Spurring Kenya’s Economy Through Industrialization

Space Summary

The Twitter Space Spurring Kenya’s Economy Through Industrialization hosted by MwangoCapital. The Twitter Space on spurring Kenya's economy through industrialization provided valuable insights into how industrialization serves as a key driver of economic growth, job creation, and infrastructure development in East Africa. Discussions emphasized the significance of investing in skilled labor, sustainable practices, and collaboration for successful industrialization. The event highlighted the role of financial research, innovation, and overcoming challenges like skills gaps and regulatory barriers. Overall, the space underscored the importance of industrial clusters, value chains, and government policies in promoting efficient and diversified economies.

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Space Statistics

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Questions

Q: Why is industrialization important for Kenya's economy?
A: Industrialization boosts economic growth, creates jobs, and improves infrastructure and technology.

Q: How can financial research benefit industrialization in East Africa?
A: Financial research provides insights for strategic investment decisions, market analysis, and risk assessment.

Q: What role does skilled labor play in industrialization?
A: Skilled labor drives innovation, productivity, and quality in manufacturing processes.

Q: Why is collaboration essential for successful industrialization?
A: Collaboration fosters alignment of interests, resource sharing, and effective policy implementation.

Q: How can industrialization promote sustainable development?
A: Through green practices, resource efficiency, and innovation towards low-carbon production.

Q: What are the benefits of promoting industrial clusters?
A: Enhanced specialization, innovation, and competitiveness among related industries.

Q: How does industrialization contribute to diversification in economies?
A: By reducing reliance on agriculture and expanding into manufacturing and services sectors.

Q: What challenges may arise during industrialization processes?
A: Issues like skills gaps, infrastructure deficits, financing constraints, and regulatory barriers.

Q: What strategies can be implemented to overcome barriers to industrialization?
A: Investing in education, technology, infrastructure, and creating supportive policies and incentives.

Q: How do industrial value chains impact economic efficiency?
A: Value chains optimize production processes, distribution, and market access, enhancing overall economic performance.

Highlights

Time: 00:10:35
Importance of Industrialization in Kenya Discussing how industrialization drives economic advancement and job creation in the region.

Time: 00:25:15
Role of Infrastructure in Industrial Development Exploring the critical link between infrastructure investment and industrial success.

Time: 00:35:45
Sustainable Practices in Industrialization Highlighting the need for environmentally friendly approaches in industrial growth.

Time: 00:45:20
Government Policies and Industrial Progress Examining the impact of regulatory frameworks on industrialization initiatives.

Time: 00:55:10
Skills Development for Industrial Workforce Addressing the importance of educational programs and training for industrial labor force.

Time: 01:05:30
Financial Insights for Industrial Sector Investments Analyzing the role of financial research in guiding investment strategies for industrial projects.

Time: 01:15:40
Innovation and Industrial Competitiveness Exploring how innovation drives competitiveness and sustainability in industrial sectors.

Time: 01:25:55
Challenges of Industrialization in Kenya Identifying obstacles such as infrastructure gaps, skills shortages, and funding limitations.

Time: 01:35:20
Public-Private Partnerships for Industrial Growth Discussing the importance of collaboration between the public and private sectors in advancing industrialization.

Time: 01:45:10
Future Prospects of Industrialization in East Africa Looking into the potential growth and development opportunities through industrialization in the region.

Key Takeaways

• Industrialization is a key driver of economic growth and development in Kenya and East Africa.
• Investment in infrastructure and technology is vital for successful industrialization.
• Skilled labor and workforce development are crucial for industrialization initiatives.
• Financial research and analysis play a significant role in understanding market trends and opportunities in East Africa.
• Collaboration between government, private sector, and stakeholders is essential for sustainable industrialization.
• Industrialization can lead to job creation, increased productivity, and improved living standards.
• Sustainable industrialization practices can help mitigate environmental impact and promote green growth.
• Knowledge sharing and capacity building are important for fostering industrial innovation in Kenya.
• Promoting industrial clusters and value chains can enhance competitiveness and efficiency in the economy.
• Industrialization drives diversification and resilience, reducing dependency on specific sectors.

Behind the Mic

Introduction and Agenda Setting

Hi, Tobias and Robert. Yes, Tobias here. I can hear you clearly. I can also hear you very well. Thank you. All right, perfect. I think we just need to get Zach as a speaker and we should be going. We should be good to go, I think, in about five minutes. Right. Good evening, everyone. Thank you very much for carving time out of your schedule this evening for a conversation that we're about to have over the next hour and some change about the future of manufacturing in our little corner of East Africa. My name is Raman Yang. I'm a business journalist with CGTN Africa and Bloomberg as well occasionally see my bylines over there. The topic ahead of us is actually a fairly interesting one. Shall I say a fairly topical one as well, because a big chunk of the things that we consume, that we invest in, that we buy our daily lives one way or another, tends to be produced in this country. Not as much as you would like, because the entire goal, at least as far as the state is concerned, is to try and raise manufacturing share of GDP to a significant amount, roughly the order of around 20% of GDP by 2030, which, incidentally, is not that far off. It's basically in the next five or six years.

Current Manufacturing Landscape

But as things currently stand, if you look at the share of manufacturing as a percentage of GDP, it's actually been in decline in the decades to 2023. In 2013, it was around 10.9% of GDP, but it fell to under 8% by last year. So what exactly is going on and how can we reverse this trend? We'll explore that in detail over the next 60 minutes with us for this conversation. We've got Tobiasalanda, who's the acting CEO of the Kenyan association of Manufacturers. We also have Zach Munyu, who's a chair of the alcoholic beverage subsector within KM, the Kenyan association of Manufacturers. We also have Robert Ware, who's a chair of the public finance committee over at IspaC. Gentlemen, thank you very much for your time this evening. I want to start with you, Tobias, just to get a general sense of where we are with manufacturing at the moment, because the general trend, as I pointed earlier, is one of decline as far as the share of GDP for manufacturing is concerned. But also we're seeing a much slower rate of growth in that output, 1.3% in the first quarter of this year. Compare that to 1.7% in the first quarter of 2023.

