Interview: Carole Kariuki, CEO
How is business optimism in Kenya evolving?
CAROLE KARIUKI: Increased business activity stemming from greater investor confidence is pegged to a surge in private sector output and employment. According to CfC Stanbic Bank’s Purchasing Managers’ Index, business activity is up from a low of 34.4 points in October 2017 to 57.7 as of April 2018. This renewed confidence comes from the political stability ensuing from the end of 2017’s prolonged electioneering, as well as several sectors’ improved outputs. Between the first quarter of 2017 and 2018 GDP growth improved from 4.8% to 5.7%, while inflation and exchange rates have remained fairly stable. In addition, the state’s willingness to work with the private sector in achieving the Big Four agenda has further invigorated investor confidence.
As a manufacturing base, which assets does Kenya count as competitive advantages in the region?
KARIUKI: Kenya ranks 80th globally and third in Africa on the ease of doing business index, owing in part to a supportive policy framework that, for example, prioritises the development of special economic zones. A fast-growing middle class and rapid urbanisation offer a fairly sophisticated domestic market, a skilled workforce and higher labour productivity than regional peers. Furthermore, its road, port and rail infrastructure make Kenya a transport hub in the EAC. Lastly, manufacturers gain a competitive edge from Kenya’s investment in research and development (R&D), as well as its well-developed ICT infrastructure, which includes the fastest internet service in Africa.
What measures could spur investment in industry?
KARIUKI: Exempting raw materials and capital equipment from the import declaration fee and the railway development levy and, especially, reducing levies on power to lower the cost of production to about $0.01 per KWh will both be crucial to that end. Moreover, it would be advantageous if the government established incentives to invest in R&D and worked to create a more predictable policy environment.
What hurdles do public private partnerships (PPPs) face in helping to fulfil the goals of the Big Four?
KARIUKI: There are a few challenges that the private sector faces in aligning with the Big Four. Firms are particularly concerned about corruption and the misuse of public resources, high business costs and scant access to affordable credit. Companies also bear in mind illicit trade, competition from cheap imports and constraints to market access, particularly within the EAC. These factors render the PPP framework ineffective and hinder investment in some of the proposed areas. However, the government can address these challenges by working with the private sector to develop lasting policy solutions, reforms and support strategies that encourage private sector participation in driving the agenda.
What ongoing initiatives are creating digital work?
KARIUKI: First, the growth of Konza Technology City will transform Kenya into an IT hub and a destination for business process outsourcing. Second, the training and mentorship of the Ajira Digital Project has equipped 7293 youth with the skills for digital jobs. As a result, 50% of the project beneficiaries had access to online work, while 38% reported earnings from such work.
How can the private sector develop human capital?
KARIUKI: Initiatives that bring together actors from the private sector, the state, academia and development to find grounds for cooperation are the best ways to improve Kenya’s skills development. Further, we should champion increased investment in technical and vocational training programmes, and greater uptake of sciences, technology, engineering and mathematics courses in Kenyan universities. The integration of ICT, research and innovation into training modules will spark innovation and grow the entrepreneurship space.
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