Pan Paper’s Sale Sets Stage for Miller’s Revival

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The sale and purchase agreement signed between the Joint Receivers of Pan Paper Mills (in receivership) and a strategic investor has paved way forthe revival of the paper miller who will invest $60m.

The purchaser of the miller’s assets, Tarlochan Limited, a subsidiary of Rai Group of companies, will take over the running of the once vibrant icon of Kenya’s manufacturing sector. The purchaser indicated that it will invest an estimated Kshs 6Billion in the next five to ten years. The Rai group has interests in agro-forestry, farming, saw milling, paper milling, wheat milling, edible oils and fats, and sugar in the wider Eastern Africa region. They also have requisite experiencing in reviving Mufundi paper miller in Tanzania.

Pan Paper Mills, which was incorporated in 1969 with Orient Paper industries Limited, Government of Kenya and the International Finance Corporation, as the principal shareholders, was placed under receivership on 20th March 2009, after failing to service its
debt obligations. The decision to sell the paper miller was made by the secured lenders who are owed in excess of Kshs 6 Billion.

Speaking during a media briefing, the joint receiver, Mr. Kuria Muchiru said: “We are delighted that the agreement reached with Tarlochan Limited to purchase the assets of Pan Paper Mills is progressive and will lead to the re-birth of an asset on the brink of significant deterioration. This is a groundbreaking  receivership process that started with a global search for an investor with
requisite capability to restore and grow the local paper milling capacity as well as free the business from mounting debts. Whereas, the lenders may not have actualized the full recovery of their debt, a greater gain with potential positive long term prospects for the region has been realized.”

Read more: Pan Paper’s Sale Sets Stage for Miller’s Revival

Kenya Association of Manufacturers Signs MoU to Scout for New Markets

 

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Kenya Association of Manufacturers has signed a Memorandum of Understanding with a regional trade agency to promote trade and investment for expansion of markets for local goods. 

The manufacturers lobby group signed the MoU with USAID-funded East Africa Trade And Investment Hub to aid in the efforts to support policy reform activities and expansion of trading avenues especially under the African Growth and Opportunity Act. 

“AGOA offers great opportunities for our local businesses especially the SMEs. It is essential we build their capacity to enable them leverage this partnership to realise financial sustainability for their businesses," said KAM chief executive Phyllis Wakiaga.

"Beyond this we are also looking to diversify our exports through this partnership and increase competitiveness of various agricultural value chains.”

Following the MoU signing, KAM will be organising and hosting trade delegations, policy and investment promotion activities that will attract investment in the mutual priority sectors which include textile and garment, leather and leather products, agro processing, horticulture, ICT and cotton.

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KNCCI Has Automated the Issuance of Certificate of Origin for Exporters

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Kenya National Chamber of Commerce (KNCCI) has partnered with TradeMark East Africa (TMEA) to launch a trade portal that will automate issuance of the certificate of origin. The certificate of origin is an export document that confirms the country of origin of goods in a particular export shipment. The system will also be integrated to Equity Bank, thus allowing for real time payments and receipt of notifications via mobile phones or online.

Speaking during the launch of the portal, Kiprono Kittony chairman of KNCCI had this to say, The portal is in response to the challenge exporters’ face in accessing manual certificate of origin including delays. It will enhance security of the exports documents, create more transparency and speed in the issuance of the ordinary Certificate of Origin and thereby actively play its facilitator role in enhancing a friendly trade environment.”

The system will see an increase in efficiency and transparency in business operation at the chamber. It will see a reduction in the time spent on the acquisition of the certificate from 2 days to less than 1 hour. The reductions will be realised due to the elimination of travels and physical verification required in the manual process.

TMEA has provided technical and financial support to KNCCI in enhancing trade environment, increasing market access and increased competitiveness. TMEA is spearheading adoption of ICT within key government and private sector institutions to transform their processes and increase efficiencies.  The KNCCI trade portal is part of the Kenyan government digitization process, and will be integrated to the Kenya Electronic Single Window.

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Exporters Profit From Drop in Trade Barriers

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Regional traders are saving significantly as a result of reduction in trading times and costs, a recent report by Trademark East Africa (TMEA) shows.