Factors Affecting Manufacturing Growth

What explains that slowdown in growth? And are those issues mostly internal or external? Thank you. Thank you very much, Rama. As you have stated, the manufacturing sector has declined in the past couple of years. And indeed the issues that affected the manufacturing sector are both internal and external. We are in a global market, so competition is indeed stiff. And having a stiff competition requires each government also to align policies that can enable their respective manufacturing sectors to grow. Because it's a competition, every country is trying its level best to ensure that their respective manufacturing grows. And that calls for a lot of action planned by respective governments, but a lot of also enabling environments to attract investment in respective countries. As investors in the manufacturing sector, they look at various factors, which is the business environment or the climate that will enable them to spur growth in any investment that they do in their respective countries. So it's largely based on the competition around the globe and also the internal aspect of the economic environment and incentive.

Impact of Tax Policies

Tobias, with respect to internal factors, because I know this conversation came up especially around the 2024 finance bill, and we'll get into that in a bit more detail later on in the hour. But to what extent is that unpredictable tax policy? One year you've got this specific set of policies that are in place. Say for example, the railway development levy is set at this rate, excise duty is set at this rate. And we know it has to be remitted at this point in time. And then within another twelve months or so it's changed to something completely different. To what extent has that contributed to that much slower growth rate that we're talking about now? So every quarter or so, we do what we call a manufacturing barometer. And in our last manufacturing barometer, the month of July, we did note key important highlights. A lot of the manufacturing companies are operating below capacity, indicating challenges in achieving full production potential. Again, another thing of concern is the cost of industrial inputs, which have gone high globally due to various factors. So manufacturers sourcing inputs, both internationally and locally, have reliance on supply chains.

Connectivity Issue and Policy Discussion

Tobias, are you still there? Can you hear us? Most manufacturers anticipate. Apologies to that, to our listeners. It seems you're having a bit of a problem there with Tobias's connection. He's fading in and out, but we'll try and clean that up and get back to soon as we can. Zach, I want to come back to you with respect to the policy environment that we have at the moment, early in the year, around June, July, we were speaking around the 2024 finance bill, and the argument at the time was pretty much focused on these are the things that we do not want in a finance bill because they will have these specific negative effects on our ability to do business in the country. There was this interesting line that came in from one legislator that essentially went something to the effect of, well, if you don't want to manufacture here, you can always manufacture somewhere else. But at this point in time with the fiscal situation that we're in at the moment, there is talk from treasury of trying to essentially revive some of the proposals that were in the 2024 finance bill.

Insights on Finance Bill Proposals

From where you sit, are there any specific ideas in the 2024 finance bill that you'd like to see brought back? And if so, why? Thank you. Thank you, Ram. I hope I'm audible. Yes, you are. Yeah, I can hear you. Okay. Thank you. Yeah. So, when we look at the 2024 finance bill, I think there are some surprises for us. I think one of the big negative surprises was the fact that there's a proposal to delegate section 14 of the Excise Duty act, which allows us to offset input excise from the finished goods. And I think that was a real advised proposal. And what we understand is that there was an aspiration by government to just delete clauses within the tax laws that were generating tax expenditures. I think section 14 was just caught in the crosshairs in the quest to do that. And I think that was the biggest negative proposal we had seen, because it would have wiped out our competitiveness across the region.

Impact on Regional Competitiveness

It would have made Ugandan and Tanzanian products much more affordable if they are sold here. As you know, we are collapsing a lot of the borders now we have Africa's free trade area. I think that thinking should have been there when that proposal was made. But to the tail end of the engagements, members of parliament have agreed to actually pass that and retain our ability to offset the excise duty we pay on inputs or finish goods. I think to your question, which proposals were good? I think there was a suggestion in terms of bringing tax remission on spirits products. We, as an industry team, thought that was a good idea. We have tax remission that is given for beer products currently, where you get, instead of paying 100% of the excess duty on beer produced from raw materials that are grown locally, millet and cassava, we pay 80% of that.

Expanding Tax Benefits

So currently, a little beer, for example, pays an excess of 152 shillings. So we'll only pay 80% of 20% of that. So 80% is limited to manufacturers to allow them to continue investing and also to recruit from a big pool of people who are at risk of consumer research, even that alcohol generally is very expensive. So that incentive was meant to be extended to spirits products, which currently don't enjoy that. And I think that would have been a good step forward just to address the consistent issue of increasing trade, which is currently not around 59% of all the alcohol that is consumed in Kenya. We also think that when you look at going back several years, particularly the product now, beer has been declining by around 2.5% year on year.

Trends in Alcoholic Beverage Industry

And then there was the suggestion of the proposal to move taxation from volume-based excise into ABV based excise. We're not even as that now. We are not in dispute of that. I think it's a progressive proposal. And there was a suggestion that the effective tax would effectively go down by 24%, which was good because it was the government looking at the statistics of what they've been collecting and how the industry has been growing over time. And given the consistent decline in consumption of beer specifically, then it made sense that the taxes on beer would go down. Because currently, for example, for every bottle of beer you buy, 51% media starts. And that's why you find most young people who say, beer, first of all, is for all people.

Challenges in Beer Consumption

So it's not exciting. But we are trying as an industry to bring out innovations that make it more appealing to those who choose to consume. But also the fact that Zack, if I may just interrupt that briefly, because looking at the data from the first quarter of this year, one of the trends that I noted there was that if you look at the production of soft drinks, it was down by around 6.5% year on year in Q one this year. And then if you essentially stretch that out and ask, okay, what does production of soft drinks look like over the last four or five years? So, 2021 to date, there was a bit of an increase in 2022, but then it fell in 2023. Would it be accurate to say that perhaps you're also dealing with a demand side problem here? Because at some point, that lack of purchasing power, that diminishing purchasing power that households have been dealing with for the last 510 years, is eventually going to catch up with manufacturing, isn't it?

Economic Impact on Soft Drink Production

Yeah, most definitely. And given that soft drinks and alcohol drinks depend on disposable income, once the disposable income for consumers actually go down, they actually feel the effect. So the moment you find that the cost of food is going up, the priority for most people will be taking care of the essentials. Your food, your rent. And what you're left with, essentially, is what you're doing today. Beverage space. And that discretionary spend usually diminishes when you have reduced or squeezed disposable income for consumers. So I say you're right. Indeed. And we'll come back into the tax proposals in a bit more detail in a moment. But I want to bring in Robert into the conversation as well. Pretty much the same question to you, Robert, from where you sit over at ISPAC, what would you like brought back that would potentially help in spurring manufacturing growth?

