.

Chairmans Statement

Dear fellow members,

Welcome to the 2014 Kenya Association of Manufacturers (KAM)AnnualGeneralMeeting.

The year 2013 represents positive growth for the Association as well as the manufacturing sector in Kenya. The manufacturing sector grew by 4.8% in 2013, underpinned by single digit inflation and a stable foreign exchange rate. Congratulations to Government for macroeconomic stability. The growth of the economy, especially in the manufacturing sector, is quite welcome as we had all expected some contraction due to the electionsatthebeginningoflastyear-afearthatdidnotmaterialise.

Polycarp Igathe,KAM Chairman


Chairmans Statement (Contd)

On energy matters Government has made huge strides and industry is optimistic that when the planned 5000 MW power plants are commissioned they will be a game changer for an industrial revolution in Kenya. Security remains a major concern for industry and Government has to keep us assured of good security in order not to dampen investor confidence in Kenya.

The Government promised to encourage everyday goods to be produced in Kenya. To this end, KAM had a good working relationship with Government through the Cabinet Secretary for Industrialization & Enterprise Development, Mr Adan Mohamed, in promoting the Buy Kenya Build Kenya campaign. It is still work in progress.In the tax regime, unintended consequences of VAT negatively affected some industries. We have seen some reversals with the recently passed VAT Ammendment Act of 2014 but there are still some anomalies that we expect Government to correct soon. The Association will continue to push for reversal of some of the policies that make the tax policy unfavorable for local manufacturers and emphasise a tax policy that promotes production.

Financial PerformanceTurnover rose by 75% to Kshs 375, 751, 626.00 in 2013. Profit grew by 60% to Ksh.36, 338, 856.00 from Ksh.21, 397, 357.00 in 2012. This was mainly due to the increased level of subscriptions received and advocacy related projects that the Association executed and support from grants.

The future of the bottom line of the Association looks bright as we complete our new building where the rent will supplement the income of the organisation.

On this note I would like to commend the secretariat, who under the leadership of the Financial Management and Projects Committee of the Board, supervised the construction of the building and saved the Association Kshs.35 million out of the initial cost estimates in the construction of the new KAM house.

AppreciationMy job would not have been easy without the remarkable support that I received from the volunteer board at KAM. We bid farewell to Vimal Shah and Yaw Nsarkoh from the BoardandwelcomedHelenKimaniandRajanShah.

Betty Maina and the team at the Secretariat have been outstanding and I can bear testimony that it has been a pleasure watching the secretariat team pull together and redefining advocacy work in Kenya.

Future ProspectsI am optimistic of the future of the manufacturing sector. Key fundamentals including security, policy stability, education to ensure that the skills churned out of universities match the requirements of industry will be crucial for the success of the sector. Standard Gauge Railway will bring in a lot of efficiency in the transport system. Governments ambition to create more jobs in the country can easily be achieved if an enabling environment is created for industries at County level.Improvements in infrastructure and delivery of an additional 5000 MW of power at cheaper rates bode well for the development of the manufacturing sector.It has been an honour for me to serve the manufacturing sector in Kenya. I have no doubt that I served in an entity which is undoubtedly the best manufacturing business membership organisation in East Africa.

Fellow members as I pass on the baton to the incoming chairman, allow me to thank you all for your support during my term of office. The manufacturing agenda in Kenya is complex and we would not have managed to make the strides we did without your full support. It was a pleasure serving you all for the last two years. Indeed we have made progress in our advocacy initiatives and I call upon all of you to offer the same support to the next chairman of our great organisation.

As my two year term comes to an end, I would like to thank you all for the opportunity and confidence bestowed upon me to serve as KAM chairman for the last two years. May the KAM spirit of inspiring global competitiveness live on as we spark a manufacturing revolution in Kenya and beyond.

Polycarp IgatheChairman


Board of Directors

1. Mrs Flora Mutahi, Melvin Marsh International2. MrsTabithaKaranja,KerocheBreweries(untilMay,2014)3. Mr Bharat Shah, Kenafric Industries4. Mr Sachen Gudka, Skanem Interlabels5. Mr Mahul Shah, Spinknit Limited6. Mr Palu Dhanani, Universal Corporation Limited 7. Mr Bimal Kantaria, Elgon Kenya8. MrYawNsarkoh,Unilever(UntilDecember2013)

Polycarp Igathe, KAM Chairman, Vivo Energy

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Board of Directors (Contd)

9. Mr Joseph Lithimbi, Associated Vehicle Assemblers Limited10. MrLutafKassam,IndustrialPromotionServices(IPS)Limited11. Mr Kaushik Shah, Mabati Rolling Mills12. MrStephenBrooks,HomaLimeCompanyLimited13. Mr Muhoho Kenyatta, Brookside Dairy14. MrsHelenKimani,KevianKenya15 Mr Rajan Shah, Capwell Industries16. MrJasBedi,BediInvestments-exofficio

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14. Pradeep Paunrana, KAM Vice Chairman,Athi River Mining

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2013 was a transformative year which tested the resilience and commitment of Kenyan manufacturers towards achieving the goals of Vision 2030 and spurring economic growth. It was an election year where generally business slows down but that was not the case for Kenya as industry kept its wheels in motion, championed a message of peace and propelled productivity amidst a mixed bag of reactions.

It is the same year when the new constitution was implemented and as Counties tried to get on their feet some pounced heavy blows on business by increasing taxes to raise revenue. Challenges metamorphosed and took new shapes with the new dispensation.

The Association proved its advocacy prowess by quickly adapting to the changes brought about by the new constitution and engaged the different structures to advance the manufacturers advocacy issues. Some challenges appeared insidious but the Secretariat was up to the task.

The Association followed up on the promises that had been made by the substantive office bearers in the new Government during the campaign period where the Industrial Business Agenda was shared. KAM spearheaded Governors Roundtables in various Counties around the country and following the success of the pilot engagements the meetings will be held in all the Counties in the country.

Growing the manufacturing sector

In 2013 the Association redefined its strategy with a view to position itself as a strong voice for the manufacturing sector in light of the new dispensation. It was the same yearthatKAMconcludedworkonits3-yearstrategicplanfor the period 2011 to 2013. A new Business Development Plan which took into consideration the changes that came in with the new constitution which had an effect on the modus operandi of the Association was developed.

The Business Development Plan which was developed for the next three years focuses on transforming the Association into an inclusive, member focused and sustainable business membership organisation that delivers to an engaged constituency; substantially resparking and transforming Kenyas manufacturing sector by growing/nurturing manufacturers competitiveness, doubling share of intra-Africa trade and increasing thesectors growth domestic product contribution.

In addition to this, the new Business Development Plan is aimed at retaining manufacturing purity while engaging and growing KAMs constituency to a level where KAM represents at least 75% of active Kenya manufacturers. Furthermore, the Secretariat will actively grow KAM sectors and chapters to represent the voice of Kenyan manufacturers.

International Advocacy

KAM added its voice on the international arena where global decisions were made that affect the survival of the manufacturing sector in Kenya. Contributions were made at regional and global forums such as the East African Community, Common Market for East and Southern Africa, African Union, United Nations Industrial Development Organisation , OECD and the United Nations.Most of the engagements yielded positive developments for the local manufacturing industry as the Association proved its prowess in local and international advocacy.

Partnerships

We continue to be grateful to all our partners who have assisted the Secretariat in delivering its work through the extension of funds and technical expertise to successfully deliver our mandate for industry. We could have not been

Betty Maina, MBSChief Executive

Chief Executives Report


able to deliver most of our projects without the support ofDanishInternationalDevelopmentAgency(DANIDA),Agence France de Developpement (CIPE) (AFD), BritishHighCommission,BusinessAdvocacyFund(BAF),Centrefor International Private Enterprises, Government of Kenya andDepartmentforInternationalDevelopment(DFID).

We also worked closely with other business membership organisations for the delivery of some projects which are cross cutting such as the Governors Roundtables and engagements in the counties. KAM cannot be everywhere and coalitions offer opportunities for increasing influence as we join hands with other like minded institutions. Business coalitions were formed to spearhead engagements with Governments in the devolved system and the coalitions have delivered good results for industry.

I would like to pay special tribute to the hardworking and professional members of staff of the Secretariat who continue to serve members interests. The dedication and commitment of KAM staff in delivering unparalleled service to the manufacturing sector is highly commendable.

If you want to go quickly, go alone. If you want to go far, go together. ~African proverb

Chief Executives Report (Contd)

Outlook

As the world focus turns to Africa for opportunities there is a major industrialization drive taking place. It is believed that manufacturing will be a key driver for economic growth. The mandate of the Association remains relevant in championing the interests of manufacturing sector.

Betty Maina, MBSChief Executive

Betty Maina greets the President of Mexico at a high level meeting of Global Partnership for Economic Development Cooperation in Mexio City.


