Local Sourcing is Effective in Raising Local Standards and Creating Linkages

By Soko Directory Team / Published March 15, 2016 | 12:00 pm

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Cost-effective local sourcing is gaining momentum and remains more important than ever especially in our quest to attain Vision 2030. This is because if we raise local standards to meet global demands, we are inadvertently raising the quality of goods and services within our borders and uniquely positioning ourselves as a force to reckon with globally.

The decision to outsource jobs overseas and buy from international markets is based mainly on two things; price – when we consider that in some cases, unfortunately imported goods are cheaper and secondly a historical trend that has placed the value of imported goods at a much higher scale than local products, sometimes with good reason. However, taking into account how much is produced locally, it is prudent that we find ways to use this to our advantage and make ours a very competitive market.

If we look at our supply chains for example, there is definitely a latent capacity to add value and enhance the quality in order to create a strong and sustainable local economy. Some of the benefits of enriching our supply chains is that, given their locality you will enjoy shorter delivery times and more certainty that your goods will arrive at all; reduced transportation costs, supporting the local economy and creation of a strong community relationship.

In other words, promoting local sourcing goes hand in hand with ‘The Buy Kenya Build Kenya’ initiative. Further, it gives us a sense of ownership and pride to buy and promote Kenyan products whilst at the same time branding our country’s output as that of reputable quality. Hence, in as much as local sourcing is about raising our own standards, it is also about making our supply chains and value-add industries formidable enough to cushion us against any external shocks.

However, local sourcing in the hospitality, food and beverage sectors has remained low in recent years. This should be a key concern for stakeholders in industry who are keen to build a strong manufacturing base. For example, recently the COMESA Business Council (CBC) in partnership with Kenya Association of Manufacturers (KAM) initiated the Local Sourcing for Partnerships (LSP) Project to target the Small Growth Enterprises within the hospitality and agro-industry sector, with the aim of building their capacity on quality standards.

A World Bank Report titled “ Kenya Economic Update” cited food production as a dominant manufacturing activity in Kenya, accounting for 32 percent of total manufacturing output in 2013. The food subsector leverages Kenya’s large agricultural economy and strong domestic demand. Other key subsectors are beverages and tobacco products, chemicals, printing, rubber and plastic products. Dairy products, pharmaceuticals and metals were also rates as the fastest growing manufacturing sub sectors between 2009 and 2013.

According to the Kenya Industrial Transformation Programme, Eastern Africa annually imports USD 3.8 billion in raw and processed commodities such as wheat, palm oil and rice for local consumption. This presents a great window of opportunity for value addition in the agricultural sector with a promise to make our country an agro processing hub. Currently, we process only 16 per cent of our agricultural exports and this figure needs to go up; we should be blending our own tea and selling it in a blended form. By contrast countries like Tanzania, Uganda and Ivory Coast process 27%, 34% and 32% respectively. So it is possible for us to double the amount of our processed agricultural exports to boost agriculture, create an additional 110,000 jobs and earn USD 600 million.

With a project such as the Local Sourcing for Partnerships we seek to encourage a responsible procurement policy that focuses on local Supplier improvement mechanisms. Its overall goal is to increase local sourcing from Small Growth Enterprise by large corporate companies in the COMESA region in order to create jobs and economic development.

The CBC and KAM has partnered with the COMESA Sanitary and Phytosanitary and food safety (SPS) Unit to implement the training program for SMEs in the food supply business. The idea is to make sure that our SMEs have the capacity to meet the key quality standards demanded by our own hotel industry in order to encourage integration into their formal supply chain.

The training program known as the Global Food Safety Initiative- GFSI also looks into improving implementation of the Hazard Analysis & Critical Control Points (HACCP); a management system in which food safety is addressed through the analysis and control of biological, chemical, and physical hazards from raw material production, procurement and handling, all the way to manufacturing, distribution and consumption of the finished product. From this one training 80 suppliers will be equipped with skills and knowledge on quality standards .

This is one way in which stakeholders can get actively involved in partnering with local suppliers with special focus on SMEs. It is a low hanging fruit for industry and indeed achievable.

Finally, looking at the personal connection can also be a tremendous asset. Having the ability to meet your supplier face to face provides a greater opportunity for personal connection and relationship building. This personal touch comes into play when your business is in crisis or needs to meet a surprise deadline. Having a good rapport with your supplier will be the oil that greases the cogs of your business allowing you to operate with no hitches.

The writer is the CEO of the Kenya Association of Manufacturers and can be reached on ceo (at) kam (dot) co (dot) ke.

About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system.Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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