Future of Manufacturing Sector

Personally, I don't think we're going to hit that 20% share of GDP number that government is talking about by 2030. But as one way of getting us to that point, what mix of tax policies do we need to see in place for this fiscal year? Thanks, Rama just confirmed that you can hear me loud and clear. Excellent. Great. And I think Zach's point is very important because if you don't have disposable income, then clearly demand will suffer. And so the market really doesn't exist. And this is really a function of the kind of economy that we're operating in. The government says that the inflation rate is now down to about 4.4%, but you can still see that the populace is struggling. So one of the things that we hope as ISPAC to see amongst the proposals is some of these proposals that were included in the medium term revenue strategy.

Addressing Tax Bracket Concerns

So, for example, in Kenya, employees hit the top tax bracket of 30% very early on. It's too narrow a gap. At 32,000, you're already paying tax at 30%. What you probably need to do, and this is what the medium term revenue strategy is proposing, is expand that. So that, for example, you hit that at probably 70 or 80,000 shillings. What that does is that I will have a bit more disposable income, and I will then consume or save, either of which is good for the country in terms of manufacturing, because if I consume, then government is still collecting VAT, probably excess duty. If I consume Zack's products, if I save, then we've got the pensions, investing and probably lending government, or investing and creating additional jobs again, which then feeds into the consumption pattern of the country. So that's one of the things that we hope to see in the finance bill.

Stability and Predictability in Taxation

I think the other one is just really looking at tax stability because, and I think somebody alluded to this in the conversation. You see, when you've got changes, for example, and Zach will tell you this excess duty on glass bottles, it changes this year, then changes next year. It becomes very difficult for investors, especially in manufacturing, because this is a long-term game. It becomes very difficult for those kinds of investors to plan their investments. I'll give you an example. Rama. Just this week, Rwanda has gotten about €40 million from the European Commission to invest in their pharma sector. And so in very short order, you'll likely see Rwanda manufacturing medicines and importing into the country. And in Kenya, we are still going back and forth between do we zero rate these products? Do we exempt them? How do we treat the packaging and so on and so forth?

Need for Regulatory Clarity

So a stable tax environment would be, in our view, a critical ingredient in fostering manufacturing? Rama indeed. And I want to put this question to both you, Robert and Tobias. Robert, you're going to go first on this one because some of the proposals that I remember come putting forward earlier in the year in Q two, Q three thereabouts was, instead of having all these conversations that we're having now about what should be exempt, what should not be exempt, in some instances, at least, especially on the input side, on the investment side, some of those tax expenditures are necessary.

Arguments for Lower VAT Rates

But one of the key arguments that the association made was, look, we'd much rather have a lower VAT rate for manufactured goods instead of VAT exemptions in order to reduce the eventual cost of finished goods and by extension, help the competitiveness of Kenyan manufacturing. Can we put a number on that with respect to how competitive, how that would help, rather, with making companies here competitive? What number makes sense? 16%. 14%, 12%, 10%. Robert, you go first. And then Tobias?

Data-Driven Approach to VAT Rates

Yeah, thanks. Thanks for that question, Rama. Now, I think, first of all, for us to put a number on this, I think it needs to be data driven, because for far too long in this country, we've come up with proposals, especially tax proposals, that are really not underpinned by data that is known to the public. Perhaps National treasury has got that data. We don't know. At least we don't have access to that. But I think we need to have a very clear study which says that for these products, which we think are, and this is an example from the UK, for these products which we think are critical, we'll apply a VAT rate of 5% because we are then supporting the population in terms of access to these products. However, for these others, we think that the rate should be 16% or 14%. But having said that, Rama, you see, even in the medium term revenue strategy, there's some two reforms that I think were critical for VAT, and one was actually in the finance bill that was rejected, and that is increasing the VAT threshold to 8 million shillings.

Shortening VAT Rates and Administrative Costs

And that does wonders in terms of administrative costs of managing VAT. But the second, and I think more important one, is to bring down the VAT rate by one percentage point this financial year and probably another percentage point by 2026. And that then makes some of these products a little bit more affordable. And hopefully you can drive additional demand and collect much more than you're actually collecting at 16% VAT. But I know, you know, for government, this is probably a very delicate balancing act. Remember, in East African Community, we've got the lowest VAT rate. So it then, you know, and there's actually a move towards convergence of the tax regimes. You know, we started with customs. There's very advanced work around excise, and probably VAT will follow suit. So it's something that we need to be very careful and think and at least use data to inform that decision.

Manufacturing Sector's Tax Rate Discussions

Rama indeed, Tobias, do you want to weigh in on this? What sort of lower VAT rate makes sense for KN? So there are conversations going around, and part of the proposal was we harmonize the tax, the VAT rates in justice. Sorry, Rama. So I was saying there has been a conversation going out, and in the proposals that we have made that we consider harmonizing the VAT rates between the regions at 16%, you lower it by another two percentage, you will increase a disposable income that can be considered for investment by the manufacturing sector. But I think the most important thing is to consider statistics and data that would support this decision, because the basis that the government looks at it is, looks at it on his own taxation and generation of revenue, it shouldn't be looked at it at that angle alone, but it should be looked at it in the angle of supporting.

The Economic Impact on Consumers and Manufacturers

Manufacturers have disposable income to spark investment and also making our goods affordable to the local citizen and the regional citizen. Over to you, Raman. Indeed, I want to put a question to both of you with respect to the, essentially picking up on your points there, Tobias, because one hand, we will say, well, the state tends to look at things from a very revenue extraction perspective. And even when they say they want to reduce tax expenditures, essentially what they're spending on tax refunds and so on and so forth, here's what the current finance minister said during the handover between him and Professor Ndungu. A lot of tax expenditure claims, tax refund claims are fictitious. So now we must look at ways of reducing tax expenditure that we can only do because there are commodities, there are items you may not stop subsidizing because they're basic, they impact directly on the cost of living.

Zero Rating vs Exemptions

But you can move them to exemptions so that we do away with this zero rating of commodities, which ends up clogging our system. That was John Baddy when he took over at treasury, and some of the numbers that were talking about at the moment was, in terms of total tax refunds, he was saying that the expenditure at the time was well over 520 billion Kenyan shillings, a better part of $4.5 billion for some of our international listeners here, and 65% of that was just VAT refunds. So that's the general attitude that we have from treasury. Their argument is, well, we're wasting way too much money, or losing too much money, as they see it, just on tax refunds. How do you engage with treasury when they? This is their argument that essentially starting. This is the starting point, and they're saying, well, we're giving you guys way too much money.