1. Mr Kennedy Mohochi, Chief Operations Officer 2. MrsPaidaNyamakanga-HeadofCommunication3. MsZipporahMaina-HeadofFinance4. MrTobiasAlando-HeadofMembershipServices5. MrsPhyllisWakiaga-HeadofPolicy,Research&Advocacy6. MrFrancisKodhiambo-HeadofKAMConsulting

Ms Betty Maina, MBS.Chief Executive

Leadership Team

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Trade

Legal and Regulatory

Chapter Secretariats

Tax

Energy services

Ethical Business

Standards

Manufacturing Academy

Business Facilitation Services

Infrastructure

SME

Business Informa-tion Services

Projects Communica-tion

Membership

CEO

OperationsPolicy Research and Advocacy KAM Consulting

Organisational Structure

Annual General Meeting (AGM)

Executive Committee

14 Industrial Sectors

8 Working Committees

Secretariat

7 Regional Chapters

Finance & Admin

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KENYA ASSOCIATION OF MANUFACTURERS ANNUAL REPORT 2013

Industrial Business Agenda

The Association continued to lobby for issues which were contained in the Industrial BusinessAgenda (IBA) in aneffort to create an enabling business environment for the Kenyan manufacturing sector. The IBA identified 15 key issues for the new Government to address as priority challenges for the manufacturing sector.

The priority challenges were as follows:

Ensuringenergysecurity Unblockingthelogisticscorridor Makeitlesstaxingtopaytaxes Achievemeaningfulregulation Wagepolicythatsupportsemploymentexpansion Makingitpossibleandeasiertosellourgoodsand

services Keepthecountrymovingswiftlyandsafely Need for strong public institutions that support

Industrial development Mobilizingresourcesforindustrialinvestment Ensuringtheimplementationoftheconstitution Work towards water security and environmental

conservation Setasidededicatedlandbanksforindustrialinvestors

in key towns and locations Supportinnovationandtechnologydevelopment Improvinglinksbetweeneducationandmarket Reductionofcorruptioninbusiness

Ensuring energy security

KAM was successful through the Industrial Business Agenda in lobbying for additional investment in power generation, alternative sources of energy, better energy quality and ensuring financial viability in electricity pricing. Industry applauded the President for rejecting a proposal to increase power tariffs at the beginning of the year. The proposal was however later revised to pave way for the construction of power plants for an additional 5000 MW of power. It was also pleasing to note that more funds were allocated for additional power generation in the budget for the year.

The Policy, Research and advocacy unit is the cornerstone of KAMs work. The unit is in charge of furthering fact based advocacy for members to relevant stakeholders in order to promote global competitiveness of Kenyan products.

The main objective of the unit is to provide proactive, fact based and results focused policy advocacy for members.

Pillar 1:

Phyllis Wakiaga, HeadofPolicyResearchandAdvocacy

Policy, Research and Advocacy

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The Government roll out plan for additional 5000MW in 40 months is scheduled as follows:

This should lead to decrease in price of electricity with a target of US$ 0.09

NEWCAPACITYADDITIONS(MW)

TIMEINMONTHS 6 12 18 24 30 36 40 TOTAL

Hydro 24 - - - - - - 24

Thermal 87 163 - - - - - 250

Geothermal 90 176 190 50 205 150 785 1,646

Wind - - 20 60 300 250 - 630

Coal - - - - 960 - 960 1,920

LNG - - - 700 350 - - 1,050

Co-Generation - - 18 - - - - 18

Total 201 339 228 810 1,815 400 1,745

Cumulative Additions 201 540 768 1,578 3,393 3,793 5,538

Walter KamauEO Trade and Policy

Wambui NdunguEO Research and Tax Administration

Frida MbuguaEO Legal Affairs

Maria LimoEO Customs & Standards

Policy, Research and Advocacy (Contd)

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Besides increase in capacity and expected reduction in price, we also acknowledge the ongoing work by to improve the quality of supply by Kenya Power. A policy brief on the ongoing work in the power sector has been published by the Association. The special policy brief There Shall be Power.. outlines all the improvements targeted at industrial customers.

The Kenya Power management team led by the Chief Executive met with KAM members in all chapters to discuss plans made to cushion commercial electricity consumers against frequent blackouts for consistent and uninterrupted business operations. The meetings were held in Nakuru, Eldoret, Industrial Area, Mombasa, Thika and Kisumu and draw members in all the regions adjacent to these centers.

Joseph WairiukoAEO IPR & anti Counterfeits

Patrick KaleveAEO KAMEA Nairobi

Georgina WachukaEO Regulatory

Emmanuel AlengaAEO Policy Research and Advocacy

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Besidesincreaseincapacityandexpectedreductioninprice,wealsoacknowledgetheongoingworkbytoimprovethequalityofsupplybyKenyaPower.ApolicybriefontheongoingworkinthepowersectorhasbeenpublishedbytheAssociation.ThespecialpolicybriefThereShallbePower..outlinesalltheimprovementstargetedatindustrialcustomers.The Kenya Power management team led by the CEO met with KAM members in allchapters to discuss plans made to cushion commercial electricity consumers againstfrequent blackouts for consistent and uninterrupted business operations. Themeetingswere held in Nakuru, Eldoret, Industrial Area, Mombasa, Thika and Kisumu and drawmembersinalltheregionsadjacenttothesecenters.TheCabinetSecretaryforEnergy&Petroleum, Mr Davis Chirchir also met with the top 100 customers who consume thelargest power in Kenya which are mostly industrialists, to review the plans forimprovementandbuildconfidenceondeliveryof the5000MWwithanend topursuingincrease in consumption. Plans are underway to connect high energy consumers todedicated lines.Membersareoptimisticthatmoresimilarengagementswouldgoa longwayinensuringsmoothbusinessoperations.Somemembersarealreadyhookeduptodedicatedlinesandreportimprovedqualityandreductioninoutages.Otherswillexperiencereliefoverthenexttwomonthsandmorebytheendoftheyear.

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Culled from Kenya Power presentation to the KAM Board.

Enhanced Supply Reliability - Distribution Projects -Coast

Project name

Scope Budget Areas covered Benefits Completion

Mishomoroni 33/11KV US$6.19mil Mainland north, Mishomoroni, Utange, Kisauni & environs

Loss reduction, capacity enhancement and improve reliability

Dec. 2014

Jomvu 33/11KV Mainland west Jomvu, Miritini, Chaani and environs

Loss reduction, capacity enhancement and improve reliability in

Dec. 2014

Nairobi Ragati (Upper Hill) 2x45MVA 66/11kV US$7.72mil around Nairobis Upper Hill area and City

Centre. Upper Hill, KNH, Nbi Hospital, Government Hill, part of CBD, Nairobi West, Stadium

Capacity enhancement, voltage support and reliability improvement

April 2014

Eastleigh 2X45MVA 66/11KV Eastleigh, Dandora, Eastleigh, Kariobangi CompleteRuaraka complex 66/11 kV, 2X23MVA KShs 560M Ruaraka, Thika & Baba Dogo Rd, Muthaiga,

Mathare North, parts of EastleighCapacity enhancement, voltage support and reliability improvement

April 2015

Mamlaka Road - UON

2X45MVA 66/11KV US$6.96mil State House, University of Nairobi Capacity enhancement, voltage support and reliability improvement

October 2015-April 2016

Nairobi Projects 9 No. (Villa Franca, Lukenya, Rironi, Uplands, Magumu, Githugunri, Lower Kabete, Dagorretti, Likoni Rd

US$20.89mil Nairobi peri-urban areas and parts of Machakos, Nyandarua, Kiambu counties

Loss reduction, capacity enhancement and improve reliability

Dec. 2014 June 2015

Likoni Road 66/ 11KV, 90 MVA (between BAT & House of Manji)

March 2016

GSU Magadi 10 MVA, 66/11KV US$3.0mil Magadi GSU camp and its environs. Improve supply quality, reach more customers

March 2015

Mt. KenyaRuringu 2X7.5MVA 33/11KVEmbu East 1 x 7.5 33/11KV Embu town & environs Alternate supply to Embu Town CompletedMakongeni (Thika East)

2 x 45 MVA 66/11KV Capacity enhancement and improve reliability

Completed

Thika North (Kahaini )

23MVA, 66/11 US$4mil Makuyu and Thika town & environs Capacity enhancement and improve reliability

December 2014

Mt. Kenya Projects 5 No. s/s in 33/11KV (Gatundu, JKUAT, Kangema, Tala and Mwea)

US$8.56mil Gatundu, Juja (JKUAT), Kangema, Tala and Mwea

Capacity enhancement and improve reliability

Dec. 2014 June 2015

West Bahati 2X7.5MVA 33/11KV US$4.349 Bahati, Engashura, Kabazi in Nakuru Capacity enhancement, voltage

support reliability October 2015-April 2016

West Region Projects

8 No. Substations in 33/11KV (Ahero, Chepseon, Elgon View, Kibos, Majengo, Kabarak, Maseno and Kipsaraman)

US$10.28 Ahero, Chepseon, Elgon View, Kibos, Majengo, Kabarak, Maseno and Kipsaraman

Loss reduction, capacity enhancement and improve reliability.

