CMC Motors bows out of Kenya, Uganda & Tanzania citing high operational costs

One of East Africa's largest manufacturing automobile companies, CMC Motors Group, has made the shocking announcement of its plans to exit key markets in Kenya, Tanzania, and Uganda. The company cited a tough business environment as the reason behind its decision, which is expected to leave thousands of staff jobless and disrupt the supply chain in the regional market. To gain insight into the implications of this move and explore how countries can enhance their competitiveness to attract investment, CNBC Africa's Aby Agina sat down for an exclusive interview with Tobias Alando, the CEO of the Kenya Association of Manufacturers. Alando expressed that the unpredictability of the business environment, particularly in terms of tax and policy measures, has led to scenarios where companies like CMC Motors Group are forced to exit due to the loss of market share. This decision, though not surprising given the challenging operating conditions, raises concerns about the economic losses in terms of tax revenue for the government and the impact on employees and their families. The departure of such a significant player also signals a red flag to potential investors, casting doubt on the stability and attractiveness of the market. The manufacturing sector in Kenya has been grappling with issues such as high taxes, a burdened national debt, and an unstable business regulatory environment, which collectively undermine the competitiveness of local industries. Alando highlighted the critical need for the government to streamline regulatory processes, conduct impact assessments on tax policies, and address the high cost of energy to create a conducive environment for businesses to thrive. The Kenya Association of Manufacturers has engaged in dialogues with the government to advocate for these changes, emphasizing the urgency of restoring confidence and retaining production capacity in the country. Despite the challenges posed by CMC Motors Group's exit, Alando remains optimistic about the potential for growth in the manufacturing sector. He stressed the importance of achieving the country's manufacturing GDP contribution target of 20% by 2030, outlining strategies such as expanding market access through trade agreements like AFCFTA, EUEPA, and ESC market. By focusing on policy predictability, market expansion, and addressing energy costs, Kenya aims to strengthen its position in the global market and prevent losing ground to neighboring countries in terms of business competitiveness.