Balancing Refunds and VAT Administration

We need to claw back some of that. Tobias, we can start with you, and then, Robert, you can weigh in. I think what needs to be made clear that it is a refund. It is a tax refund. It's not that the government is giving you money in that context, but a lot of it is caused by them because of the administrative burden, in terms of the process of reviewing the claims and all that can be simplified. If you just remove. If you just remove and reconsider the approach in terms of VAT, create a lot of exemption out of that exemption, then you'll not have people coming to claim tax refund. Indeed.

Exploring VAT Refund Statistics

Robert, do you know any? Yeah. Thanks. Thanks, Rama. And in addition to what Tobias is saying, I think one of the reason statistics that we've seen is the World Bank IMF saying that in the last quarter, there's been a jump of about 40 billion in VAT refunds. And I think the question then has to be, what is driving these VAT refunds, so that then we can understand how best we deal with this. But, Rama, allow me to just very briefly explain why the difference between exempt and zero rated and why this is such a heated debate. When you've got a product.

Understanding VAT Exempt Products

Absolutely. Please go for it. Yes. When you've got a product that is VAT exempt, it means that as a manufacturer, you cannot claim the input VAT because you are supplying exempt products. Whereas if it's a zero rated product that you're supplying, are allowed to claim the VAT that you incur, for example, on your transport, on your electricity, and so on. So when you make a product exempt, theoretically it might appear to be cheaper, but actually, in actual fact, the manufacturer will pass over the cost that they are unable to claim as input VAT or a refundable VAT to the consumer. So exempting products really makes them slightly more expensive than zero rating the product.

Government's Approach to VAT Products

Now, I think the view the government should probably consider is, can we have a first approach to shifting these products from zero rated to exempt, depending on how critical those products are? For example, medicaments. I think it's, given what we are going through in terms of universal health coverage and shift, I think it's important to get these products to be zero rated and phase it out just like we had with the fuel then. The other thing is, if you look at our national tax policy, we've subscribed to international best practice in terms of taxes. So, for example, exported services and goods should be VAT zero rated.

International Best Practices and Refunds

So inevitably, there'll have to be a VAT refund. And so there's not really much that we can do around that other than perhaps tightening the refund process. And I know revenue authority has reduced the turnaround time to about 51 or so days in the last year. So I think just accepting that international best practice will inevitably lead to some VAT refunds. And the last point, Rama, is we've got this thing called withholding VAT, where the commissioner can appoint some manufacturers, for example, the big guys, not manufacturers, but some businesses, the big businesses, to withhold VAT when they are paying suppliers. And the idea here is we'll then be able to identify that Robert has supplied EABL, for example, some services, and he needs to account for the VAT, which is all well and good for visibility.

Questioning Withholding VAT Practices

However, with E-teams now, the question that we're asking ourselves is, do you actually need this withholding VAT? And if we don't need it because E-teams is giving government the visibility, then surely we can do away withholding VAT and reduce the amount of VAT refunds that we are dealing with. Rama? Indeed, Tobias, just before you got cut off in the initial part of the program, I'm going to put this question to both you and Zach. You mentioned that in terms of capacity utilization across the sector, for quite a few manufacturing firms, they're operating well below capacity. Can you go into a bit more detail on that? What sort of numbers are we talking about? Is it, you know, 50% utilization, 30%? 70%?

Capacity Utilization in the Manufacturing Sector

Yes, I can hear you. Oh, so, like I said, we did, we normally do a manufacturing barometer, just an assessment of the manufacturing climate, and based on the feedback that we got, is a larger number of the manufacturing sector are operating below capacity. And one or one of the major reasons they are operating below capacity is the predictability of the environment in terms of globally and nationally. In globally. When you look at this raw material, cost of raw materials is varying based on competition that is coming around in different countries where they source their raw material. The global supply chain has not remained stagnant. Prices keep changing.

Challenges Affecting Manufacturing Efficiency

And based on that, they cannot predictably plan their production because cost is varied. The other major challenge that they have foreseen based on that is a consideration of downsizing. Like, for example, now that we've had other additional taxes introduced in the form of medical cover, wherever. Tobias, are you still there? I think we've lost you briefly at that point. I'm saying. Yes, yes. Now I can. Okay. We are saying some of the manufacturers, based on the feedback, are considering downsizing. And this is attributed to the taxation. And the taxes that are introduced in recent cases is the health, the sharp health tax that has introduced where employer and employee have to make an additional contribution.

Impact of Tax Policies on Employment

So in this context, employers contributing an additional 1.5 would affect their overall planned costs. In that context, some of them are considering laying off workers just to meet their costs within this period of the year because they never planned for this additional costs. Do you have. Sorry, just to interrupt briefly there as KM. Do you have any estimates on the potential job losses that may arise across the entire sector as a result of, say, for the sake of argument, some of these firms saying, look, these tax policies don't make sense for us, we're going to have to downsize.

Potential Job Losses in Manufacturing

Do you have any rough idea of how many job losses we're potentially looking at? We don't. Currently, we don't have the exact figure, but you're looking at a loss of between 20% to 30% based. My word, 20% to 30% based just based on the estimates that you have at the moment. Over to you, Raman. Indeed, Zach. It's, you know, looking at manufacturing, it's one hand, you're being whacked by a very unpredictable, fast changing tax policy environment. At the same time, you're dealing with a fairly constrained basket of consumer spending.

Manufacturing in a Competitive Environment

But at the same time, we're in an environment where we have to compete with entities in South Africa, in Egypt, in Uganda, in Tanzania, and our energy costs are arguably higher than in many of those other different markets. Is there any advantage that there is to manufacturing in Kenya at the moment? Because it surely can't just be an old doom and gloom scenario with respect to manufacturing in this con. In this country. Zach, are you there? I think we've lost you there briefly. Hello? Am I audible?

Identifying Kenya's Competitive Edge

Yeah, yeah, I can hear you now. Zach, are you there? Can you hear us? Well, we'll try and get Zach's connection cleaned up in just a moment, but just a reminder for anyone who's on the space at the moment, you've got any questions or ideas that you'd like us to put to our panelists tonight? You certainly can do that. There are many ways of doing that. You can essentially send a tweet in response to the pinned tweet that you have at the moment over on the mongol capital account. Respond to that. We certainly get to those questions in the course of the conversation.

Competitive Advantages in Manufacturing

All right, let's try this one more time. Zach, are you there? Oh, dear. It seems we're having quite a few connection issues today. Anyway, as we mentioned a little earlier, if you've got any questions for panelists, please just put them into the. Or rather respond. Either send the DM directly to the Mongo capital account, or alternatively, just respond to the pinned tweet that they have on the account at the moment, which essentially has a spaces going on at the moment. Tobias, I guess I should just put that question to you directly, then, as we try and get Zach back onto the call.

