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Exclusive Interview of KVM Kenya

2007-03-15    Source:www.chinabuses.org

www.chinabuses.org: www.chinabuses.org: David Percival is a bus builder from Kenya. His company(KVM)has over the last two years been building all the blocks it needs to grow a much more comprehensive bus building system. David joined China Bus Visit Tour at March, 2007 to look for cooperation with Chinese bus builders.


Kenya's growth Spurt


Kenya had political problems with many of the politicians getting into the businesses that were running the country. Under the current regime, there is a progressive removal of these hands from the till. Even though the country is headed for another election between Christmas and new year 2007, the business community is simply looking on and ignoring politics as irrelevant to the opportunities in Kenya. This is new.


Investment continues at a pace not seen in the region for three decades, growth sitting just over 7%. In KVM we see this in the creation of new roads on which our product runs, and in the increasing orders for heavy commercial vehicles and buses. Of course for years since liberalization we have been running the factory, as have our competitors, at a very low utilization, sometimes as low as 10%. Now the economy is booming and we are again growing with the demand.


Of course, before 1993, the entire trade operated through a 'built in Kenya' program, and the volumes then were far higher than they are now. Since then, the liberalization of the market has allowed Kenya to become the dumping ground of a lot of Vehicles which are no longer economic for the home market they are coming from. New product only accounts now for 15% of what is imported into Kenya.


The slow imposition of control by our government has been an interesting process, as it goes against the decision by the previous president to allow anything onto the roads in the name of growth. What he allowed was lack of control rather than growth, and it resulted in an economy which had no rules, resulting in formal businesses not investing heavily. The growth was instead by traders who were in for a quick return, and no long-term investment. As our new government got involved, they realized that the imposition of control was necessary to growth, and all the signs are now showing that this strategy is paying off. In one week, there was a showdown between the small bus system which Arap Moi had allowed, and the current administration. All the 14 seat vans (Matatus)were taken off the road for having no speed governors and no seat belts, as required by law. The owners had had ample warning but had taken no action, as they had assumed that the government would simply cave in. This time the government was serious, and for two weeks there was chaos, till these vehicles started coming back onto the road with all the right equipment. This was a demonstration of firstly what it took to get everyone to believe that there was a new broom in the cupboard, and secondly that the person in charge was capable of driving its use. This had not happened before.


It was a warning bell to all the politicians still invested in industries which were out of control, that this would not be tolerated.


Following this there has been a progressive introduction of performance contracts for all workers in the government, although in some sections of it they are lagging behind. The targeting has been the people at the top, who then either perform or are replaced. In many cases, as a result of this, there are a large number of women at the top of many sections, as they are the ones who never did a thing wrong, and who, being family based, believe in the rule of order and predictability.


The environment that has resulted from this has been great for business. Instead of not being sure what needs to be done to get a project off the ground, in most cases, it now is much easier to find out what the rules are and who needs to do what. This is saving a huge amount of time for businesses, and we are seeing growth as a result.


In the vehicle business, the follow on from the 14 seats bus saga, has been that the accident rate immediately went down, as speeds were enforced. They hadn't been for 15 years. We have seen a slow introduction of governor switches, so that the user of the Matatu can switch off the device. The police don't seem to have realized this or perhaps it is just another source of revenue for them.........


To improve the insane gridlocking in Nairobi, and other major cities, there is a plan to remove Matatus from the city centres, and to introduce a more viable bus based mass transit system. As the election is coming up the plan has been temporarily shelved, but we fully expect that in the new year it will be dusted off and be put in place in its entirety. It is strange that having had the example of the control imposed by the governing of Matatus, that the Government have not realized that they have to control city traffic. This could easily be done by the introduction of what they have in UK, where the policing of areas of road keeps them clear, using hashed yellow boxes on the road, which only cost paint and police time. This is apparently too simple.


If the ban on 14 seaters happens then there are some 30,000 of these units which need to be replaced by something like 10,000 51 seater (or thereabouts) buses. Assuming that there will be a phased introduction plan, then we are looking at 5 years to introduce the idea, with 2000 additional buses needed every year. Kenya is currently buying buses at the rate of 1000 or so a year, so this is set to treble as this new law gets in place. Given the growth in buses being purchased, this feels like it is the way it is going in the eyes of the bus fraternity here.


Already many opportunities are being looked at, as the country is still too small to have huge diversity, so it would be better for the economy to have only a few types of bus introduced to fulfill this requirement. Added to this there is a local bus building trade that is producing buses at a price which is difficult to beat in any part of the world. Extraordinarily, most of these buses are made to measure like a suit, with the egos of most of the owners of small private bus firms dictating to body builders what exactly they would like to see built into their buses. This doesn't work very well in their repair shops, but gives them a unique feel which the international market doesn't supply.


So where is this going to lead? The three countries of Kenya Tanzania and Uganda have an economic cooperation group which when it is complete will mean that they have complete political union, as well as financial union. If the negotiations go well, there will be an understanding of the huge benefits which this bigger market will give. Already the vehicle importers are finding ways to trade across the borders which before were largely closed to them. It is very interesting as this means that they are all looking for alliances and wondering who to work with in their neighboring countries.


There is another dynamic on the way in in the form of COMESA, which includes with the above countries another 20 or so east and north African countries. This alliance is purely financial, and allows a much further reach to our local industries. It also allows their local industries to penetrate this market free of duties. This bigger market is part of what is developing the growth we are seeing in Kenya, although the systematic removal of corruption is actually what is making the country work.


KVM has over the last two years been building all the blocks it needs to grow a much more comprehensive bus building system. We have looked for and not yet found a Chinese partner, as we want to have some of what is available out of the huge Chinese bus developments, however we have not yet found a partner. To penetrate the Kenyan market, they will have to take action on their designs which simply won't survive the lack of roads which our bus operators have to put up with. We are still looking.


There are specific things that are held in Kenya as truths, which we have to work through in order to develop a new bus industry here that runs more along the lines of our international counterparts. The first is the acceptance of us (KVM) as a bus builder, and we believe we have achieved this. The second is the development of buses which are lighter and of a standard design and have as standard Air conditioning and many of the upmarket features which are nonexistent in Kenya now. This is what we are engaged in now. The third stage is to standardize the bus standard, to enforce all body builders take responsibility for their buses. This feels like it is about 5 years off. We in the meantime are setting in place the engineering to be able to offer this to the government of Kenya, so that we can analyse all bus designs that come on the market here, and provide the government with the tool to make sure that they all work.


We have developed a KANBAN system of building bus bodies, which has a specific set of trollies in it, which can't be increased. This limits our inventory to a specific number of bodies in production, and the only thing that will increase this is the introduction of some chassis, on which we load part built buses, which are already assigned. This limits how much inventory we pre-build for customers. It also means that we are readily able to respond to orders through predictive build on a jig and thence on a trolley of the full bus body. Someone just walked in to buy 7 of these buses today, so I had better go and look after them.



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