Dec. 2014 June 2015

Maungu 23MVA 132/33kV US$7.889Mil Voi Town, Maungu town & environs De-Link from KPC system, Capacity enhancement, reduce interuptions , alt supply to Voi town

October 2015-April 2016

Thika Road substation

2X200MVA, 220/66KV US$28.97mil Nairobi City & Environs, Thika Rd, KU, Ruiru,

Capacity enhancement, voltage support and reliability improvement

April 2016

Enhanced Supply Reliability - Transmision Projects -City Centre (KR Land-mawe Yard )

1No 2X200MVA, 220/66KV GIS s/stn 2 x 220KV cables from Embakasi, 66KV feed out

US$132mil CBD & Nairobi City & Environs. Capacity enhancement, voltage support and reliability improvement

April 2016

Juja Rd Rehabilitation & upgrading from 235MVA to 360MVA 132/66KV GIS

KSh 3.0Bil Nairobi & Machakos counties Improve supply reliability July 2016

Athi river 220 / 66 KV 2 x 200Mva KSh 248mil Machakos & Kajiado counties Improve supply quality June 2015Komarock 220 / 66 KV 2 x 200Mva KSh 285mil Nairobi & Machakos counties Improve supply quality June 2015Ngong 220 / 66 KV 2 x 200Mva KSh 249.6 mil Kajiado & Nairobi counties Improve supply quality June 2015KETRACO projects (22)

19x132/33 KV & 3x220/33kV substations(485MVA) (Malindi, Garsen, Lamu, Kitale, Awendo, Mwingi, Garrissa, Wote, Kitui, Isiolo, Ishiara, Machakos, Konza, Kajiado, Namanga, Nyahururu, Kabarnet, Narok, Bomet, Homabay, Ortum & Turkwel)

Garrissa, Isiolo, Malindi, Garsen, Lamu, Kitale, Ortum & Turkwel, Awendo, Homabay, Mwingi, Wote, Kitui, Konza, Machakos, Ishiara,

Improved quality of supply, increased capacity for more customers, reduced interuptions

Reactive Power Compensators for West Kenya, Coast & Mt Kenya

Reactive compensation (capacitors & shunt reactors) equipment for substations at: Musaga, Mtito Andei, Meru, Rabai, Bamburi, Eldoret, Kisumu, Lanet, Chemosit, Kiboko, Kiganjo, Nanyuki, Voi, Kiambere, Kisii

At preliminary stage

Garrissa, Isiolo, Malindi, Garsen, Lamu, Kitale, Ortum & Turkwel, Awendo, Homabay, Mwingi, Wote, Kitui, Konza, Machakos, Ishiara,

Improved quality of supply, increased capacity for more customers, reduced interuptions

At preliminary stage


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The Cabinet Secretary for Energy & Petroleum, Mr Davis Chirchir also met with the top 100 customers who consumethe largestpower inKenya-whicharemostlyindustrialists, to review the plans for improvement and build confidence on delivery of the 5000MW with an end to pursuing increase in consumption. Plans are underway to connect high energy consumers to dedicated lines. Members are optimistic that more similar engagements would go a long way in ensuring smooth business operations. Some members are already hooked up to dedicated lines and report improved quality and reduction in outages. Others will experience relief over the next two months and more by the end of the year.

Make it less taxing to pay taxesThe Government has moved to streamline tax payments to reduce the administrative burdens. Plans have been finalized to harmonize payments of payroll taxes PAYE, NHIFandNSSFincombinedmannerandcentrallythroughKRA. Besides this, the ongoing automation processes including I-Tax are expected to ease the administrativechallenges associated with payment of taxes.

In addition to administrative burdens, KAM advocates for changes in the Common External Tariff (CET) tosupport local industries. In 2013 there were significant gains in rationalization of the CET to eliminate negative distortions that had arisen and affected Kenyas paper converters negatively with the correct classification and application of 10% for the intermediate goods down from 25%. This has now been finalized in. Besides paper, KAM successfully persuaded government to adopt 60% of our proposals on the CET in 2013 and 2014 budgets.

While KAM supported the principles behind the reform of the VAT law and regime and the promise of elimination of long backlogs of refunds, the introduction of the VAT Act 2013 came with significant challenges for some sectors of the industry such as the pharmaceutical sector and net exporters. KAM continued to engage the National Treasury and Parliament on the VAT Act. Some amendments were adopted in the VAT Amendment Act, 2014. We shall continue engaging Treasury and Parliament on other necessary amendments. Amendments are expected to be enforced in the 2014 budget cycle.

Wage policy that supports employment expansion

Manufacturers have for a long time been advocating for a productivity based wage increment. In 2013 industry was dealt a heavy blow when Government announced a ceremonial wage increment of 10%. The textile industry was hardest hit because products from Kenya became non competitively priced compared to countries such as

Bangladesh and Cambodia whose input costs are much lower.

Government however listened to the hue and cry of industry and did not announce a ceremonial wage increment for 2014. KAM will continue to lobby for a productivity based wage increment.

Making it possible and easier to sell our goods and servicesBuy Kenya build Kenya

KAM engaged on an aggressive Buy Kenya, build Kenya campaign and worked closely with the Ministry of Industrialization and Enterprise Development and other stakeholders to inculcate a culture of loyalty to locally manufactured goods.

KAM participated in the review of the Public Procurement andDisposal (PreferenceandReservations)Regulations,2011 which granted exclusive preference to local contractors offering motor vehicles, plant and equipment, furniture, textiles and foodstuffs.

Local firms were also allowed to engage foreign firms under joint venture agreements as long as foreign firms stake does not exceed 30%. Though directives have been given by the Presidency and in several instances regulations changed, we are still pursuing procurement entities to ensure they comply with the directives.

Exports to EAC region drop

TheEastAfricanRegionisKenyaslargestmarket.Howeverit is under threat from administrative restrictions through (NTBs) and reintroduction of tarrifs. Kenyas exports toEast African Community have reduced by a total of 7.4 % from about Kshs. 134 billion in 2012 to 124 billion in 2013. At the same time, Kenyas exports to Tanzania reduced from Ksh46 billion to Ksh40 billion in 2013 while exports to Uganda reduced from Ksh67 billion to Ksh65 billion and to Rwanda from Ksh16 billion to Ksh13 billion. This is believed to have come about because of continued existence of restrictions of market access by partner states through imposition of non-tariff barriers such aslack of recognition of the EAC rules of origin certified by KRA, restrictive trade requirements by regulatory bodies like TFDA, numerous levies and charges including discriminatory excise duties and red tape at border points and other deliberate technical barriers to trade. This is one of the factors for reduced contribution by Kenyas manufacturing sector to the GDP of 8.9 per cent in 2013. The value of Kenyas exports to EAC market is illustrated over leaf.


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Value of Exports by Destination in Kshs. Million

COUNTRY 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Rwanda 6011 6190 7282 4765 5801 8953 9536 10535 13554 16151

Tanzania 14588 17921 19953 18288 22326 29224 30087 33211 41743 46036

Uganda 30668 37059 42679 27812 33571 42285 46240 52108 75954 67450

Burundi 2752 2971 3714 2184 2424 3479 4597 5458 5904 5309

TOTAL 54019 64142 73630 53050 64122 83941 90460 101312 137155 134946

*Provisional Source: Kenya National Bureau of Statistics/ Kenya Revenue Authority

Kenya continues to have an open policy for imports from other EAC Partner States including the imports which have benefited from various incentive schemes such as goods coming from EPZs and duty draw back schemes from United Republic of Tanzania (URT) and goodsbenefiting from fiscal incentives under industrial Parks in Uganda. Kenyan companies who use duty remission scheme to manufacture finished goods for export outside the EAC are still being penalized when exporting into EAC on grounds that their names appear in the EAC Duty Remission Gazette Notice. This is despite the fact that they pay duty for raw materials used in manufacture of finished goods sold within EAC. Most manufacturers have withdrawn from the duty remission scheme and in the process impacting negatively on the competitiveness of their products both in the home market and export market.

While some longstanding NTBS have been resolved, others are reported to have been instituted. Notably, levy of US$ 200 on Kenyan trucks by Tanzania was abolished, Uganda no longer demands retesting of Kenya milk. Charging full CET on plastic products from Kenya was stopped. Mutual recognition of each Partner States Quality Mark was adopted. Recognition of East African Rules and and Certification of Origin in the EAC improved and verification inspections were conducted were rules of origin were doubted.

But other NTBS remain. The outstanding non tariff barriers such as restriction of beef and beef products by Uganda, lack of preferential tariff treatment on rice grown

in Kenya by Uganda, lack of preferential treatment for motor vehicle sector in the EAC market and 70% and 75% material local content requirement imposed on cigarettes imported from Kenya into Uganda and Tanzania market require quick resolution and were escalated to Cabinet Secretary level in the line Ministries of Industrialization and Enterprise Development and National Treasury and East African Affairs, Commerce and Tourism. KAM has provided recommendations with regard to the outstanding NTBs to the line Ministries. It is however, necessary for the Government of Kenya to take the matter of denial of access to the EAC market very seriously at the highest level and seek solutions to the same.

