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Hi, I'm Joanne Joseph.
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I'm coming to you from the Kenyan capital, Nairobi, with this latest episode of The
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Blue Space.
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Thank you for joining us.
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As you're probably aware,
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Africa ships the bulk of its raw material offshore for processing only to import the
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final product.
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So how do we keep the value right here on the continent by substituting our imports
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for local manufacturing?
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Let's find out on The Blue Space.
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My name is Anne Mugweru.
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I lead Diversified Industries and Real Estate at Stanbeck, Kenya, in the
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corporate and investment banking space.
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I'm Stefan Grabowski, and I'm the CEO of Kimpoli.
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What's on your playlist at the moment?
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Ooh.
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Podcasts.
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I do a lot of podcasts, you'll be surprised I have not so much of music.
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Tea or coffee?
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Coffee.
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Tea.
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What do you love most about your work?
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It's really seeing people grow and develop.
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What's your get up and go song?
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I like this is my fight song.
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Hello, I'm Joanne Joseph and you're in the blue space brought to you by Standard Bank
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Corporate and Investment Banking.
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This episode is being filmed in Nairobi, not far from Kenya's East African import
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and export hubs.
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Every day, Africa sends a wealth of raw materials overseas to be processed and
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converted into finished products,
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and millions of Africans are missing out on the benefits of local manufacturing.
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How can import substitution solve this?
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Well, joining me to unpack this question are Executive for Diversified Industries
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at Stanbic Bank Kenya,
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Anne Mugueru.
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And Ken Polly Manufacturers CEO, Stefan Grabowski.
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Thank you so much for being with us today, Stefan and Anne.
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So looking forward to this chat.
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And Anne, I want to start with you by defining what we're talking about here,
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this very intimidating term, import substitution.
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What is it exactly and why is it so important to Africa's development?
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So import substitution is really the enablement of developing countries to
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manufacture products in their
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country.
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It's really to empower developing countries to be self-sufficient on the
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products that they need, at least a bulk of them,
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and reduce their reliance on imported or processed raw materials.
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So import substitution is as old as the 1980s.
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It's a policy that came up when most African countries got their independence,
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and it was intended to help grow their industrialization.
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Natcha nascent industries in those countries and just give them some economic
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muscle.
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It continues to be relevant today because every country, depending on where they are
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on the economic cycle,
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still need import substitution to take the economy and the industrialization level to
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the next level.
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There's always room for growth.
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In Kenya, for instance, there's a need to maintain a good balance of trade.
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There's a need to ease pressure.
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on our foreign currency, dollar and KESA exchange rate.
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There's a need to spark GDP growth and the way to do it is to mobilize our
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industrialization sector.
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There's also a need to deepen our employment and empower our people.
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That's the growing of a nation from low income to mid income and we want to get to
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a first world with
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time.
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So it's relevant across Africa.
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So much potential here.
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And Stefan, I'm going to bring you in here because the manufacturing sector we know
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is key to driving import substitution.
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That's the space in which you play.
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So give me a sense of how the Ken Polly Group keeps its capacity in country while
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managing to stay competitive.
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We really started out purely as an import substitution company, making final
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products from imported raw materials,
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which breaks the mold a bit.
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But I also kind of think that, you know, just because you have a foothold in the
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market,
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thinking you can be comfortable is enough.
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Africa is a continent of over a billion people.
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And what we've sort of seen in Kenya is consumers are really maturing in their
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tastes.
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They're modernizing pretty rapidly.
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And so if I look at us as a company, although our core capability really
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started around the basics of importing,
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substituting what we imported products, Right now we've had to develop a bunch of
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different capabilities around design,
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engineering, you name it, so that we can serve the local market better.
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So Africa is not standing still either.
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And that's wonderful to hear and I'm sure if this were easy everybody would be doing
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it right?
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But I'm also pretty sure that you've faced a number of challenges.
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in implementing your import substitution strategy.
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Could you give us an idea of what some of those challenges might have been and how
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you overcame them?
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When you think about challenges, I think a lot depends how you frame them.
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If you are committed, committed to a place, committed to an industry, you
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really don't have a choice but to confront them.
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You can't run away from them anymore.
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And so then you really have to reframe those as opportunities.
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And the biggest opportunity that I really see is the capacity we can build in our
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people.
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Yes.
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We have machines.
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Yes, we produce products.
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But the core of that is our capability.
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And as I said before, our engineers learn here locally and our designers and our
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product people.
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Speaking at the beginning about these imports and the effect they've had
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essentially,
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but are imports necessarily all bad in inverted commas?
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I mean, is there a balance to be struck between importing what is useful while
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keeping the value in Africa?
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That's right, Joanne.
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Not all imports are bad.
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I think it's keeping a balance.
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Every country economically has to focus on the things they can do best.
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If we are an agricultural producing country or if we have certain minerals in
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our country,
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we should process them to a certain stage before we sell them raw, before we export
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them raw,
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only to import them all right back in a different...
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finished products either through our electronics or vehicles or you know other
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consumables.
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So we have to do what we can do best and we have to invest in creating some value
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even when we have to export a
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process through material or finished product.
