Discussing Economic Trends, Investment Opportunities and Ease of Doing Business in Kenya with KNCCI

Interview with Samuel Matonda, CEO of Kenya National Chamber of Commerce and Industry (KNCCI)

Samuel Matonda, as CEO of KNCCI, what is your general assessment of the Kenyan economy?

The Kenya National Chamber of Commerce and Industry has been in operation since 1965. Luckily, our membership has grown from the last time you interviewed my predecessor, from 20,000 to 47,000 direct members. We also deal with more than 7 million members who are affiliated to associations who are members of the Chamber. This means that more than 80% of our membership is micro and small enterprises (MSMEs).

Before the pandemic, the general business was operating very well. We could see all the sectors vibrant and cooperating normally. Tourism was booming. The agribusiness sector was too, and there were movements from one area to the other. That was very good. The economy was projected to grow and move to a higher level but then came the pandemic, which brought a total disruption of the economy and some sectors had to close down.

In Nairobi, at the CBD, we had hotels like the Intercontinental Hotel closing completely. Now, it is on sale because it closed. There is a hotel, which is just behind me about 500 meters, the Silver Spring Hotel, that is closed up too and is not yet opened. Meaning there are some sectors which are actually very much crippled. You could see the impacts of the pandemic in the newspapers. There was no day you could not see 20% to 30% of the newspapers indicating or advertising auctions, meaning businesses were railing, and they were really dire. They could not meet their financial obligations, and they were being sold. That is how bad it was.

Fortunately, the economy has started to recover. Even the tourism sector is bouncing back. The agribusiness is also doing very well and the economy has seen a positive trend. We are glad that the infrastructure sector, the hospitality sector and the transport sector, which had been crippled because of the ban on movement, are now back. Instead of people using the vehicles maybe at a 30% or 50% rate, now it is full capacity, and movement from one country to another is not as hampered as it was in the past, meaning that the economy is vibrant. We have not reached optimal level yet, but we are doing much better than two years ago.

What are some of the sectors that are still facing major challenges?

Regarding the ease of doing business, Kenya has tremendously improved. We get licenses fast and the bureaucracies have tremendously improved thanks to measures taken by the World Bank.

Education has recovered, but not fully. Fortunately, those who incorporated e-commerce and the use of internet could say that they have recovered. Tourism is at maybe 50%, meaning that it has not recovered fully as well. When we talk about the other sectors, like manufacturing, we see that manufacturing of some specific products has really picked up, but there are some sectors which have been affected. If you talk about manufacturing towards healthcare, like the face masks, that one segment has been booming throughout the pandemic. So you will find that there are some sectors that are recovering, but they have not reached the optimal level. Transport has recovered, but then again, people are not travelling as much as they used to travel. There is that fear that if you use a public transport, you may get sick. Though it has recovered now, it is breaking even, but it has not yet reached the optimal level. When you talk about minerals’ exploration, this sector has also not picked up optimally, because there are some investors who travel from other countries which are still locked and they are not allowed to travel widely.

Regarding the ease of doing business, how has it improved over the period? What is the Kenya National Chamber of Commerce and Industry doing to help the process?

Regarding the ease of doing business, Kenya has tremendously improved. We get licenses fast and the bureaucracies have tremendously improved, as confirmed by the World Bank. The National Chamber of Commerce and Industry issues the ordinary certificate of origin, which we have been doing manually, meaning it could take up to seven days to process because of the intensity and the workload. We are now issuing them through digital means. That has really decreased the length of the process. Within 20 minutes, you are able to register, and within an hour you get your certificate of origin. Unless there are some other countries that require a stamped copy of the certificate of origin, those are the ones that may take a day for us to get the certificate of origin ready. We have really enhanced the service delivery. When the pandemic hit, we had discussions with the government and we waved the fees for tea exports, which was to be in operation for a year. It now reverts back to the same because the sector has now come back and it is not struggling the way it was. That was very key because it was sensitive to our members and they were able to get the services, but we did not charge them any of the fee that they were paying earlier. Those are some of the incentives.

Of course, in order for us to enhance the ease of doing business, we have been advocating against the double taxation. We have been at the forefront enhancing or discussing with the government about infrastructure development, whereby movement of goods from the port of Mombasa all the way to the Western and to other East African and Central African countries has been enhanced. That is also because of our intervention as the Kenya National Chamber of Commerce and Industry.