Nationally, 50% of the reported internal trade hindrances were resolved. These included; delay in clearance of goods at the port, delay in verification and release of orders of export goods, Kenya Revenue Authority Simba System downtime was reduced, KEBS testing certificates that were taking long to be released were issued within required time. In addition, Kenya has reduced roadblocks and introduced highway patrols along Northern Corridor. Containerized goods were weighed only twice in Kenya at entry and exit point.

Trade Agreements

In view of the proposed free trade agreement between East African Community, Common Market for East and Southern Africa and Southern Africa Development Community, the Association presented its proposals to safeguard Kenyan manufacturing industrys interests in the negotiations. 70% of the proposals were taken up

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for discussion in the Tripartite Trade Negotiation Forum. Kenya has an opportunity to tap into a population of 600 million in the market that will be presented by the proposed free trade area.

Trade with Ethiopia and its market of 100 million person is set to increase with the ratification and implementation of the Special Status Agreement signed between the two states in November, 2012. The SSA has now been ratified by both nations and the elements of implementation are under discussion.

In May 2014, Kenya signed a Bilateral Trade Agreement (BTA) with Nigeria intended to boost trade with thelargest economy in Africa and its 170 million people. KAM continues to work with Government in pursuit of implementation of the BTA to ensure delivery of that market to Kenyas goods.

EPAs: Kenyas Ksh 100 billion annual earnings from exports to the European Union could be greatly reduced if continued market access is not protected with the conclusion of the negotiations of the Economic Partnership Agreements. To this end the Association has been keenly involved in supporting Government efforts to pursue an acceptable negotiated position. Working with other private sector players notably the Kenya Flower Council, Association of Fish Processers and Exporters of Kenya (AFIPEK) and the Fresh ProducersExportersAssociationofKenya(FPEAK),KAMhasworkedclosely with the Government teams and negotiators on EPAs. We hope the agreement can be concluded before the deadline of October 2014.

AGOA beyond 2015: KAM continued to collaborate with other stakeholders including the Government and ACTIF in lobbying for the extension of the Africa Growth and Opportunities Act by the US Congress. The extension of the third country fabric provisions beyond 2015 is expected to create over 500 000 jobs in the textile industry.

Counterfeits: The counterfeit menace continued to dog the manufacturing sector in 2013. KAM joined hands with other stakeholders in the fight against counterfeits. Counterfeit industry is believed to be worth over Ksh 2

billion in Kenya and is blamed for a lot of harm to society. In light of the above, KAM revived theAnti-Counterfeitsubcommittee, with the main mandate of driving the anti-counterfeitagendaonbehalfofthemanufacturingsector in liaison with other stakeholders.

KAM presented a position paper with proposed amendments to both the Anti-Counterfeit Act 2008anditsregulationstoAntiCounterfeitAgency(ACA)forconsideration. Awareness seminars were also carried out in Nairobi, Mombasa and Central Kenya. KAM has partnered with ACA in sensitizing the judiciary on illicit trade at the Judicial Training Institute.

Anti-counterfeitremainsanagendaitemfortheindustryand KAM will continue to work with Government and other stakeholder in the fight against counterfeits.

Standards

Following the challenges raised by members on standards which were hampering trade in the East African region, KAM lobbied for the harmonization and follow up on gazettement of the same was underway by the close of the year.

KAM paid a courtesy visit to the Kenya Bureau of Standards (KEBS)newManagingDirectorandpresentedstandardsissues affecting industries.

The Association participated in a one day validation workshop in Kigali on assessment of the progress in implementation of adopted EA Standards and effectiveness certification schemes in EAC. KAM is following up on the final report.

Business facilitation

The Association continued to facilitate expedition of the processing of work permits and AGOA visas. To this end, 65 work permits , 45 special passes and 3552 AGOA Visas were processed. In addition, 338 duty remission applications were processed.

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Ensuring the implementation of the constitution

A lot of changes came with the implementation of the new constitution. As the devolved Government system kicked in, a National Business Membership Organisation guide for engaging County Governments under the theme ensuring Government delivers for business was developed. The guide was used to engage County Governments through the business coalitions that were formed during the CEOs of BMOs conference early in the year.

Devolution issues

Teething challenges were experienced during the early stages of implementation of the devolved system of Government. KAM engaged various Government agencies to demystify devolution to the industry stakeholders. Devolution seminars were held to sensitize stakeholders on how devolution works. We have a dedicated devolution desk to keep track on emerging challenges affecting businesses. Feedback can be emailed to [email protected]

Work with the Judiciary

KAM is working with the National Council on the Administration of Justice (NCAJ) to develop an IllicitTrade Manual which will be a one point of reference for all interested parties involved in combating illicit trade. The manual will provide an increased understanding of the impact of illicit trade to the business community among the targeted stakeholders; judiciary, prosecutors and police. KAM is also partnering with the NCAJ to launch Business Court Users Committees (BCUCs) in Nairobiand 6 counties. The BCUSs will create an increased understanding by the courts of the business implication of the court decisions and an appreciation by the business community of the court process and how this should be followed to reduce costs to businesses.

Acts, Bills reviewed and tracked

County Taxation and Business Regulation Process Bill

Public Procurement and Assets Disposal Bill Environment Management and Conservation Act Competition Act EALA Competition Act and SQMT Act: Public Private Partnership Act Anti Counterfeit Act NTB Bill Accreditation Bill Work Injury Compensation Bill VAT Bill Finance Bill Tax Appeal Tribunal Bill: Kiambu County Finance Bill Nakuru County Finance Bill Mombasa County Finance BIll PublicProcurementandDisposal(Amendment)

Bill, 2013 The County Industrial Development Bill, 2013 NSSF Bill Special Economic Zones Bill

When someone is drawing a line in the sand someone should stand in front and advise on whether they should move a bit to the right or left in order to maintain a straight line. ~ African proverb

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The objective of the unit is to competitively offer value-added services to companies on a consultancy basis in an effort to augment KAMs revenue streams

Pillar 2:

KAM Consulting is the business division of the Kenya Association of Manufacturers charged with helping KAM members and customers reduce their operational costs and enhance their revenues through Energy Efficiency Management, development and financing of renewable energy resources, management and leadership trainings, consultancy services and surveys, supply chain linkages, business information services and global market expansions.

The unit buoys the sustainability of KAM through income generating projects.

KAM Consulting carries out these responsibilities through 5 departments, namely:

CentreforEnergyEfficiencyandConservation RegionalTechnicalAssistanceProgramme ManufacturingAcademy BusinessInformationServices SMEsDevelopment

In the year 2013 KAM Consulting generated revenue of Khs 35.8 million compared to Ksh 33.8 million in 2012.

CEEC

The Centre for Energy Efficiency and Energy Conservation runs programs designed to help companies identify ways of conserving energy and promoted the use of energy efficiency mechanisms in companies operations. The service is offered to both KAM members and non members.

Energy audits conducted by the Centre continued to gain popularity amongst businesses in the country primarily buoyed by the savings companies make by implementing recommendations from the exercise.

To this end, 57 General Audits were completed with potential savings of Ksh 77 million per annum, from an investments of KSh 110 million with a payback of 1.4 years. In addition, 54 Investment Grade Audits completed with potential savings of Ksh 2.5 billion per annum from an investments of KSh 2.3 billion with a payback of 0.9 year.

Next is a table outlining audits completed between 2007-2013.

Francis KodhiamboHeadofKAMConsulting

KAM Consulting

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Six exchange visits were carried out to raise awareness of the audits and to showcase technology available globally. Certified Energy Management Trainings were conducted. 43 participants took part in the training and 32 passed.

As a result of this support, KAM through CEEC by December 2013 completed 230 General Audits and 106 Investment grade audits. This has seen enterprises save over Ksh 6 billion in energy costs.

The audited enterprises are spread all over Kenya with Nairobi (154) taking the lion share followedbyCentral(59),Mombasa(32),CentralRift(24)Southrift(23)NorthRift(22),Nyanza(15)Eastern(7).

The center also embarked on 5 energy related specialized trainings which attracted on an average 40 participants per training. The trainings serve to equip participants with understanding on how to apply energy management principles resulting in reduced energy consumption and significant cost savings.

Further, KAM through CEEC in conjunction with theAssociationofEnergyEngineers(AEE)intheUSA offers the Certified Energy Management (CEM)programmeannuallyandtodatethereare100 certified Energy Managers in Kenya from the programme.

KAM appreciates the support received from the Government of Kenya and DANIDA for the energy projects. To date the Government of Kenya has extended to KAM Kshs 225 million to and DANIDA has given 30 million DKK to implement various energy efficiency initiatives

Energy Management Awards (EMA)

EMA 2014 was the 10th of what has become a hugely successful annual event. The event which was held on 4th April 2014 at the intercontinental Hotel and waspresided over by the Cabinet Secretary, Ministry of Energy and Petroleum, Mr. Davis Chirchir. The event which was dubbed Celebrating the 10th Year of Excellence in Sustainable Energy Management saw industries save over Ksh 10 billion over a period of 10 years through energy management and energy efficiency initiatives. A total of 60 companies participated in EMA 2014 and three new award categories were introduced, namely: EMAGoldenHonoursAward, EMASilverHonoursAwardand GreenbuildingandGreenArchitectoftheyear

AwardBidco Oil emerged the Overall Winner of the 2014 Energy Management Award.