The recently conducted independent evaluation of the non-tariff barriers (NTBs) indicates that most barriers have been eliminated to ensure traders across the region reap the benefits of the trading bloc.

Non-tariff barriers refer to restrictive measures such levies, quotas, embargoes and sanctions used by countries when trading with each other.According to TMEA, of the 112 NTBs that were identified, 87 have been resolved through the East African Community Time Bound Programme on elimination of barriers.This was as a result of intervention by the National Monitoring Committee and the EAC Secretariat, with the support of TMEA, which led to the enactment of EAC elimination of NTBs Act.As a result, the time taken to import goods from one East African country to another has dropped by 14 per cent to 31 days.

The time taken to export goods to any East African country has been cut to an average of 26 days. This is a 20 per cent reduction from the initial 33 days.It now takes 30 days to export goods from Uganda as compared to 35 days in 2011. Similarly, inland transportation times from Dar es Salaam to Kigali have dropped to about 3.5 days. The time spent to get an electronic certificate to clear goods has also reduced.Tanzania has witnessed the highest drop.

It now takes just an hour to get an electronic certificate of origin, down from five days.

With the reduction in time, costs have also come down.Transporting a standard container of about 40 feet from Mombasa port to Kigali (Rwanda) now costs an average of $4,500 (Sh455,595).According to Trademark East Africa, the cost used to be $6500 (Sh658,081) in 2011.

According to TMEA Chief Executive Officer Frank Matsaert, enactment of non-tarrif barrier act was a significant milestone in boosting trade volumes within the region.“A reduction in NTBs will invariably lead to more trade in the region, which is ultimately our goal of growing prosperity through trade,” he said.

TMEA invested about $7.89 million (Sh799 million) in the NTBs project and expects to continue to bring down non-tariff costs that were approximated at $490 million (Sh49.6 billion) in 2010.

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Kenya Bets on AGOA to Grow Apparel Exports

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Kenyan apparel exports could grow by 5 percent this year to $400 million after the extension of a preferential U.S. trade deal with African nations, according to an industry body.

East Africa’s biggest economy exported clothing worth $380 million in 2015, when the U.S. extended its African Growth and Opportunity Act agreement by a decade, according to Phyllis Wakiaga, the Chief Executive Officer of the Kenya Association of Manufacturers.

“The 10 year extension of the AGOA agreement has offered African manufacturers more confidence to make long-term investments, especially in apparel,” Wakiaga said in an e-mailed response to questions.

Brands such as Puma, Wal-Mart, JC Penny, H&M source some of their garments from Kenyan Export Processing Zones, which employ over 66,000 people, according to KAM. The EPZs, which are required to export 80 percent of their output beyond the regional East African Community bloc, enjoy 10-year tax exemptions.

Used Clothes

East Africa could potentially export garments worth as much as $3 billion annually by 2025, according to a 2015 McKinsey report. Affordable electricity and cheap labor -- with monthly salaries as low as $60 -- make producers such as Kenya and Ethiopia attractive to investors, the study shows.

Kenya’s textile industry declined in the 1980s after market liberalization policies demanded by multilateral lenders exposed the market to secondhand imports. Most new clothing sales are now sourced in China. South African retailers such as Woolworths Holdings, Truworths and Mr. Price Group also have a presence in the nation, targeting the middle class.

The regional East African Community bloc is working to revamp the domestic garment market by banning secondhand clothes imports at the end of 2018, Wakiaga said. Kenya imported used clothing worth $243 million weighing more than 100,000 metric tons in 2013, according data by the UN agency Comtrade.

Kenyan garment exporters ramping up their production could also tap local fashion retailers too, she said.

“Second hand clothes sellers have a chance to take up the sale of new clothes as the supply will be guaranteed from the manufacturers, thus they may avoid loss of jobs,” Wakiaga said.

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CS Adan Promises to Fast-Track ‘Buy Kenyan Build Kenya’ Draft Into Law

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Industry, Investment and Trade Cabinet Secretary Adan Mohamed has assured manufacturers that he will expedite the finalization of the draft “Buy Kenyan Build Kenya” Policy into law.