Kenya's Edge in Manufacturing

There's got to be something that makes manufacturing in Kenya makes sense vis all of those competitors that we have within the region were also members of these other trade blocs or regional economic groups that we put together from the African Continental Free Trade Area to COMESA to the EAC, all of these groups. But what is Kenya's competitive edge in manufacturing? I think if we are looking at ESC, we are definitely way much ahead of our counterpart. Uganda, Tanzania, Rwanda.

Growth and Challenges in Kenya's Manufacturing Sector

The manufacturing sector in Kenya is thriving and is bigger than the other regional counterpart. However, if we go beyond ESC, we can find that there are other manufacturing companies in different countries that are thriving more than us. If you look at South Africa, they are way, much ahead. But this presents us an opportunity to compete with our counterparts within Africa. Currently, the signing of the agreement, the African Free Trade Area, free continental trade Area agreement, and the EU EPA presents a good opportunity for us to showcase our ability to produce and export into this market.

Communication Issues

Tobias, can you hear us? I think we've just lost you there for a moment. Oh, you lost me. Yes. Now I can confirm if you can hear me. Yes. So I was saying the signing of the agreement has presented a very good opportunity for us as Kenyan manufacturers to export to the other regional markets under the AfCFTA and EU and EPA. And therefore it requires more manufacturers to establish themselves here and export to the African countries and EU. So it is not lost and gloom as it may seem, but with the presentation or with the opportunities of the new markets. We believe if Kenya can be able to export to other regional markets, then the manufacturing contribution to the GDP in this country will definitely grow. Over to you.

Electricity Cost and Competitiveness

Indeed, I want to put this question to both you and Zach, considering that the cost of electricity here, and granted, I'm probably using the slightly wrong figure here, but because it's on the retail side, if the cost of a kilowatt of electricity is around 20 kilowatt hours, right, on a consumer side, and I know it's slightly lower than that in Egypt and in South Africa, how can Kenyan manufacturing remain competitive? All else being equal, let's assume for the sake of argument, our tax policy problems don't change, our logistics problems don't change. Just from a cost of energy perspective alone, can Kenyan manufacturing really be competitive over the next 510 years? Tobias and then Zach, you can weigh in on this. Definitely not. We will not be competitive. The cost of electricity indeed contributes largely to the ultimate cost of goods that we produce and sell to our regional counterparts. If Egypt remains cheaper, South Africa may be erratic. In terms of electricity, Zambia, we can compare with Kenya at least, we are far much better. But if the cost of electricity remains high in Kenya, there is that element of competition that will still remain.

Government Intervention and Priorities

At the moment, we are about 12% uncompetitive with our like-minded counterparts. If that cost remains the same, then we largely remain 12% uncompetitive rather than reduce our uncompetitiveness in the region. So this cost of electricity, I think it is a priority for government to find means and ways to reduce the cost because it largely affects how we can compete in an external market. Indeed, and we'll get to that in just a moment. But Zach, same question to you. With the cost of electricity being where it's at least 20 US cents per kilowatt hour, can Kenyan, from where you sit and based on the experiences you guys have at the moment, I'm not just talking about Diageo EAPL, but beyond that, within the beverage sector, can Kenyan manufacturing really be competitive within the region in the next 510 years? Definitely not. And I totally echo what Tobias has said because, and I'll give the example, glass packaging.

Challenges in Local Manufacturing

And I think Robert alluded to this has. When you import glass, let's say from Egypt, which is a commercial country, it doesn't make sense why we'll be putting excise on it. We pay 25, no, 35% excise duty, which was a protection tax that was put to protect local manufacturers of glass. Now, the local manufacturers of glass complain a lot more about power costs. That is what is making them very uncompetitive. So you'll find their prices. Even the time when the tax at some point was 25% excess duty, when you import the glass, it was still much cheaper than glass that we sourced locally. That's how uncompetitive it was. So it's not until we put it at 35, or the government put it at 35%, that now local glass was at parental. Within potted glass. But you see, it's a symptom.

Effects of High Power Costs

We are treating a symptom while the underlying problem is still there, which is the high power cost. So with the fact that now many countries, we are collapsing the borders, we are getting to Africa, continental fitted area people and their clauses specifically prohibiting putting up domestic tariff barriers. From blocking goods or importation of goods into Kenya, like glass packaging, we grant the government and ask. So I guess that then leads. I think that then leads most of our listeners to then ask, okay, if the cost of power is as high as it is. And it's a key factor in why we're not being as competitive as we are now. What can be done in the short run? Well, in the short run and the long run, in order to essentially lower that cost of electricity. Because one counter-argument could be for us to look at the LC PDP and say, sorry, the least cost power development plan and say, look, if the cost of power is extraordinarily high.

Addressing Electricity Costs

We essentially need to be paying either a lot less for it. With respect to the sort of power purchase agreements that are being signed at the moment between Kenya power and power providers. Or we need to start bringing in a lot more cheaper sources per kilowatt hour onto the grid. Be that geothermal or coal. And coal, of course, will have its own controversial issues as well. But from your perspective, Zach and Tobias, what needs to be done now to bring down the cost of power? I think I can go first, then to us. We'll go next, if that's okay. Yeah, absolutely. Yeah, sure. Yeah. Thank you. I think the first thing would be. I know the power purchasing agreements are state secret and most of the time when even people have requested for information about how long is it, are we still paying higher fees? And there's a lot of lack of information in the public domain.

Need for Transparency

And I feel as if you were able to lift the veil and actually have the candid conversation, like what would it cost the country to bring down the cost or to revise the contracts that have been signed, I feel like that's a bullet we'll need to bite to bring back competitiveness within the manufacturing space. And eventually, even if we don't bite the bullet now, eventually we'll need to bite the bullet. And I think it's essential. But from what we can control as manufacturers, I feel like there's also an opportunity for us to find alternative sources of energy. I think there are manufacturers within the space who are moving away from heavy fuel oil and putting up biomass, which is the use of waste material, let's say from sawdust, from academia and the likes, to power boilers within the manufacturing sector.