KAM Consulting (Contd)

Mary KiemaEO & Coordinator CEEC

Nicholas Gachie EO Energy Services

Martha CherutoEO Energy Services

Jeff MurageProjectCoordinator-RTAP

Pascal HabayTeam Leader RTAP

Simple Payback Period(yrs)

Investment required: Kshs Billion

Potential savings: Kshs Billion

1.1 2.4 2.1 230 General Audits completed

0.9 3.4 3.7 106 Investment Grade Audits Completed

1.0 5.9 6.0 Total/Average

34 MW equivalent

2007-2013 Audits

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Award Categories Winners Runners-Up1. Overall Energy Manage-

ment AwardBidco Oil

1stRunnersup:SarovaWhitesandsHotel2nd Runners up: Wrigley Ltd

2. Best energy Management Team Award

Sarova Whitesands

Gitugi Tea Factory3. Fuel Savings Award BidcoOil(large) SarovaStanleyHotel

SarovaTaita(SME) None4. Electricity Savings Award

(SME,Large)-GathuthiTeaFactory(Large) TurtleBayHotel(Large)

SarovaShaba(SME) KapsaraTea(SME)5. Service Sector Award SarovaWhitesandsHotel

SarovaPanafricHotel6. SustainedHighPerfor-

mance AwardBidco Oil

BAT Ltd7. Best New Entrant WireProducts(Large) MombasaCement(Large)

KaluworksLtd.(Large)SME: None SME: None

8. EMAGoldenHonoursBidco Oil Kenafric Confectionery

9. EMASilverHonours Spinknit Ltd SarovaWhitesandsHotel10 Green Building Award LRC Building, Catholic University of East

Africa1st Runners Up: CocaCola, East and Cen-tral Africa Business Unit. 2nd Runners up: Leleshwa Primary School

11 Green Architect of the year University of Nairobi, Department of Architecture and Building Science

Environmental Design Consultants Chap-ter, AAK

EMA 2014 Winners


Lilian OdhekEO Business Competitiveness Services

Beatrice Kithinji EO CEEC

Anne KariukiAEO Energy Services

Peris KasaeProject Assistant

Joseph MwangiAEO Energy Services

Catherine MukokoEO Manufacturing Academy

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Energy efficiency and Climate Change

The Kenya Association of Manufacturers through the Centre for Energy Efficiency and Conservation (CEEC)spearheaded a strategy for Capacity Building on Energy Efficiency and Climate Change. This initiative was funded by GIZ. The grant was made available for the period from October 2012 to November 2013.In 2014, CEEC continued with climate change initiatives. To this end, the Association received support from BusinessAdvocacyFund(BAF)soastosensitizemembersand the private sector on impact of climate change on businesses bottom line as well as raising awareness on the upcoming Climate Policy and Bill.

Supporting Investment in Energy Efficiency and Renewable Energy in Kenya

AFD has made available a line of credit to support bank lending to investors on Renewable Energy and Energy Efficiency. The Regional Technical Assistance Programme (RTAP) operated by KAM provides technical support toproject sponsors and acts as a liaison between the Banks and the project sponsors to facilitate the development of viable renewable energy and energy efficient projects throughout Kenya, Uganda and Tanzania. Technical assistance offered involves projects support to a bankable level for project owners (in both renewableenergy and energy efficiency). RTAP also supportsthe bank credit officers of partner banks in evaluating the attractiveness of the projects by availing financing through tailor made debt financing through the French developmentagency(AFD).

RTAP continued to offer technical assistance to energy efficiency and renewable energy projects in the region. This included process improvement that resulted in energy optimization at firm level. In this regard, 31 renewable energy and energy efficiency projects were technically certified during the year. The projects, with a total net worth of USD 110 million qualified for financing.

The project spread its tentacles into the region and formed trade partnerships with companies in Tanzania and Uganda. In Tanzania RTAP mandated Confederation ofTanzaniaIndustries(CTI)asitsfocalpointinTanzania.BankofAfricaTanzania(BOAT)istheLocalpartnerbankin Tanzania. Training was done for local banks offering debt financing to the certified projects through the line of credit from AFD.

Eight of the projects were financed at a total value of USD 39.5million through co-operative Bank Kenya LimitedastheKenyanpartnerbank.Co-operativeBankofKenyaformally wrote to AFD seeking for a new line of credit to support the certified projects not funded under RTAP 1 and targeting to support more projects.

Following the successful completion of RTAP phase 1, RTAP 2 was launched in May 2014. It is expected that in RTAP 2 there will be a strong focus in Uganda and Tanzania.

Manufacturing AcademyThe Manufacturing Academy which has been in existence for the last three years rolled out 20 new training programmes and 8 consultancy services in 2013. The capacity building programmes were in the following areas; Supervisory Skills Development, Good Manufacturing Practices, Production Management, Accelerated Sales Force, Employment Contracts Management, Lean Manufacturing, Waste Management and Disposal in Manufacturing, Procurement Fraud Detection and Mitigation and Managing Discipline in the workplace. Technical training was conducted in Programmable Logical Controls.

The trainings were aimed at bridging the skills gap between the training received from colleges and universities with industry requirements. In addition to this, trainings were also conducted to enhance skills capacity in the existing industry personnel.

A total of 11 trainings were conducted during the year and a total of 175 participants from industry were trained.

Memoranda of understanding were signed with Technical University of Kenya for technical training, Centurion Systems for practical training on use of industrial production machinery and KPMG for fraud finance related trainings.

Business Information Services

Through the Business Information Services, trainings continued be offered in an endeavour to equip industry personnel with relevant skills. To this end, about 700 people were trained as the association played its role in bridging the skills gap between the skills churned out from various universities and the industry requirements.


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Training services alone generated a net income of Ksh 5.16 million.

A total of eight topical seminars attended by an average of 60 participants were held. The seminars were mainly on; fighting counterfeits; Customs valuation; Kenya Revenue Authority Export procedures; devolution; budget; VAT Act 2013 and devolution seminar on fees and charges in Nairobi Country. Trainings were also conducted on Unlock your financial blind spots; social Media Marketing; Tax Compliance and Planning technical training.Breakfast meetingswithAfricaTradeInsurance(ATI)andNSEwerealso held to discuss risk management and alternative sources of raising finance through the stock exchange.

Besides Nairobi, these trainings were also held in counties such as Mombasa, Nakuru and Kisumu.The9thAnnualKAM-KaizenConferencedubbedKAIZENfor Quality was held in July 2013 and attended by 106 participants drawn from the manufacturing, service and hospitality sectors. The conference was graced by Mr. Jon Miller the CEO of Kaizen Institute Global and a global crusaderofKaizen/Lean.Hiskeynoteaddressedfocusedon Kaizen for Quality required to drive Kaizen/Lean to achieve true transformation.

The conference also took a 2-pronged approachnamely: tutorials on Day1 and Company tours on Day 2. Companies that showcased their implementation of Kaizen included: Ubbink of Naivasha; Kariki Farm in Juja; Unga Ltd on Dakar Road, Nairobi; Synresisn in Industrial Area, Nairobi; Associated Battery Manufacturers (ABM)in Industrial area, Nairobi; and Kenafric Industries Ltd in Ruaraka, Nairobi.

On KAIZEN interventions, the following companies signed up for the Kaizen Journeys: Chnadaria Industries Ltd, London Distillers Ltd, Connix Industries Ltd, Flooring & Interiors, Uhuru Flowers and Stokman Rozen.In July 2014, KAM will host the 10th Anniversary Kaizen Summit at the Safari Park Hotel (Pavilion). The founderand Chairman of the Kaizen Institute, who is also the translator of the Kaizen Principles from Japanese to English Sensei Masaaki Imai will be in attendance for the 2 days. The event will entail: over 15 top KAIZEN practicing organizations share their experiences; Plenary discussion led by Industry leaders on overcoming barriers in building a Kaizen culture and Application on Kaizen Thinking in supplier customer relations for mutual benefit

in tomorrows Kenya; an interactive quiz on how to check your Kaizen Quotient and Sensei Masaaki Imai will crown it all with a keynote address

Trade and Investment mission to Ethiopia

Following the signing of the Kenya - Ethiopia SpecialStatus Agreement (SSA) in November 2012, the KenyaAssociation of Manufacturers (KAM) in liaison with theKenya Embassy in Ethiopia organized a Kenya Businesses Investment and Trade Mission to Ethiopia in July.

The main objective of this mission was for Kenyan business people to make initial contacts with both Government and Businesses of Ethiopia and to explore Investment and Trade opportunities for both parties to take advantage of theKenya-EthiopiaSpecialStatusAgreement(SSA)inanendeavour to expand markets. Other objectives of this Investment and Trade Mission included: TocementtheSpecialStatusagreement(SSA)

and persuade the respective Governments to develop the necessary protocols to implement it.

