Kenya’s economy has recorded an impressive performance against the backdrop of a pandemic that broadsided governments across the world. Success Afrika magazine’s Eric Obwogi had a chat with the CEO of Kenya Private Sector Alliance, the umbrella body that brings together private firms in Kenya, on the experience and expectations of the organization’s members. Excerpts follow.
Success Afrika: Kenya, like most African economies and indeed the world, is slowly emerging from the devastating effects of Covid 19. What is the overarching sentiment from members of KEPSA now, as the economy grapples with the effects of the pandemic?
Ms Carole Kariuki: Compared to similar period last year, business confidence has improved significantly on the back of relaxation of Covid-19 related restrictions and the ongoing vaccination process. The Stanbic Bank Kenya PMI has remained above 50 since April this year indicating improved operating conditions and positive sentiment among businesses. The only concern is the rising costs especially fuel and the unpredictable tax regime.
Success Afrika: What segments of the economy are leading the way in recovery and why are the rest lagging?
Ms Kariuki: Agricultural output has grown robustly in 2020 due to favorable weather conditions, as indicated in the 2021 Economic Survey by KNBS recording a 4.8% growth compared to 2.6% in 2019. Others are construction that recorded 11.8% growth due to continued investment in public infrastructure, health and social work 6.7%, finance and insurance 5.6% and ICT 4.8%. The ICT sector in particular has been experiencing major upward trends and has to be capitalized so as to aid in the recovery of the economy. A weaker than expected global economic recovery is undermining Kenya’s export, tourism and remittance inflows which were the most hit sectors by the pandemic.
Agricultural output grew robustly in 2020 due to favorable weather conditions
SA: Please give an overview on members’ performance during the last couple of years and what could have been done to better prepare KEPSA members better for an occurrence like the pandemic?
Ms Kariuki: According to World Bank data, 2015-2019 are the years Kenya’s economic growth averaged at 5.7%, making it one of the fastest growing economies in Sub-Saharan Africa. This economic performance, which KEPSA members are part of, has been accelerated by a stable macroeconomic environment, positive investor confidence and a resilient services sector. The pandemic was unforeseen and no country was prepared for its health and economic impact. While it is vital to avail financial aid and relief in the short term, it is even more essential to think beyond the immediate needs to recovery for the long term.
SA: Sources for raw materials closed due to the movement restrictions severely affecting the manufacturing sector while hampering effective local response efforts. What in your opinion can be done to strengthen local value chain around sourcing of raw materials for businesses?
Ms Kariuki: To ensure we don’t suffer similar disruptions in the future, the best option is to invest more in growing local and regional value chains now that the AfCFTA is in place. However, this requires investing more in improving our manufacturing competitiveness to attract investment. This will create demand, and then we can work on making the supply efficient to meet this. Introduction of various policy measures to have control over the market can also create a sense of security not only to the local sources but also to the manufacturing sector as well.
SA: As economies step out of the shadow of Covid 19, what is the strategy for Kenya’s private sector and how upbeat are you about the economic prospects over the next one to two years?
Ms Kariuki: With the ongoing vaccination drive, we are optimistic that the economy will resume normalcy and allow full recovery over the next two years. To ensure we build back better and emerge economically stronger together as a country, KEPSA is focusing on five strategic focus areas for this year. These include:
- Public Private Dialogue towards improvement of the business environment and Kenya’s global competitiveness;
- Sustainability Pillar focusing on the Sustainable Development Goals (SDGs), Green Economy, Blue Economy and Climate Change;
- Governance Pillar focusing on promoting good Corporate Governance, National Leadership and anti-Corruption measures;
- Business Hub Pillar focusing on SMEs Development and Economic Diplomacy for increased trade and investment;
- Social Pillar targeting Youth and Women – jobs and enterprise development
It is also evident that for businesses to thrive beyond the pandemic, it is essential for them to go digital. KEPSA has since leveraged on this, to ensure that not only their members but other businesses as well, especially the MSMEs are on various online spaces. In partnership with TradeMark East Africa (TMEA), KEPSA has successfully trained more than 2600 SMEs on e-commerce and digital marketing, and onboarded them onto various digital marketplaces. This is in addition to the ongoing Ajira Digital Project that has so far created 1.2 million digital jobs for young people in Kenya.