Adopting Alternative Energy Solutions

And I think that in a way reduces our reliance on fossil fuel, which consistently is going up. So if you can come up with similar ideas just to reduce the cost of power going off grid, I think that would help manufacturing. Indeed. Tobias, do you know, Wayne, on how do we reduce the cost of power, at least in the short run and the medium term? So I think we've had this conversation for a long time. I remember even during the time of the late President Kibaki and the former president Uhuru, some of the proposals that we put forward are touching on the IPP's independent power producers. And some of the proposals that we highlighted is to consider retiring some of those contracts.

Retirement of Power Contracts

Because indeed these contracts, the IPP contracts are secretive enough, but for a fact, they are the ones that contribute to expensive power. In Kenya, we did propose that we retire some of those contracts. And once you retire, we do not sign into more other contracts that will increase the cost of power. But that has not happened. We are now seeing even the current government is considering new IPP agreements. So in a nutshell, even this new IPP agreement will still continue increasing the cost of power. Now from the private sector, what we are currently doing is promoting energy efficiency and conservation. So companies are working and. I think we might have lost you once again there.

Continued Efforts in Energy Efficiency

Tobias, can you hear us okay? Yes, I can hear you, where did you lose me? You were talking about essentially trying to, the fact that a lot of the conversations have been had during the Kibaki era on trying to essentially retire a lot of the expensive power purchase agreements, but that has not happened. And the current authorities in fact are actually thinking of lifting the moratorium on signing new IPPs. Exactly. So confirm if you can hear me. I think it's a network issue. Yes, yes I can hear you. Yeah. Yes. So we did make proposals to consider retiring some of those IPPs. But if you look at it, even the current government is now signing more IPPs and that spells doom in terms of the cost of electricity because I can guarantee you through the signing of these new IPPs.

Future Concerns

The cost of power will not go down. So from the private sector, what we are considering is energy efficiency programs that will help companies reduce the cost of energy. And these programs have been successful at the moment and at least they save a little bit. That can help them in terms of their costs. Some are considering solar insulation in their plants and this is what we encourage because ultimately these costs will not reduce based.

Automation Challenges

Yeah, yeah absolutely. I hear you. There's a question here, Robert, that I think you'll probably best fit to take on. It's coming onto the Mongol Capital Twitter timeline and it's from Vic Novella, that's his handler at the moment. And he's asking why did Etim switch back to the manual entry on itacs as opposed to the pre filled form of the data from the ETR machine which, and he says he experienced that for filing this month. I'm not sure if that's a problem that perhaps you're also seeing amongst your clients or perhaps also the manufacturing space, especially among your smaller clients. Is that the case? Yeah thanks. Thanks for that Rama.

Tax Compliance Issues

And just before I answer that question, I think there's one other thing that probably we need to think about as a country in terms of the cost of power. And if you look at the AU Agenda 2063, it talks about making Africa a manufacturing hub and part of that would obviously have to be a supply of affordable power. Now one of the flagship projects around AU Agenda 2063 is the Inga dam project which is in DRC. And that dam is supposed to generate about 43,000 mw. If you compare Kenya's installed capacity of about 3000 mw, that's about 14 times that and just gives you an idea of what we could do as a continent, as a region, as a country if we were to engage in that power pool.

Potential of the Inga Dam Project

So I think there's a lot of opportunities there. Captive power solutions like Tobias was talking about and just thinking about climate-smart power supply. But now on to the question posed. You know, the idea around e teams and automation and pre-population of the VAT returns was that if everybody who is VAT registered and who is running a business, runs their business via the e teams, then revenue authority will be able to see or has visibility of all the transactions. And so as opposed to the current scenario where you as Rama, you disclose your transactions to revenue authority, and then revenue authority, after some time, comes to review your transactions and do audits, which are long drawn and very painful.

E-Teams Implementation Challenges

The idea is that revenue authority should actually be able to pre-populate your return based on the data that they have, because this is all data-driven. And so in March, they rolled out the pre-populated VAT return, but because the e teams rollout has not really been as smooth as was expected, there were a lot of massive issues. You know, people go into their returns and they see data that they are not aware of or they don't know the source. And so that created a lot of problems. And in fact, on that due date for the March return, the system had to be relaxed so that now people manually input their numbers into the return. And I think what the revenue authority learned from that exercise was, we actually need to take it a bit more slower.

Important Lessons Moving Forward

Let's roll out these initiatives and ensure that they are properly piloted so that then you can simplify the tax compliance process, because I know the challenge really here is simplification of the tax payment and compliance process. So it's a hiccup that revenue authority we understand is dealing with, but it's something that probably is a learning point in terms of how we implement future solutions going forward. Rama, indeed. I mean, it sort of speaks to some of the policy challenges that you've mentioned in the last hour or so, where we rush headlong into changing things very quickly. But even switching to that new system, in several cases, the system just isn't properly tested, it's not properly tried out.

Long-Standing Projects and Capital Needs

And then we end up with, we're sort of running a system on the beta phase and we're still weeding out a whole bunch of bugs and problems with implementation, rather than actually trying to make sure that it actually works properly. On to your point. Actually, Robert, with respect to Inga, the fun part about this is, and I'm seeing some individuals here have known for last ten years plus Grand Inger has been on the cards for arguably about as long as I've been in the business journalism space, all the way back to 2006, and likely beyond that. And one of the main problems that we've always encountered with Inger is, on paper, fantastic project.

Challenges in Financing Projects

Huge potential to essentially provide lots and lots of emissions-free electricity, feed that into the south and Africa and. And the East African, potentially into the west African PowerPoint if you convince guys to build power lines through the DRC, Cameroon, and then up into Nigeria. But at the end of the day, it always comes back down to that age-old question of where's the money? Who's going to put the capital in to actually make sure these things get built? Because there's a lot of potential out there. But turning that potential into reality, more often than not usually, is our big problem.

Discussion on Foreign Ownership

Let me pick up one more comment here from Salim. I believe Salim M. Was essentially arguing that, look, it's not lost that our industries are largely owned by foreign individuals or entities who expatiate that income to other countries other than Kenya. The tax income, I believe Salim is arguing, is insignificant to induce industrial growth, given all the other factors that we've spoken about. High energy cost and negative government bureaucracy, plus tax policy. Personally, I'm not 100% sure that foreign ownership is an impediment, necessarily to investment and growth. Because the reality is, if you're going to find the capital to invest in the country with savings rates that are as low as ours, the capital has to come from somewhere.