ToidentifypossibleinvestmentopportunitiesinEthiopia.

ToexpandtradebetweenKenyaandEthiopiaasneighbouring countries.

Toidentifybusinesspartners.

36 Kenyan companies took part in the trade mission which was attended by chief executives and other senior management drawn from the manufacturing, banking, floriculture, tourism, tobacco and services sectors. The delegation included five directors from KAM including the Vice chairman, Mr. Pradeep Paunrana.

The Kenya delegation organized under the auspices of the Kenya Association of Manufacturers was led by Mrs. Phyllis Kandie, Cabinet Secretary in the Ministry of East African Affairs, Commerce and Tourism. Other Government ministries and departments represented included the Ministry of Industrialization and Enterprise Development, the Ministry of Foreign Affairs, Department ofExternalTrade (BilateralDivisionandAGOAUnit)andthe Export Promotion Council, Tourism Fund and KICC.

The delegation had an opportunity to pay a courtesy call onthePrimeMinisterofEthiopia,H.E.AtoHailemariamDesalegn. Meetings were also held with the Ethiopian Ministers of Foreign Affairs, and Trade and Industry.


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Jas Bedi receives Savant of Advocacy Award from KAM Chairman Polycarp Igathe

Cabinet Secretary of Ministry of Industrialization & Enterprise Development, Mr Adan Mohamed meets with KAM Board during a visit to KAM

Betty Maina greets Alhaji Aliko Dangote of the Dangote Group during a Kenya-Nigeria Business forum held in Nairobi

KAM Trade mission to Ethiopia with H.E. Ato Hailemariam Desalegn, the Prime Minister of Ethiopia

KAM and General Electric (GE) hosted Jeff Immelt, Chairman of GE in a Town Hall session during his visit to Kenya

The Year in Pictures

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Signing ceremony of the AFD grant of 2.1 million extended to KAM for RTAP technical assistance

Former UNIDO Director General, Yumkella Kandeh, receives commemorative plaque from KAM chairman during a dinner hosted by KAM for African Ministers during CAMI 2013

Dr. Manu Chandaria greets Deputy. Governor of Nairobi County, Jonathan Mueke at the Nairobi Governors Roundtable

H.E. The President Hon. Uhuru Kenyatta being welcomed to an exhibition stand by Polycarp Igathe, KAM Chairman and Betty Maina KAM CEO during the National Exporters Forum

The Year in Pictures (Contd)

Cabinet Secretary for Ministry of Energy & Petroleum with Betty Maina and Polycarp Igathe at the Energy Management Awards

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The Special Status Agreement signed by the two countries has now been ratified by both States. KAM will continue to lobby for the implementation of the Special Status Agreement.

SME focus and engagement

In line with the companys overall goal of being an all inclusive voice of the manufacturing sector, KAM continues topartnerwith theMicro-enterpriseSupportProgram Trust (MESPT) to identify high growth SMEsubsectors and opportunities within specific agro-processing subsectors value chain targeted at firm level interventions and technical assistance. The value chain programme is aimed at enhancing efficiency of manufacturers and competitiveness of manufactured goods in the domestic, regional and international markets. Subsectors of immediate focus are: Mangoes, Aloe Vera, Irish potatoes and coconuts.The KAM MESPT memorandum of understanding has seen small to medium enterprises benefit from a grant of up to Ksh. 5 million per company to shore up capacity and boost competitiveness of agro products. The funds have been injected into the sector by the Danish Government through Danish International Development Agency, DANIDA. The use of these funds is facilitated through the SMEfleX, a product launched by KAM in 2012, to cater for the needs of SMEs in the agro-processing value chain.Since the launch of SMEflex, the following companies are either utilizing the service or have been earmarked to benefit: Herbal Gardens Ltd, KabondoWomen Fruit

Processors, Kakuku Fruit Growers and among other SMEs in the pipelineAdditional firm level interventions for SMEs have been identified and will be rolled out in 2014. The Association carried out a mapping exercise for small and medium enterprises.

Efforts will be stepped up in the ensuing years to increase the activities and voice of the small and medium enterprises. KAM is making a concerted effort to represent more of the small and medium scale enterprises.

As the unit evolves along the strategic path its main thrust will be centred around creating an enabling environment for small and medium enterprises as well as bridging the skills gap by matching industry requirements with the needs of the industry.

EMA 2014 Award winners.

If you cannot solve your problems in peace, you cannot solve wars. ~ African proverb


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The membership unit is in charge of recruiting, delivering relevant , quality, timely and effective services to members. KAM remains the most popular business membership body for the manufacturing sector. The Secretariat continues to attract and retain members through its bouquet of services. The year started off with a round of roundtables with aspiring Governors and after elections substantive Governors were engaged to follow through the promises made during the campaign period.

In order to effectively serve our members more emphasis and support was accorded to chapter work in line with the changing architecture of the Government structure which was brought in by the new constitution.

Mapping of Counties was done for each County on recruitment & service delivery. The Association also participated in 4 exhibitions to raise awareness of the organization.

Pillar 3:

The unit exists to ensure that KAM is the most preferred business membership organisation for manufacturing value-add industries.

Tobias Alando, HeadofMembershipServices

Membership

David W. KimaniChapterOfficer-Machakos Chapter

Eric Ochieng ChapterOfficer-Nyanza/ Western Chapter

Judy NjinoCoordinator, Global Compact

Susan GitauChapterOfficer-Coast Chapter

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NO SECTOR&Sub-Sectors KAMSECTORRELATIONSHIPOFFICER1. Metal & Allied Sector

HotRolling ColdRolling WireProducts

Tobias Alando

2. Food&Beverage(Solids) Food&Beverage(Liquids) EdibleOil Saltsubsector

Paida Nyamakanga Maria LimoMaria LimoEunice Mwanyalo

3. Energy & Electrical Sector David Waweru4. Chemical and Allied Sector

General Industrial Chemicals Agro-Chemicals Paints & Resins Cosmetics&HygieneProducts

Georgina Wachuka/Patrick Kaleve

5. Pharmaceutical Sector Bella Akinyi/Wambui Ndungu6. Leather Sector Catherine Mukoko/Joseph Wairiuko7. Plastic Sector Robert Juma/ Beatrice Githinji8. Paper and Paper Board Sector Wambui Ndungu9. Motor Vehicle sector

Motorcycle MotorVehicle&Accessories MotorVehicleAssemblers BusBodyBuilders

Joseph Wairuko/Phyllis WakiagaEmmanuel AlengaJoseph WariukoPhyllis WakiagaTobias Alando

10. Textile and Apparels Sector LocalTextiles ApparelsExporters

Joseph Wairiuko

11. Timber,WoodandFurnitureSector- Jeff Murage13. Service Sector

ICTFrancis Kodhiambo/Zipporah MainaPhyllis Wakiaga

14. Building Mining & Construction Paul Mutambuki15 Fresh Produce Martha Cheruto16 SME Focal Point Kennedy Mohochi

Sector continued to engage and more subsectors were formed to handle subsector specific issues. A salt subsector was formed. KAM currently has its subsectors organised as follows;

KAM SECTOR AND SUB-SECTORS LIST-2014

Sectors

Membership (Contd)

Gladwell KamauChapterOfficer-CentralKenya Chapter

Robert JumaChapterOfficer-Industrial Area

John KamauChapterOfficer-Nakuru Chapter

Edith KoskeChapterOfficer-Eldoret Chapter

Josephine NgugiEO Business Information/ Library Services

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KAM welcomed the following members in 2013 into the Associations ambit:

New Members

Eunice MwanyaloEO Salt Subsector

Otto MarevuSalt Subsector Community Liaison Officer

Westminister Paints & Resins Ltd

Glacier Products United Distillers Vintage Brush Manufacturers

Kenrub Ltd Top Pak EastAfricaMaltLtd-EAML Solimpex

Kenwear Garments Ltd E-manageAfrica East Africa GlassWare SolohWorldwideInter-enterprises

GZ Industries Seven Seas Ltd Endest Bites Ltd Kip Melamine Co. Ltd

De La Rue Currency & Security Print Ltd

Vectus Kenya Ltd CFC Stanbic Bank SelectaKenyaGmbH&Co.KG

Richfield Engineering Ltd Adpack CompuLynx Connix ltd

Sintel Security Print Solutions

Endmor Steel Millers ltd Ernest & Young Flair Kenya Ltd

Morani Ltd Rongai Workshop & Transport

PriceWaterHouseCooper Cica Motors

Brilliant Garments Kenya EPZ

Kenya Breweries Savana Cement Salim Wazarani Kenya Company Ltd

Load Trailers Symbiotic Media Consortium Ltd

Jumbo Quality Products R.T East Africa Limited

Intraspeed Arcpro Scania East Africa Limited African Retail Traders Gone Fishing

Essential Manufacturing CFC Stanbic Bank Kenafric Bakery Ltd DodiAutotech(k)Ltd

HondaMotorcycle Tile & Carpet Centre Ltd Naline Steel Works Ltd Tana River Quarry Ltd

Pernod Ricard Kenya Ltd Ikapamedia East Africa Kerio Valley Development Authority

Tuff Foam Ltd

Fine Engineering Works Ltd Kenya Flower Council Darshan Plastic R.T East Africa Limited

MFI Ultra Print Ltd Farm Refrigeration & Electrical Systems Limited

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Mombasa Chapter

The chapter was a hive of activity during the year as it adapted to changes brought about by the new constitution.