SA: About Kenya’s preparation for the AfCFTA, what in your view are the wins and/or losses for Kenya as the agreement takes root across the continent?
Ms Kariuki: Kenya is set to maximize its gains in the newly implemented AfCFTA due to its strategic positioning that will ensure successful implementation of the AfCFTA. These factors include a strong manufacturing base, access to credit, efficient transport systems, and availability of reliable energy.
The only challenge anticipated relates to our shrinking market share due to low competitiveness driven by high cost of production i.e. regulatory burden, power, transport costs, inputs, etc.
SA: What are the immediate bottlenecks to the agreement from KEPSA’s perspective as the apex body of the private sector?
Ms Kariuki: Prevalence of NTBs – this has been a major challenge within the EAC region and it’s likely to affect the agreement. Cross-border infrastructure may also pose a challenge and there is a possibility of arising of institutional bottlenecks; legislative and judicial decision making which is a result of rigid rules that promote gridlocks in the decision-making systems.
SA: The high cost of doing business remains a big problem for local market players. Currently where is the shoe pinching you the most for your members?
Ms Kariuki: The overall regulatory burden and the rising fuel and power costs. We are happy that the Parliament is taking up the issue to address the fuel price increase while the President has directed Kenya Power to implement the report recommendations by the Taskforce on PPAs. This will translate to lower cost of power from December 2021. The taxation regime remains a matter for ongoing deliberation to drive at a compromise between government and the private sector and which makes the recent court suspension of the Minimum tax a much welcome reprieve.
Construction was a top performer due to continued investment in infrastructure
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SA: Energy sources continue to diversify, and Kenya has a good standing in terms of renewable and lower cost sources of energy globally. Why, in your opinion, has this not translated to competitive advantage for Kenyan manufactured goods in the markets?
Ms Kariuki: One of the main causes has been the PPAs with Independent Power Producers (IPPs) signed at very high rates above the rate Kenya Power buys power from KenGen. This is what pushes the power costs up but we are glad the recently released Task force report will address these challenges. Also, most of our renewable sources are not reliable since they are affected by weather (e.g. hydro-electric plants) and will require a base load to stabilize the grid especially on peak demand. Part of the base load is generated through thermal plants which are very costly sources of power. Another source of base load is geothermal whose generation capacity continues to grow.
SA: In terms of infrastructure, how would you rate Kenya’s performance especially looking at transport and logistical bottlenecks for business?
Ms Kariuki: Is Kenyan produce not getting to the markets in good time?No, but the process can be faster.Problem areas includedelays at the ports and border points; Congestion has also been a derailing factor for years and this is due to a couple of reasons including the ongoing construction projects which lead to frequent closures and diversions.
SA: How is Kenya’s competitive human resource market working in your favor as KEPSA? What is your opinion on how the country can retain the best professionals and avoid brain drain?
Ms Kariuki: Brain drain has a direct relationship to levels of education attained, and access to training and job opportunities abroad. Therefore, the best way to curb this is through creation of more jobs, especially for the youth. It is also important to provide an enabling environment so as to attract more investment and businesses which in turn translates to more job opportunities.
SA: We are at a point where enhanced investment in private healthcare facilities is seeing Kenya emerge as a potential medical tourism destination on the continent. On the performance of Kenya’s Private Healthcare sector, what in your view is holding us back?
Ms Karuki: Private healthcare makes up 41% of Kenya’s healthcare system. It is however a challenge to access by a majority of the population who still rely on out of pocket payments, especially those in the rural areas. Low income and high costs of living also makes it harder to own some form of health insurance coverage.