“Implementing the new law will lead to job creation, and consequently better wages for the employees and support Kenya’s quest to have a robust, diversified, and competitive manufacturing sector”, he observed.

The CS was addressing a Ministerial Stakeholders Forum led by KEPSA held at the Ministry of Industrialization attended by the two Principal Secretaries for Industrialization and Cooperatives.

Among issues in the meeting’s agenda included Building and strengthening the growth of local Industry; Tackling Illicit trade; and the adoption of a favorable taxation and regulatory regime for industrial growth. The manufacturers were led by the Chairperson KEPSA Phylis Wakiaga.

The manufacturers complained that increased Government procurement of foreign contractors was excluding their members from Government projects while these companies excluded local contractors from providing them with services or materials that were locally available.

Industrialization PS Julius Korir assured them that Government would ensure proper enforcement of the local content requirements and that the new Procurement Regulations would ensure local contractors compete effectively against foreign companies and capture the growing local opportunities.

“We are working towards reducing unemployment amongst our youth as this can jeopardize all the gains we have made so far in the growth of the economy “, he pointed out

On illicit trade, ​Ms. ​Wakiaga appreciated the increased inter-agency collaboration between the Kenya Revenue Authority, the Anti Counterfeits Agency and the Kenya Bureau of Standards saying this would positively impact on domestic trade.

PS Korir pointed out that there are ​also ​substantial amounts of counterfeits produced within the country and called upon members of the Alliance to share intelligence on local manufacturers who were producing counterfeits that were hurting the economy and endangering lives.

The manufacturers called for the abolition of the 1.5percent railway development levy on raw material imports to encourage the growth of local industries saying this would lead to higher income taxes to Government from increased profits.

The CS regretted that delays in VAT tax refunds was affecting manufactures of export products and called on ​them to provide the Ministry with workable recommendations on procedures that would reverse the delays for onward transmission to the Treasury.

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Chinese Industrialists Seek to Invest Ksh200 billion in Kenya

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Kenya has huge investment opportunities in various sectors that it can tap into to boost its comparative advantage, Industry, Investment and Trade Cabinet Secretary (CS) Adan Mohamed has said. These, he noted, included agro-processing, textiles, leather, construction services and materials, oil, gas, mining and IT related sectors

The CS was addressing visiting Chinese investors from the KEDA Clean Energy Company who are in the country seeking attractive opportunities. They want to invest between $200 million (Ksh20 billion) to $2 billion (Ksh200).

The cabinet secretary told the Chinese delegation last week that the country was the fifth largest economy south of the Sahara with educated, qualified and skilled youthful labour force. “The country boasts of vast agricultural resources besides having a more advanced infrastructure and IT capabilities equal to none among its peers in the region,” he noted.

Mr Adan explained that the Government has created a favourable and enabling environment to attract investments locally, regionally and globally. These include tax incentives for export based industries that could see investors enjoy specific tax holidays.

He encouraged investors to consider setting up infrastructure in special economic zones along the Standard Gauge Railway (SGR) from Mombasa to Nairobi, adding that the Government is availing land in these zones for investment.

He said the country requires more investments in the textile and leather sectors which are a major growth drivers in industrial exports. “The labour costs are relatively cheaper compared to manufacturing in Asia,” he said adding that Kenya’s preferential access to global markets had created a cost advantage to buyers in pursuit of a diversified sourcing base.

“The country is expanding its power supply from 2,500 to 10,000 megawatts and production of the remaining 7,500mw of clean energy is another investment option you could consider,” he told the seven member delegation.

The Chairman of the Company Mr Bian Cheng who was also leader of the delegation told the CS that they had already acquired 60 acres in Kajiado along the Namanga highway build a brick and tile factory.

“We want to set up a manufacturing plant to produce construction equipment for use in the country,” Mr Cheng told the CS adding that they had already met the necessary environmental standards requirements for the plant in Kajiado.

Mr Cheng said the factory will give locals  350 direct jobs with plans underway to support some local development programmes.

The CS who was accompanied by the Ministry’s acting Director, Medium and large Industries Charles Mahinda told the delegation that Kenya is seeking duty free access for its products in the Chinese market.