Engagements with Executives in the new structure of Government begun in earnest. The Chapter held a meeting withGovernor HassanJoho,FinanceWalid Khalid, CE Tourism, Anthony Njaramba and stakeholders from KAM,KAHC,KATO,KNCCI,EATTA,andthe Disaster Management Director to discuss the Finance Bill 2013. The Governor emphasised the need to have stakeholders involvement and consultation as it is enshrined in the constitution. Various stakeholders present appreciated the fact that the County needs to raise revenue in order to render services, however the sentiment shared by the stakeholders is that the margins of revenue increment are too high and they will adversely affect business in the

Central Kenya Chapter

In its second year of operation the Chapter continued to advance advocacy issues for members in the Central Kenya area. The Chapter held a successful Kiambu Governors Round Table in September under the auspice of the Kiambu Business Coalition.

The Kiambu County Government promised to promote an enabling environment for business. This follows the contention with the Finance Bill that had been passed by the County. Concerns and proposals were raised in the following key issues

County. Stakeholders were asked to engage with their members and come up with a proposal, to be presented to Finance before the bill is presented for approval.

The County Government is putting up a 5 member committee, of which KAM is part of to discuss give their views. Once passed, it will propose the fees and charges for the County.

The Salt Sub-sector that is primarilybased in Mombasa organised itself and elected a Chairman to drive its Agenda. Two officers have already been recruited one to focus on general advocacy and engagements and the other one to focus on community engagements.

KAM Coast chapter in partnership with Kenya Power held a dinner for the coast region power consumers, the dinner which was held at Nyali Beach

Fifth Schedule Part III Agricultural Produce Cess

Second Schedule Permit/ License fee for various businesses

Third Schedule Part II Solid Waste Management Services

Third Schedule Part XIV Fees for physical Services

Third Schedule Part XV Other Fees for development

ThirdSchedulePartVII-Feesfor outdoor advertisement and Signage

Third Schedule Fees for Parking Third Schedule Part IV Public

HealthServices

hotel was attended by the Managing Director of Kenya Power Dr Bernard Chumo, Mvita MP Abdulswamad Sharif Nasir, KAM Chief Executive Betty Maina and representatives of Business Membership Organizations. Historically there were challengesto do with power supply and that is why most members of KAM invested in training on energy management and auditing to cushion themselves against high power costs.

The County Government committed to engaging industry on the issues raised as well as to share ideas on how to improve service delivery.

Chapters Report

Munir ThabitChairman, Coast Chapter

Rajan ShahChairman, Central Kenya

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Nairobi Industrial Area

Nairobi County is home to the largest number of manufacturing companies in Kenya. The Association set up an office in the industrial area in 2013 to deliver membership services more closely to the industry.

The Industrial Area chapter has been involved in various activities for the last one year aimed at improving the overall business environment. During the past year, the chapter caretaker committee was formed comprising of the following members;

Manoj Shah Chairman, Industrial Area Chapter

The quality of power supply to the industries and residents of Thika town was set to greatly improve following the completion of a 66/11 kv substation with two 45 MVA transformers at Makongeni.Theultra-modern facility,constructed by Kenya Power at a total cost of Ksh 642 million, has adequate capacity to accommodate additional power demand by existing industries who would like to expand their operations, as well as new industrial and commercial enterprises.

Speaking during the official commissioning of the substation, Kenya Powers Managing Director and Chief Executive Officer, Dr. Ben Chumo, said that the substation will greatly complement the efforts that the power firm has put towards meeting the growing demand for reliable and competitively priced electricity in the greater Kiambu County.

Kenya Power has so far invested Ksh 4.5 billion towards constructing

substations in Githunguri, Gatundu, Kirigiti, Magumu, Rironi, Lower Kabete, Dagoretti, Uplands, JKUAT, and on Thika Road within the County.The power utility promised to invest in n another new substation at Kahaini, Thika, at a cost of Shs.532 million, in the coming few months to further stabilize and meet growing demand in the north of the town.The Thika Industrial Substation and the companys other undertakings in Kiambu County, were part of projects the Government and electricity sub-sector players are speedilyimplementing so as to develop at least 5,000 MW of additional generation capacity by 2017.

Kiambu County Business Agenda Validation

The Kiambu County Business Agenda draft was validated during a breakfast meeting attended by the officials of the business membership organisations in Kiambu County.

Chapters Report (Contd)

The Manufacturers called for enabling environment from the County Government and listed pertinent issues that needed to be resolved in the County for a conducive business environment which include; land issues, infrastructure issues and investments in the health and security sector.

500 kilometres of road were graded out of the 5000 kilometres and work was ongoing however the issue of quality was raised. The County Spatial Plan is in the final stages and a ban of the change of user had been placed to help in the zoning. A commitment was made by the County Government to continue engaging businesses in order to create an environment which promotes industrial growth.

Commissioning of the Thika Industrial substation in Makongeni, Thika.

Mr.ManojShah-OshoChemicalIndustries(ChapterChair)

Mr.ManishShah-PolyflexIndus-tries(ChapterViceChair)

Mr.HezekiahMacharia-TwigaChemicalsLtd(ChapterTreasurer)

Mr.AmirParpia-AlphaFineFoods(Member)

Ms.MaryGesare-ElysChemicals(Member)

Mr.NashirKassam-SadolinPaints(Member)

Mr.RobertJuma-KAM(SecretarytoCommittee)

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Plans are underway to expand this team to reflect various sectors that make up the chapter membership to push the manufacturing agenda better.

The Chapter engaged with different County and central Government officials and other key stakeholders over the year to bolster the manufacturing industry in the country, whose growth is by a large margin pegged on robust manufacturing industry. This is not only through the production of superior quality Kenyan products for local consumption and export, but also offers thousands of jobs to Kenyan and foreign professionals. Furthermore, the contribution made to Government coffers is quite significant.

A two-day Public Private Partnershipworkshop for Nairobi, Machakos and Kiambu counties was held in July 2013 at Nairobi Safari Club. H.E. William Kabogo, the Governor,Kiambu County and H.E Dr. Evans


Kidero, Governor Nairobi City County and representatives form Machakos County were in attendance.he workshop sought to identify ways the County Governments and other business membership organisations can work in synergy to boost business growth and spur economic development.

An annual chapter security meeting was held at Highchem in Octoberby the members to discuss security matters with security agencies in Industrial Area and surrounding regions. In attendance were representatives from the Makadara District who assured members of their security at all times. Sighting frequent cases of break-ins in companies,members were asked to be cautious of the private security guards they engage as some connive with criminals. Other measures that were discussed to curb crime included installation of modern security systems like CCTV cameras and electric fences around business premises. In November, members engaged

directly with the County Government on key issues that affect business during a forum that was held at Sadolin Paints.InattendancewereHon.AnnaOthoro, the Nairobi County Executive in charge of Trade, Industry, Corporate Development, Tourism and Wildlife, her public works, roads transport counterpart Hon. Evans Ondiek,among other key County Government officials. Several pertinent issues were discussed in depth and by the end of the forum; members were assured that the city is on the right path to clean up a name that has been tarnished by years of oppressive practicesandhigh-handednesswhendealing with the business community. Some key areas discussed during the forum were; city inspection processes that needed streamlining, bad state of most roads and overall infrastructural challenges, inter-County businesschallenge due to devolution, security, just to mention a few. A similar event will be held this year

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Machakos Chapter

The Chapter was involved in a number of activities to advance advocacy issues for manufacturers in the County. At the onset the Chapter helped organize and participated at an investment conference where the County Governor, Dr Alfred Mutua outlined the Countys strategic plan. This was in response to a memorandum containing our members wish list that KAM presented to him at his first engagement with business at Maanzoni Lodge.

The Governor committed to facilitate business in the county. The County Government has plans to set up one stop shops for investors to register their businesses in the county without encountering bureaucratic procedures. With this process still ongoing, the chapter has been engaging with county officers at all levels to ensure that business runs smoothly, uninterrupted. A major hurdle facing many members is the harassment issue by county officials. Branding, parking and distributing goods have become very expensive. We are in constant communication with the Trade Executives in the county to iron out the issue.

The Mlolongo weigh bridge was a major headache for traders. Through our engagement together with other stakeholders, the regulations where trucks were weighed per axle were revoked and now trucks are weighed as a unit, thereby reducing time spent at the bridges.

The chapter also held its annual general meeting, after which there was a chapter meeting to elect the Chapter Committee Officials. They include:

Mr Gideon Aswani: Chairman (NationMediaGroup)

Mr Mureithi Regeru: Vice Chair (AfricanCottonIndustries)

MrPeterKilonzi:Treasurer(MabatiRollingMills)

MsHildaKamau:Secretary(KAPAOilRefineries)

Mr Walter Mochoge: Member (OrbitChemicals)

Mr Patrick Kariuki:Member (EastAfricanPortlandsCement)

This team has been working hard to ensure that members issues are tackled fast and that County policies are formulated to bolster growth in the various sectors within the chapter.