Lastly, we have been advocating for a favorable position for startups which have been our niche as a business membership organization, because 80% of our members are micro and small enterprises, and most of those are startups. Most of those startups might not have been able to survive during the pandemic. That is why we worked with some agencies and some donors who gave us some fund to give to the startups and the micro enterprises to cushion them during the pandemic. It was a revolving fund which was to the tune of 500 million Kenya shillings. That was our role to ensure that our MSMEs and our members largely did not suffer during the pandemic.

How much have you helped to contribute to the economy?

We offer our services even to non-members, like the ordinary certificate of origin. We have also been working very closely with our member and non-member manufacturers, through networking forums, trade missions and virtual meetings that we have been organizing with potential buyers from across the globe, because most of the times we are meant to authenticate those who are in trade and ensure that they are genuine traders. We have been coming in handy to do due diligence and inform the buyers or potential partners from across the world that, yes, we know this company, we have visited them, they are registered with our country with the relevant organizations and yes, you can trade with them. We are also the ones who are entitled to issue a movement permit. The government gave us that mandate because we have coverage in all the 47 counties of Kenya. By so doing, we were able to talk to our members from across the counties and issue them with the movement permits, allowing them to move from one region to another.

As for agribusiness and healthcare, those are the products which were really in need at that time. We worked very much with our members and across the value chains, to be able to ensure that there was no part of the country that missed or lacked from this core commodities and core products.

Kenya is a commodity-based country and the drive to add value to the product is key. How has that improved over the years since Kenya exports a lot of tea, and a bit of coffee as well?

There is a lot of focus on value addition, and agribusiness in Kenya accounts for 70% or 75% of the economy, meaning that the economy is largely an agricultural economy. We are no longer relying on commodities only. If it is milk for instance, we have so many companies which have come up who are doing yogurts, ghee, and other value-added products from the milk itself, not only for the local but also the export markets. If you talk about avocado, for instance, of course, once we harvest it we can sell fresh as it is. But we also have those companies which are now chilling the avocado so that they can access markets like America and China, because they require chilled avocado. On the crop, again, we have the product that cannot be exported, but it has high oil content. You will find there are so many companies that are across the value chain, which are now manufacturing oil from avocado, which is used for cosmetics as well as cooking. This is just an example of a value chain. In the past, avocado was not an export product. It was not grown commercially, but now it has grown and it is in itself a cash crop. Regarding tea, we now have companies which are doing specialty tea packaging. Initially it was only Ketepa (Kenya Tea Packers) which was packaging the tea. Now, we have several other companies that are adding value and packaging it and even going further to have the purple tea, for instance, meaning it is high value tea which is for a specific market. Coffee is the same. Yes, we have the commodity because of the majority, but then we have narrowed down to specialty coffee whereby we now have instant coffee, not only from West Africa, but also instant coffee that is done locally and broad to suit. That now adds value to the consumer because the coffees and teas have a specific taste, depending on where they are grown. If they are grown in a particular area on volcanic soil or red loam soil or whichever type of soil and altitude, you will find that the scent, the smell, the taste is totally different. When we have it packaged at source, it means it maintains its aroma and qualities. That is exactly what we are doing at the moment. It is really giving our business community a value for money for that particular purpose. But there is still room for improvement, because we have not optimally exhausted that.

That means there are policies that have come up to support these local industries.

Yes. There are policies that have been put in place and others are being put in place like in the tea sector. There are so many policies that have been discussed. In the blue economy category, there is the pyrethrum sector, the dairy sector and fisheries, which are segments that are going to see a lot of growth, and Kenya is doing very well when it comes to the blue economy, both at the coastal line and the lakes, and also the ponds that are being put up. When we are doing advocacy, we do advocacy to ensure that the policies are friendly to the business community and that they are aligned to ensure that they support the business.

Direct foreign investment is key for every economy around the world. What are the important areas that people can come and invest in?

There is a lot of potential in ICT and FinTech. Kenya is ahead when it comes to innovation in that sector. M-Pesa is an innovation from Kenya. There are many other products aligned or suited to that. I am seeing that it is still a gray area. There are so many opportunities. Another sector is mining, which has not been exploited fully. There is a lot of potential in so many minerals. I am a chemist, and from what we used to learn in school, I did not realize those minerals were all over. You will go to a dry area and think that area is barren. It is not barren because beneath it, there are minerals. There is a ministry that is in charge of that, and there is a lot that needs to be done. Another sector that needs investors to come in is manufacturing, especially the agribusiness sector. The value addition in all segments of the agriculture sector in all value chains is really an opportunity. It is important that we look at what needs to be done in that particular sector. That is where the majority of Kenyans are.

