NAIROBI, 28 January 2013 – Most analysts have ceased upon the potential damage to property and businesses that may loom ahead of Kenya’s upcoming national elections. But what happens to key industries such as manufacturing after the election may be just as crucial to Kenya’s economic development. To bring light to this issue, the African Trade Insurance Agency (ATI) addressed a group of manufacturers today with a client-friendly solution designed to help the sector become more competitive as opportunities from regional integration expose the industry to regional markets in 2013 that potentially represent a consumer base of over 240 million people.
“With all the news focusing on the elections, it is important keep in mind what happens after the election particularly for bread and butter industries such as manufacturing. Ethiopia has relaxed its foreign investor restrictions, the two Sudans are well on their way to reaching agreement, and Kenya’s ongoing and massive investment to improve road connections to neighbouring countries will all combine to create a perfect storm in 2013. We predict that Kenya is poised to receive a floodgate of opportunities in the near term,” notes Humphrey Mwangi, ATI’s Sr. Underwriter.
Kenya has pegged its fortunes on the manufacturing sector, which plays a key role in the government’s Vision 2030 goal of transforming the country into a service and manufacturing hub. According to the Kenya Association of Manufacturers (KAM), the leading association for the sector, which represents 700 members, the manufacturing industry and manufacturers contribute about a quarter of Kenya’s gross domestic product, while the sector directly employs over a million people along with millions of others through downstream activities.
The industry is predicted to slow as productivity and growth typically take a hit when companies are unable to do business on a credit rather than a cash basis. Recognising this challenge, ATI along with Metropol, a government licensed Credit Reference Bureau, joined forces to exploit their synergies. The programme, called SureTrade©, is designed to provide a one-stop shop for clients wishing to access products from both organisations.
The SureTrade© programme will allow manufacturers and other local companies to expand their client base, increase their trading margins and obtain financing at reasonable rates. With a combined Trade Credit Risk Insurance policy and the establishment of a credit rating from Metropol, companies can trade more securely regionally or globally and access credit more easily.
Trade Credit Risk Insurance in Africa has a major built-in challenge – obtaining accurate financial information on local companies. This is essential in order to assess whether the company is able to pay your client. Typically, the process of obtaining credit information on just one company may take weeks and even months. With the partnership with Metropol, ATI envisions a smoother process in obtaining financial information while also helping companies to build up their credibility and competitiveness with a rating from a trusted source.
Betty Maina, KAM’s Chief Executive sees increased exports as a positive growth strategy both as a buffer to potentially turbulent post-election impacts on local markets and also as a long-term plan to build a sound business. This sentiment was also echoed in a report focusing on the impacts of Kenya’s 2013 election issued by Moody’s in May, 2012. In the report the rating agency noted that beyond the election, Kenya needed “more emphasis on export growth to reduce structural and external vulnerabilities.”
In addition to manufacturers, ATI also has its sights trained on ways of better supporting banks and lenders. In December last year, the company launched a product specifically geared to banks that enables ATI to offer a blanket cover on a portfolio basis to banks. This approach ensures that multiple borrowers are protected rather than just one client per transaction. This approach is expected to provide a boost to many sectors, including the vital Small and Medium Sized Enterprises whose contribution cuts across many sectors.