Together with the Industrial Area Chapter, Members were hosted to dinner by Kenya Power, where the MD, Dr Ben Chumo assured large consumers of dedicated lines to ensure their operations run smoothly, as well as a host of other remedies to the current problems facing industry as far as power issues are concerned. At the event, the Machakos County Executive in charge of Energy, Land and Natural Resources, Mr Joshua Musili, graced the occasion and added that as part of the projects planned for the upcoming city and its industrial area, the government was looking to generate its own power to

supplement existing supplies in order to ensure that industries shall have adequate power supply.

The chapter was able to establish a library based at Mabati Rolling Mills. Members can access KAM material as well as borrow on short loan from the library, located on the second floor of the main administration building at MRM.

In an effort to give back to and improve the environment within which we operate, KAM members planted a total of 1000 trees in Mlolongo, Athi River and Chumvi on 22nd May, 2014.


Gideon AswaniChairman Machakos Chapter

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Uasin Gishu Chapter

The Chapter continued to champion manufacturers advocacy issues in the County. In June the Chapter hosted the Governor to a business dinner whereby the members presented a report on issues affecting manufacturers and businesses in Uasin Gishu County. These issues included; infrastructure, urban planning, disaster preparedness, business processes, insecurity, industrial zoning among other issues. The Governor together with his County Executive Committee assured the members of his commitment to address these issues.

In July 2013, the Chapter Officer was selected to be in the Committee in the development of the County Integrated Development Plan (CIDP)under the Industry Sector. The CIDP was finalised and passed by the Members of the County Assembly.

The Chapter held its first Governors Roundtable in August, in collaboration other business membership organisations from the County. Members of the County Executive Committee were also in attendance.A consultative meeting with the County Executive Committee from various sectors; Industry, Trade, Infrastructure, ICTandE-government,Environment, Water, Energy, Land and physical planning, Finance was held to discuss ways in which to promote manufacturers competitiveness. Follow up meetings will be held on a quarterly basis.The members actively influenced decision making processes in the County and a KAM Eldoret Chapter

member, Mrs Margaret Ongare of Fantex(K) Ltd was appointed to bein the County Budget and Economic Forum whose main mandate focuses on county budget, county fiscal strategy paper and financial management at the county level. This isinpursuanttoSection137(1)ofthePublic Finance Management Act.

There were engagements with other stakeholders including; several consultative meetings with Kenya Power Management Team which focused not only on addressing key power issues affecting members but also to build relationship between KAM members and Kenya Power North Rift Management Team. This culminated into a successful business dinner which was held at the Boma Hotel, Eldoret whereby Kenya PowerShared the power supply Plan for the North Rift Region. H.E. JacksonMandago, Governor of Uasin Gishu County, Dr. Ben Chumo, the Managing Director of Kenya Power, the Deputy Governor Elgeyo Marakwet, Members of the County Assembly and Chairmen of Various Committees of County Assembly participated in the meeting. Plans on energy for the region included; Alternativepowersupplysources

will be created for major power consumers; Fluorspar, Raiply and Unga Ltd

AseniorKenyaPowerOfficerhasbeen assigned to each major cus-tomer as a dedicate relationship officer

Creationofmoreandshorterfeeders serving Eldoret environs by June 2015

CreationofPrimarySubstationto Lessos Power Centre via fibre optic at lessos and Rivatex Substation to improve supply restoration time, flexibility and sytem isolation on planned outages

It was during this dinner that the Chapter, together with other business membership organisations launched the Uasin Gishu County Business Agenda. The Governor assured the business community of his commitment to creating a conducive environment for investment.

Standards Tribunal, KEBS and KENAS held an awareness workshop with manufacturers, traders and exporters on standards issues during the year. The stakeholders also visited two manufactures; Raiply and New KCC.

The chapter participated in the World Environment Day by attending the event held by the County Government and donating Trophies to the best institutions in Environment Conservation Practises as part of the members corporate social responsibility initiative.


Albert KimwatanChairman Uasin Gishu Chapter

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Kisumu Chapter

Work in the Chapter was mainly concentrated on ensuring that the devolved system of Government delivers for the manufacturers. The chapter held a successful first Kisumu Governors RoundTable (GRT) whichwas presided over by the Governor H.E Jack Ranguma who committedto working closely with businesses to ensure consultation and inclusion in decision making on matters that affect the business climate of Kisumu county.

AnotherGRTinHomabaycountyinasession presided over by the Governor H.E Cyprian Awiti who committedto a continued engagement and collaboration with businesses within the county and assured businesses that the GRT will be a regular event.

Nakuru Chapter

The chapter continued to engage with the County Government to ensure a conducive business environment. A series of sectoral meetings were held with the County Government over the contentious Nakuru County Finance Act. Proposals on amendments were submitted and forwarded to the county assembly for approval.

As a follow up to the Governors roundtable held in May 2013 a County Business Agenda was published and shared widely with the county Government and other Business Membership Organizations in the county. A blueprint for the county was also developed and shared with the Governor and his team. The chapter will continue to engage to ensure the blueprint is implemented.

The chapter committee members Mr. Israel Agina and Ms Joyce Opondo were appointed by the Kisumu County Governor H.E. Jack Rangumato serve in the County Business Economic Forum for a period of 3 years representing the associations interests.

The business community in the County held a joint consultative forum with the county security team and the county Government led by the Governor of Kisumu county to address serious security concerns. A team was picked to steer the functions of the committee including Chapter chair Sagar Shah and Mr. Israel Agina. There were changes in the Chapters leadership structure in September 2013. Mr. Sagar Shah was

To ensure representation in key Boards at the County, the chapter is monitoring formation of the same and nominating persons to seat on the boards. The Rift Valley Water Services Board recently advertised for board positions at the Nakuru Water and Sanitation Services Company Ltd (NAWASSCO) and the chapterpromptly nominated one of our members to seat on the Board. The selection process however is not concluded.

The Chapter had regular engagements with the Regional Management of Kenya Power over power supply issues. As a result outages have reduced significantly in industrial area and there is regular communication to the KAM office in the event of

elected chapter chairman, taking over from Mr Israel Agina at the expiry of histwo-yearterm.MsJoyceOpondowas elected as Chapter vice chairlady and Mr. Jayesh Patel as the chapter treasurer.

planned outages. Kenya power has also promised to dedicate a feeder to industrial area to improve reliability. The chapter has also scheduled quarterly meetings with Kenya Power with a view to ensure issues are captured and addressed proactively. Recently the chapter hosted a dinner


Sagar ShahChairman Kisumu Chapter

Rajen ShahChairman Nakuru Chapter

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meeting for the Managing Director of Kenya Power Ben Chumo and his team. Kenya power shared the power plans they have put in place for the county including dedicating a feeder to large consumers in the industrial area.On coalition building to ensure the business community speaks with one voice, the chapter continues to lead a coalition of Business MembershipOrganizations (BMOs) inNakuru dubbed the Nakuru Business Coalition. The initiative has brought together players from all sectors of the economy and has been instrumental in advancing our advocacy agenda and recognition by Government.

Membership Satisfaction Survey

A membership satisfaction survey was carried out towards the end of the year to assess members satisfaction levels with the bouquet of services for the Association.

KAM Performance Rating:

The overall performance ratings of KAM in 2013 stood at 85%, the index drivers were good customer service,

Nakuru Chapter (Contd)


efficiency in service delivery, reliability, staff being knowledgeable on KAM products and services, speed in service delivery, adaptation of technology and accuracy in providing information.

In the last two years members ratings on KAM has increased by the following percentage, 2% in 2011, 9% in 2012 and 1% in 2013.

Nakuru County Governor, H.E. Kinuthia Mbugua receives Nakuru County Business Agenda at a dinner hosted by KAM

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The local network of the United Nations Global Compact continues to foster engagement and activities of the Global Compact principles in supporting the sustainability journey of local network members.

In 2013 the local network recruited 18 new members. 15 companies added their signatures to the Code of Ethics for Business in Kenya, committing to uphold good ethical standards in their operations. A total of 55 companies had signed up to the Code of Ethics by the end of the year.The network engaged the local membership through

In a dance if the music changes the steps will also have to change. ~ African proverb

Betty Maina, KAM CEO, Bob Collymore, UN Global Compact Board Member and Brenda Mbathi of EABL addressing addressing business leaders in Nairobi on Global Compact activities

3 outreach and 10 learning events. Three companies successfully published Communication on Progress Reports as per the UNGC requirements. Best practice case studies were also done for two companies to showcase some of the activities that are being done in order to share experiences with other members.

Training was also conducted on the UK Bribery Act to sensitise members who deal with companies in United Kingdom on ethical standards requirements in order to trade with companies in the United Kingdom.

UN Global Compact

KAM Annual Report 2013

Documents