Besides, there is also a need for up scaling the SMEs. There are so many investors out there who are looking at where do to start and how to get into Kenya. We have so many startups and so many micro and small enterprises who maybe have been in trade for 10 years. They cannot scale up because maybe they do not have somebody to inject funds so they can grow and become international entities. We talked about availability of funding for the business community. There is an opportunity there for strategic partners through joint ventures and giving soft loans. There is also a need for us to look at how we could improve our production so that we are able to produce standard products. We formalize the micro and small enterprises, and that comes in by having someone who is keen and interested in ensuring that the business community is capacity-built. That is also another opportunity. Again, apart from capacity-building the gaps they identified, we get other experts, strategic investors to come in and ensure that we move it forward.

Finally, a small enterprise impact financing and investing is important. I am seeing most of the investors looking at how they can impact the community, and there is a lot of space there because most of these in businesses are out there, not necessarily in the city, but out there in the other counties. That is out there in the counties where there is a lot of untapped opportunity, and the majority of the companies there are micro and small enterprises. Of course, we have medium as well, and those are the ones who want to grow because the potential is there for growth. They have not matured. There is still a lot of potential to grow.

What are your current projects? What are you working on at the moment and what are the latest news?

There is a unique project that we have diversified which is very key, and that is looking at renewable energy and energy efficiency. That is a diversification from the normal, because Kenya enjoys sun throughout the year. We do not have enough renewable energy to run our factories and even operate the offices. That is a project that is going to see a big change across the country, and it is unique because it is still new.

Another one that we have been looking at is governance. We have a project whereby we are looking at ensuring that the business community is conducting their businesses in a fair environment. We are working on that one with the human rights body and the funding is coming from the Norway kingdom. We have several partners that we are working with. I can talk about GIZ as one of them and AMREF. There is a big project that we are also looking at which has already commenced, as well as a regional incubation center, whereby we are working with the International Chamber of Commerce and Industry, the global body. That is also something that is going to see us come up with an incubation center that is going to cover all the 12 countries in the Great Lakes region. In fact, I was in Accra (Ghana) in December, visiting the AFCTA (African Free Continental Trade Area). We have programs of market access that capacity-build the MSMEs and the business community, and provide them with opportunity in the African market so that they are able to move out there and create ventures with other African businesses and even global businesses. That project is also very, very important.

Finally, we are doing this export capacity development in partnership with the CBI from the Netherlands, and that program is also targeting women and youth. It is a program that is ongoing and there are others which have social impact like that. We are working with the World Vision, whereby we are targeting women and girls who are HIV positive or HIV affected. We are targeting about 3000 girls or women.

Then, I would like to talk about the block chain technology for voice of doing trade. That is also a program that is under review, but it is almost complete with these different partners and the FinTech companies that have come on board and working with us. Some are our members, but of course they have entered into joint ventures with other global partners. We are also trying to do a fast in that particular area of interest.

What is your inspiration, what drives you to do what you do?

I grew up in a humble background and the inspiration that I have is how do I utilize the skills and expertise that God has given me to turn lives around, to add value and to assist the business community to grow. That is why I have changed jobs. This is my 10th job, and I hope I will stick around for some time now that I am coming of age. If you look at the history, you realize that in all of those jobs from number 1 to 10, I have been dealing with small and medium enterprises in one way or another, or dealing directly with producers of agricultural products, because we need to give value to the grower or to the farmer. When you focus on that, the more lives you touch making that farmer be able to take his or her child to school, making them put food on the table, making them earn a living. You also touch the big company employing those people as well. When I am supporting a company to expand, I can increase their employment from 10 to 20 to 50. The bottom line is how many of these people who are not able to meet their lively expenses and put food on the table are assisted through the small actions that I do. That has been my inspiration. I have seen kids being thrown out of school because of lack of school fees, or somebody dying because they did not have money to go for a medical checkup. If there is a way I could make a conviction to the economy in such a manner that whether it is through employment creation or directly making sure that the producers also get some money for their produce or get markets, it helps. That is why we want more of those value adding companies to come to Kenya and invest, because that margin in itself could be a profit margin for the investor.

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