SA: What are some of the challenges experienced by your members in this sector?
Ms Kariuki: The Private Sector has not been involved in the annual comprehensive review of Tax regimens on Health Products raw materials and Health Products and Technologies (HPTs). This is leading to high cost of doing business and promotes biasness and eventually makes healthcare unaffordable. Currently we also do not have the appointment of KEPSA members to the Pharmacy and Poisons Board (PPB) in line with the existing regulatory reforms and which can improve the level of dialogue and engagement in this sector.
SA: What is your take on the challenge of making Kenya’s tourism perform better to stave off competition from regional competitors?
Ms Kariuki: Increased rate of crime and insecurity in the country is a major challenge to enhancing our competitiveness in the tourism sector. By increasing sensitization trainings especially on counter terrorism, we open up our country to more tourists and make it safe for everyone.
SA: Pointing to better infrastructures such as roads, airports, and a better performing airline, do you think the country is utilizing its competitive advantages well enough in this sector?
Ms Kariuki: Yes, it is. More importantly, the use of digital promotion of safe tourism in Kenya through the involvement of various social media influencers has definitely been a boost during this time.
SA: On gender representation in corporate management and leadership. What is KEPSA’s position on the disparities in corporate corridors and boardrooms?
Ms Kariuki: KEPSA has always been at the forefront of advocating for gender equality through its Gender sector board which champions for equal opportunities for both men and women through various forums. The 2017 Board Diversity and Inclusion Report, by Kenya Institute of Management (KIM) and Nairobi Securities Exchange (NSE),indicates that women representation in boards had risen to 21% from 14% in 2014. KEPSA has entered into partnership with KIM, NSE, and New Faces New Voices on the Board Diversity and Inclusion survey to raise awareness on the benefits of inclusivity in corporate leadership. We also support the Women on Boards Network, and have recently concluded the drafting of a Policy framework for gender mainstreaming in the private sector.
SA: What is your message to politicians (in Kenya and across the continent) especially looking at the electioneering period that Kenya faces in 2022?
Ms Kariuki: They need to learn from our previous mistakes. Covid-19 has demonstrated how vulnerable we are as a nation, and as we build back let us not forget to plan for the future, which has proven to be more unforeseen than we ever imagined. Above all, it is important for them to maintain peace pre and post the elections. We shall be reaching out through Mkenya Daima Initiative to get personal commitments to upholding of peace during the period and also sensitize Kenyans to shun violence.
SA: What are some of the leadership habits that you embody as KEPSA CEO? In your view, what makes a successful corporate leader?
Ms Kariuki: I delegate the power to my very capable members of management staff, a way to empower them and not come off as a micromanager.Having vision, courage, and the ability to plan strategically ensures success at the helm.
SA: Please give us some personal perspectives on the need for passion, resilience, persistence, and a desire for success in your climb up the corporate ladder.
Ms Kariuki: I strived to live for something bigger than myself which has grown on me over time. The dream to see this country not just as the hub for Africa, but the world too, has been my passion and it keeps me going. At KEPSA we set a vision to be a world class private sector apex body and through persistence, that vision continues to become a reality.
SA: Who is your favourite author, and perhaps your most memorable read?
Ms Kariuki: My favorite author is Lee Kuan Yew on his memoir The Singapore Story.
SA: Any other thoughts?
Ms Kariuki: As we work together with various stakeholders to restore normality, or at least a new one, it should be everyone’s priority to ensure they and everyone around them is vaccinated. The faster we get the entire adult population vaccinated to reach herd immunity, the faster we can get the economy fully reopened to enable us focus on what matters – securing our livelihoods. KEPSA in partnership with various stakeholders has an ongoing private sector led vaccination program. We look forward to vaccinating as many of our members, their families and members of the community as possible in our phased-out plan in support of the ongoing national Vaccination campaign by the Kenyan Government.