Investments and Economic Growth

And for the most part, that would very likely be from outside the country. But I'll put that openly to the panel and see if they have thoughts on this. What do you make of that argument? That foreign ownership and the fact that a lot of that capital and the returns, rather, from those investments essentially move outside the Kenyan economy, that sort of acts as a negative inducement to industrial growth and investment. Tobias, do you want to weigh in? I don't think that is a problem, because we are looking for capital from every source available. If that capital is foreign, then so be it. We accept the capital. I mean, in every country, you'll find people coming to invest.

Local Industries and Foreign Ownership

And there's a lot of assumption that industries are still owned by majority foreigners. That is a big assumption from where I sit. We've seen the locals, many locals coming up and setting even small industries, and they're doing really well. So we just need to encourage more locals, irrespective of where the capital is coming from to set up and start up industries in Kenya. That is where Egypt. That is how Egypt started. That is how China also did it, by encouraging their locals to set up small manufacturing companies or small setups that can produce one item or the other. Over to you, Ram.

Foreign Direct Investment and Local Impact

Zach, do you want to weigh in on that particular question around foreign ownership? Yeah, most definitely. And I support to 100% what Tobias has said. And I think the addition I'd make is the fact that the same capital that people were investing FDI in Kenya are employing Kenyans. They are sourcing raw materials from Kenya, which spurs the supply chain. And they are putting money in pockets of people who are providing supply chain items, whether it's grain, whether it's raw material, whether it's glass for packaging. All those items are purchased locally. So in a way, in their investment, they are not only generating income from what they're selling, they're also sparing the economy from the raw material sourcing supply chain that they establish. Back to you, Rama.

Import Substitution Discussion

Indeed, let me fire off one more question that's coming in from on the twitter timeline, and this is from Suresh Patel, who's saying, look, we're not talking about import substitution. He says we're importing products which can be produced not for Kenya, but for Africa. And the argument that he's making, if I recall from my basic economic history, something that we discussed in a bit more detail in the eighties and the nineties as well, but it didn't really quite take off to the same extent, I believe, that authorities back then had hoped. Tobias, what do you make of that argument around import substitution? Is it something we have to be doing? And if so, how do we get from a to b without imposing those specific orders on saying, no, you can't, we're not going to give you any support for importation because we've seen that backfire spectacularly in Nigeria's case. And we certainly don't want to repeat mistakes that have been committed on that end of the continent.

Balance Between Local Support and Open Markets

I think there needs to be a balance. We need to strike a balance. And, of course, for us to support, I don't want to use the word protect local industries, but support local industries where items can be produced locally, then we do not need to encourage importation of those items, and that needs to be encouraged, and that can only be done through the taxation regime. So imposing tariffs, a fairly targeted set of tariffs in order to essentially make sure that specific kinds of products gradually essentially locked out of the kenyan market. Over to you, Rama.

Challenges of Trade Obligations and Domestic Industry

Indeed. How do we square the circle, though, with respect to the question of using the tax codes as one way of trying to essentially provide that shield for domestic manufacturers with our obligations to keep our market open, as under comes the ESC common market, for example. Because the scenario I have in mind here is trying to avoid a scenario where we keep repeating the same mistakes that we've made with the sugar industry, for example, where we keep going to commerce and saying, well, we still need a bit more time to protect our sugar industry, we need more time for sugar reforms. And we've been saying that for the better part of almost 20 years, because at some point it does become a bit farcical. And we've got to admit that, look, we failed to do this. The Ugandans and the Mauritians can produce sugar at a much lower unit cost than we can. As long as their sugar is of a quality that's acceptable to our markets, why should we essentially try and shield our market? And that's the trick for me. Where do we find the balance?

Strategies for Revitalizing Manufacturing

I think I lost you in the. Just the final comment. Yeah. So the example I was giving was with respect to the kenyan sugar market, right? Because how do we find the balance between. Between protecting the local market and protecting local firms versus the obligations we've signed up to under Comesa, the ESE common market and so on and so forth, where we say, look, we'd like to keep our open markets to the region, to specific countries, that just the same rule sets, the same trade sets and so on and so forth. And in the sugar sector, for example, we've kept going back to Comesa, back and forth every year or so, every two years, saying we still need more time to keep specific tariffs in place in order to shield our domestic sugar manufacturers, in order to give them time to reform. But we've been doing that for 1020 years and there's not really much in the way of reform, at least on the state side, that we can speak of. So where do we find that balance between protecting domestic manufacturing versus meeting our trade obligations? Under all of these trade agreements that we've signed up to?

Key Factors in Manufacturing Growth

I think we need to be very deliberate. As it stands, of course, the duty structures guide us and protect us in terms of how we need to trade. The zero for raw materials, ten for intermediate products and 25 for finished products is a duty structure that was agreeable between the partners and we've been applying that. However, there are certain exemptions that we put in place. Oh, dear. It seems we are getting some really serious network interference on Tobias connection, but we are essentially coming close to the tail end of the conversation as well. We'll see if we can get Tobias back within the next five minutes or so as we wrap up the space at the moment.

Contributions to Manufacturing Sector Growth

Great. Zach and Robert, you've been with us quite patiently for the last 60 minutes, give or take, and I want to start moving this conversation towards the closing end of it. Zach, I want to start with you. From your perspective, what do you think we need to do to essentially make sure we at least keep manufacturing sector growth on a much higher growth path than when it's been where it has been rather, in the last five to ten years? Because that decline that we've seen in manufacturing shelf GDP has happened in the last decade, right between 2013 and 2023. If we are to reverse it, how should we go about it? Yeah. Thank you, Rama. I think the biggest win would be having a predictable tax policy or actually implementing the national tax policy as it was drafted because it went through quite a robust public participation process and people gave their views in terms of how manufacturing can be supported.

Tax Predictability and Cost of Production

And I think the cornerstone of whether we move forward or whether we get to the 20% of share of GDP purely depends on whether the taxes will be predictable. Yes, yes, I can hear you. Please go ahead. Yeah, yeah. So I think tax predictability is the one thing that I feel like if the government is sincere enough to create a predictable tax environment, I think that would be super. If we are talking about someone making an investment today and they know that the next time that they're getting a tax increase, for example, is in five years, they have the confidence to put a lot more money in the market, to innovate, to employ more, to expand the value chain. But if that security is lacking because of the unpredictable tax policies or regulatory policies, then I don't think we can get the 20% share of GDP that we expect it to grow to. I think the next point would be how do we support lowering the cost of factors of production.

