Competition from cheap imports from India and China is the biggest barrier to growth of local manufacturing, the Kenya Association of Manufacturers has said.

In its fourth-quarter Barometer report, the business lobby said 63 per cent of manufacturers complained cheap imports make local products uncompetitive. The Barometer represents a six-month forecast. The most-affected firms are Sameer Africa, which makes tyres, and Eveready East Africa, which manufactures batteries. Many other products, including textiles, are also hurt by imports.

In 2017, China accounted for 23.6 per cent of Kenya’s imports, India 14.4 per cent and the United Arab Emirates 6.4 per cent, the National Bureau of Statistics reported. This is the second consecutive quarter in which more than 60 per cent of manufacturers complained about cheap imports impeding their business growth.

In its third quarter, Barometer report in October 2017, the association recorded a similar percentage of manufacturers that said cheap imports represent headwinds to their expansion.

Regulations

“It’s necessary to fast-track implementation of the Trade Remedies Act 2017 [that] seeks to deal with unfair trade practices such as dumping, subsidising and import surges,” KAM said.

To ease the problem, the association wants full enforcement of existing laws to ensure fair trade practices and a level playing field. Last month, South Korean-based electronics giant Samsung announced it had abandoned plans to build an assembly plant in Kenya. It cited failure by the government to put in place mechanisms to protect manufacturers from cheap electronics imports.

Samsung said its locally manufactured products would be overwhelmed by cheap imports. The biggest challenge comes from China.

Apart from cheap imports, 58 per cent of local manufacturers cited the high cost of industrial inputs as a major barrier to growth. Forty-one per cent of manufacturers cited the foreign exchange rate. Manufacturers say other barriers for the next six months include taxation policies, pressure from wage increases and capital constraints, lack of demand and legislative and regulatory pressures.

Despite the challenge from cheap imports, there was a seven per cent improvement in the number of manufactures that say the Kenyan economy is declining. Still the percentage of pessimists stands at 46 per cent. This was an improvement from the 53 per cent in the third quarter Barometer report.

Thirty-three per cent said the economy is growing, while 22 per cent said economic growth will remain steady over six months.