Kenyans go big on foreign name brands
To see why foreign manufacturers love Kenya, cross Moi Avenue in Nairobi from Jazz restaurant, squeeze through the mobile airtime shops and porn video vendors, and you will reach Tom Mboya Street.
On your left, stands a glossy clothes shop full of young ladies trawling for latest fashions.
Jade is owned by a local investor, and that’s about the only thing Kenyan about it besides the hustle and bustle outside this tough side of downtown Nairobi.
All its merchandise – from the G-strings to sleek suits, have a deliberate foreign ring to them.
As local manufacturers – for instance, clothes and footwear companies – struggle, the fortunes of those peddling foreign stuff have been rocketing.
The appetite is rising, fuelled by a raging middle class, and more foreign companies are making a beeline to satisfy this tastes, including roofing companies from Turkey vying for the construction industry.
A transport and commercial hub in Eastern Africa, Kenya has emerged as a fertile hunting ground for foreign-made products, increasingly tilting the trade balance in favour of imports.
Other countries are foraying into the domestic market through delegations and trade exhibitions. Late January, a Russian business delegation visited Kenya to explore trade opportunities.
In March, Brazilian companies will showcase their prowess in agribusiness and renewable energy during the Brazil East African Community expo, with a direct bearing on the trade balances.
In 2009, for example, South Africa’s imports stood at Sh70 billion while Kenya’s exports to that country were valued at only Sh3.5 billion.
“Kenyans prefer imported food due to its high quality and low price compared to what is produced in the country,” says Bilha Rae of Magna Foods, a Nairobi based restaurant.
Ms Rae says spaghetti is one of those products enjoying good ratings in the country. “Due to lack of enough wheat for production Kenya will continue to import,” explains Ms Rae.
According to Central Bank of Kenya records between January and September 2010, Kenya’s exports totalled Sh395.6 billion, compared to Sh926.4 billion in imports.
Though Kenya is an agricultural economy, there’s a huge presence of products like eggs from South Africa and tomatoes from Spain.
With increasing urbanisation, and changing lifestyles boosted by technology and innovation, imports have gained a competitive edge through value-addition and packaging.
Even handicraft, which Kenya dominated a few years back, is shifting to Asia, especially China, Taiwan and Korea.
“What has made us survive, especially in the US market is our established brand name,” says Ecosandals’ international sales representative George Odhiambo. Ecosandals makes used-tyre sandals, know as akala, for both local and export markets.
While it takes the Kariobangi South light industry, Kenya’s answer to the global copycat industry, a day to produce 30 pairs of footwear, China produces millions given its technological advancement.
“China is going after a share not only in foreign markets but also in its domestic market,” says Mr Odhiambo. Besides, high cost of production like electricity and labour has slowed penetration of Kenyan goods in foreign markets.
“From production of a pair of sandals to the time the delivery is made in US, the cost will be Sh1,200 and so you have to sell at Sh2,400 to make a profit, but Chinese-made sell at a cheaper price,” he says.
Mr Chacha Nyangi, director of external trade at the Ministry of Trade attributes the low growth in exports to the high cost of production.
“The Common External Tariff is reviewed every year to give Kenyan goods preferential treatment over imports but the cost of production is still so high that those imported have a competitive edge due to their low price,” he said.
For Kenyan exporters to compete in foreign countries, the Export Promotion Council sources for buyers and transaction management.
Due to lack of diligence, says Mr Peterson Nyachwaya, the council’s manager in charge of trade policy analysis, some exporters enter into lopsided agreements that increase their cost, ultimately raising the cost of goods.
Though trade has been identified as a key driver of industrialisation and anchored in Vision 2030, most of Kenyan goods are semi-processed, less diversified and concentrate in a few markets.
Prof Henry Bwisa of the department of human resources at Jomo Kenyatta University of Agriculture and Technology attributes this to lack of a policy that can stimulate growth manufacturing.
“Technology to add value is there,” he says, “ but what is lacking is a policy to give incentives to the players in the respective sectors to improve that.”
As more of the world experiences globalization, including Africa expect to see a growing taste for all things foreign especially from a growing middle class. That is just the reality and natural course of development. Name brands that were unavailable, out of reach due to economics are now achievable as more and more Africans move up in the world. Kenyans are no exception.