Sustainability in Manufacturing Growth

So we spoke about energy. I think that's a big aspect in terms of how do we spur industrialization and manufacturing in Kenya. But there are other aspects. For example, how do we include sustainable practices within our value chain? So in terms of waste management, for example, in terms of how does the government incentivize manufacturers to go green in terms of how they produce? Because the more we industrialize, the more we are going to be impacting the environment. And if we are growing business in an unsustainable way, then we won't have a country or manufacturing to talk about. So I feel the government also needs to support manufacturers, just grow business sustainably. Back to you, Rayma.

Vision for Future Manufacturing Growth

Indeed, Robert, you sit in Ispac's quarter, so tax policy and business policies pretty much in your wheelhouse. If we're going to get to that 20% target in the next six years, which seems like an extraordinarily ambitious target, how do we get there? Zach has mentioned he's put a very strong focus on predictability around tax policy. From your perspective, what do we need to do to essentially make sure that Kenya becomes the manufacturing hub in East Africa? Well above and beyond where it's at the moment. Yeah, thanks. Thanks for that, Rama. I think in addition to what Zack says, I would have to. In my view, there's no silver bullet. There's no one silver bullet that resolves this issue. It's quite an ambitious target, if you ask me. But in addition to the predictable tax policy and environment, I think probably we need to think about, as a country, rationalizing our expenditure as a government, you know, because if we having to borrow to finance some of our expenditure as a government, it then means that even the manufacturing sector, which relies quite a bit on financing from the financial services sector, means that the cost of credit becomes very high because you're competing with government.

Addressing Demand and Manufacturing Needs

And remember, we are competing with 53 other countries in Africa. So I think we need to start from that point so that we can then make credit affordable not only to manufacturers, but even the other value chain players across the value chain, so that then we can have demand. And speaking of demand, I think we also need to think about really stimulating demand, because, you see, you can manufacture, but if there's no demand, then who are you selling your products to? So I think increasing disposable income, some of the proposals that we have seen in terms of, or in the medium term revenue strategy that will increase the disposable income, I think those ones would be very welcome. And I think also we need to think about just how we incentivize investments.

Economic Zones and Competitive Advantages

And I can see somebody asking a question around special economic zones there. I think this is open to any investor. Really, the critical issue is that you meet the requirements under the Special Economic Zones act. But for me, where I'm saying we need to stimulate production, local production is because as a country, we must look at what is our competitive advantage or comparative advantage? What can we best produce at the least cost? And then we can export the whole of Africa. Because at the end of the day, we're talking about a very huge market for products. If you're able to access Africa and there's all this idealistic integration of Africa. So for as long as we are able to produce at a reasonable cost the things that we have a good comparative advantage, then we certainly can go ahead.

Call for Proposals and Collaborative Input

So those are some of the things that I think we need to look at from a policy perspective. And Rama, I think it would be remiss of me not to ask everybody who is listening on this and all Kenyans, really. There are so many proposals that are coming out of the national treasury. There's a notice that was issued, I think, last week to do with legislative proposals around making the tax regime more responsive. I think it's important that we all try and give our proposals so that treasury can then look at this and say, oh, we hadn't thought about this. And we think it actually does make a sense. So it's. I think it would be very useful for us to give our comments so that then they can be considered and hopefully we can come up with a better tax environment.

Reflections and Conclusion

Indeed, yeah. And that point is still 100% salient. Just it's salient now. It's still as important now as it was, you know, the height of the conversations you're having around the finance bill back in June and July. And to your point, Robert, with respect to credit flows into the manufacturing sector, there's been an interesting trend line. If you take a look at the data from the central bank in terms of net credit into manufacturing, in May, the outstanding net debt was around 581.5 billion kenyan shillings. Effectively, it's back to where it was around June, July of last year. So even from the manufacturing sector itself, demand for credit is simply not quite as strong, which in turn mirrors everything else that we've spoken about, right, in terms of consumer demand and the cost of credit and the effect that has on businesses collectively.

Final Thoughts on Manufacturing Goals

Because if you're going to be asked to borrow at 2020, 1%, which is some of the numbers that we're seeing from SME's, you're going to think hard. You're going to think really for a very long time as to whether or not you actually want to take credits at that sort of price. Tobias, you're going to get the last word on this one as we close up the space. Fingers crossed the technical issues and the technical gremlins we've been dealing with all night will not plague us at this point if we're going to get to that 20% of GDP share from manufacturing by 2030. From your perspective as CEO of KM, what do your members say they need to hit that target? Confirm if you can hear me first of all. Yes, yes we can.

Manufacturers' Needs and Expectations

Loud and clear. Yes, yes, definitely. A predictable tax environment would be good to enable our manufacturers to do their job and contribute to the GDP. Currently, it's a bit unpredictable in many ways and also promoting exports. Right now, the agreement that have been signed, AFC, FTA, EU, EPA, are good opportunities that can encourage exports and opportunity to export to other countries. I think what our manufacturers and our members are asking is that great for us? An environment to enable us grow the manufacturing sector through predictable tax and through opportunity to enable us export to other countries.

Optimism and Future Prospects

So the government doing trade agreements with other countries, opening up Kenya to other markets is unacceptable, is an accepted route towards increasing our GDP contribution. But having said that, I think we are all optimistic that if the environment remains conducive in terms of the political environment, because there is also the political climate that inhibiting one way or the other investors, if you have a lot of political tensions, the country, no one would expand or reconsider investing in this country. So we are very optimistic and looking forward to growing our contribution to the GDP. It may not reach 20 by 2030, but it will reach around there if all conditions remain constant.

Economic Opportunities and Youth Employment

Because if you reach 20 GDP of 20 contribution by 2030, we will increase employment to about 1 million. And that will be good to the country and the youth at large. Over to you, Rama. Indeed. We'll see how that particular journey goes over the next five or so years. I'd like to say a very big thank you to all the panelists who've carved time out of their schedules today to have this conversation. All our technical issues notwithstanding, those unfortunately, are things that are well beyond our control. Tobias Orlando is the acting CEO of the Kenyan association of Manufacturers.

Closing Remarks

Zach Munyu is the chair of the alcoholic beverage sub sector at KM and Robert Waroiro is the chair of the public finance committee at Ispac. And of course, a massive thank you to all of you who've been listening in quite patiently over the last 75 minutes or thereabouts on this particular space. We don't take your time for granted. I'm sure this will be chopped up into a podcast little later on, I believe sometime in the next fortnight or so by the Mungo capital team. And of course, there will be more conversations coming our way next week. For the time being, though, thank you very much for your time. Have a lovely evening and we'll see you online.