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We do that, we started that in the tea industry, we started that in the coffee
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industry.
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What I would call bad manufacturing is or other importation is when we have to
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import all the way to toothpicks and
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napkins and tissue that we can.
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process the end product in country.
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So I think the word is keep a balance and do your best to improve your
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industrialisation in country.
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Yeah.
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I want to put this question to you now, Stefan.
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Anne's given us her take on what imports are considered bad and whether they're all
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bad across the board.
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What's your view on that?
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Yeah, my view is that imports are necessary.
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So what always needs to be in the back of our minds is...
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Where can we actually build that local capability, that local competitiveness,
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that ultimately allows us to not only replace those imports, but go beyond our
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borders and bring income into the country?
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Let someone else import our products too.
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The goal ultimately must be that import substitution is the starting point,
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which allows us to build capability here, and that does require some government
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policy settings that are appropriate to that.
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But ultimately...
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It shouldn't be something that businesses hide behind either.
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I think if we are overprotected, we never develop that competitiveness that we
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really need to go beyond that.
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So this coordination between public, the government, and the private sector, I
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think is absolutely critical.
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I couldn't agree more.
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Stefan, there's something that I need to ask, because there's a great deal of
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environmental concern around single-use
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plastics.
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You're deeply entrenched in that industry, and people are really worried.
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about the growth of the plastics industry and essentially the impact it will have
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environmentally in the decades
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and in fact even longer than that to come.
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So we're in the durable space, so there's not a single item that we produce which is
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single use.
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And really the way that we see that is the more appealing that we can make our
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products,
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the longer they stay in people's homes and out of the waste cycle.
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But on the other end of that, we already have a significant amount of
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waste volume coming back to us from our existing customers and we can use that in
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our production.
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In fact they return waste plastic to us and we're able to process that and then
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reuse it in our manufacturing
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and in fact we really like doing that.
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Leave the environmental impact to one side there's actually a significant cost
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advantage and you know what's important
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is just still giving consumers at the end of the day a product that they're really
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happy with and the content of that product.
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You know, that's where our engineers come in and really try to figure that out.
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Well, that's really good to know, Stefan.
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Anything you want to add to that, Anne?
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Thanks, Joanne, but very well said.
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I think what I'll just resound is creating awareness that, you know,
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the thinking is that plastic is synonymous to, you know, environmental negative
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impact,
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but there's a lot of recycling, as Stefan has already said, and that's why we
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support partners like...
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Like Stefan, like Ken Polly and others that do durable plastics, recyclable
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plastics,
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and they do get waste plastics from the environment, which as he explained is
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already recycled.
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into products that are not very sensitive to virgin plastic.
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Yeah, I mean, one has to think about the environmental and social impact, right,
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Stefan?
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What would you say, when you look at those words, import substitution and impact,
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what springs to mind?
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The first thing that really comes to me is the employment impact.
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You know, we've spoken a lot about the macros, but I think if you look on the
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ground, what does that mean?
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Thousands and thousands of people.
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you know parents couples people with ambitions people who want to move their
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lives forward as well and
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so the immediate impact is employment and everything that comes with that in terms
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of a healthy society does any such story
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spring to mind for you ann maybe
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i'll not talk about just one story but i've seen a community transform i've seen
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an industry
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built from scratch where it was just bare land they came and bought the land because
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they needed to expand
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and then it made sense for them to source local labor.
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You know, people who stay within the vicinity and can report to work by 8 a.m.,
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can leave if they need to leave by
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5, 30 or 6, or if they need to come for the night shift.
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So you really need to tap into the community around that area.
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And because the place was not developed, it was quite unsafe to drive, I think,
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past 6.
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There were a lot of Shlesi small traders on the streets.
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and crime was infiltrating because of that setup.
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There were a lot of, you know,
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just say a community of people living in abject poverty.
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But since this factory came up and they needed physical manpower,
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they had a preference for women.
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And they did this because that's the most vulnerable segment of the community.
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And a lot of the people I talked about who are, you know, really sometimes even
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begging on the streets were women.
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And you could see they have children on their backs.
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And they got working into this company because they got some, you know, source of
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income.
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The company provides them food.
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I think it's two meals a day.
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They have a program where sometimes, you know, their children can come play
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football in the part of the company.
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land that's not developed and of course there's a lot of mentorship that goes to
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the young mothers and and their
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children encouraging them to to you know educate their children and so on the whole
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place has totally transformed well i can't
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wait to visit you both again and hopefully we will do an episode in the future in
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which you tell me how it's come along by leaps and bounds
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and how import substitution has become the watchword of the day thank you both for
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that and that is where we will leave it
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for today, Executive for Diversified Industries at Stanbic Bank, Kenya and
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Mugueru,
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and CEO of Ken Polly Manufacturers, Stefan Grabowski.
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Thank you so much for joining us.
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Lovely to have your fascinating insights into this issue.
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I'm Joanne Joseph, and this has been another episode of The Blue Space,
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brought to you by Standard Bank Corporate and Investment Banking.
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Take care.
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Bye-bye for now.
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Visit www.standardbank.com forward slash blue space to find out more about The Blue
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Space.