Embrace cooperatives – CS Adan tells Bangladesh delegation

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The cooperative movement has immensely contributed to the success of Kenyan farmers, Industry, Investment and Trade Cabinet Secretary (CS) Adan Mohamed said.

Mr Adan noted that the country has slightly more than 3,000 agro-based cooperative societies with savings worth Ksh320 billion.

The CS was addressing a 15 member Bangladeshi delegation in his office on Wednesday, who are on an exposure visit. They want to learn about how Kenyan farmers engage with the Government and the factors that have contributed to their success.

The delegation is made up of ministers from various ministries, Food and Agriculture Organisation representatives and farmers’ representatives from Bangladesh.

The delegation is keen to learn how the Government has mainstreamed farmers at the policy and decision making levels in the country, saying that Kenyan farmers had become a case study.

The CS said the Government through the Ministry of Agriculture had established a one-million acre irrigation project at Galana in Tana River County, which targets to enhance the country’s food security.

Mr Adan advised the delegation to encourage the Bangladesh nationals to embrace the formation of cooperative societies, which he reiterated are key in assisting farmers improve production and enhance their development.

He announced that through cooperatives, members are able to borrow funds to expand their business investments without the need for collateral but by guaranteeing each other. “Cooperative movements have also helped farmers and the government to achieve large scale food production,” the CS added.

He said the Government has established programmes directed at assisting small scale farmers through provision of subsidised farm equipment, fertiliser and seeds. This is alongside the provision of ready markets for their produce. “We also offer incentives, promote exports, appropriate trade policies and strategic food reserves storage,” he said

The CS advised the team on efforts by the Government to facilitate development partners offer support to Kenyan farmers.

Banks, Ministry Discuss Alternative Collateral for Businesses

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The Ministry of Industry, Investment and Trade in collaboration with the Kenya Bankers Association and other stakeholders is working on the modalities of developing innovative solutions to replace securities for loans such as cash flow based securitisation.

“The credit worthiness of entrepreneurs will soon be extended to include payment of utilities for credit rating by the Credit Reference Bureaus,” Principal Secretary State Department for Industry and Enterprise Development Julius Korir said.

Speaking during the SME FEST 2016 Expo and Conference at the KICC, Nairobi, where he represented the Cabinet Secretary for Industry, Investment and Trade Adan Mohamed, the PS said most SMEs suffer from lack of suitable work stations, both in the urban and rural environments.

He said the Ministry is expanding industrial sheds and developing common manufacturing facilities, industrial parks and clusters that will have the requisite infrastructure for SMEs to operate in.

He explained that the Ministry has also set up work-sites, incubation areas at the Kenya Leather Development Council; Kenya Industrial Research and Development Institute and at the Export Processing Zones Authority to boost SMEs.

Kenya Ranks Top Among African Cash-Makers for Multinationals

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Kenya is among the top-three sources of revenues for multinational businesses in sub-Saharan Africa (SSA) according to a survey by The Economist Intelligence Unit (EIU) of the UK.

The 2016 Business Outlook Survey shows the other two top markets are South Africa and Nigeria.

The three markets are expected to remain at the top for at least the next six years, respondents in the survey said.

“Executives indicated that their top three markets in 2015 — South Africa, Nigeria and Kenya — would remain their key markets for at least the next six years,” said the EIU report. The survey involved interviews with 120 Africa-based business managers.

The placing of Kenya in the top group by executives is also in line with the forecast by investment bankers at Citi Global Markets that Kenya will have the highest economic growth this year among the top-four largest Africa economies, namely South Africa, Nigeria and Angola.

Citi forecasts that Kenya’s GDP will grow by more than five per cent this year while the other three economies grow by less than four per cent.

The executives believe that SSA present opportunities for growth, having already proved that profit margins from the region are either the same as or higher than the global average. The problem, however, is that the level of investment made is too low to achieve the targeted expectations.

“Well over 50 per cent of respondents reported that their firms’ expectations of growth were realistic. However, around 47 per cent cited their firms’ level of investment to be too low to achieve targeted growth expectations,” said the EIU.

Read more: Kenya Ranks Top Among African Cash-Makers for Multinationals

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