The manufacture and importation of Handtools and cutlery in Kenya

Abstract

The domestic manufacture of handtools and cutlery in Kenya dates back to the 1950s. Whereas the manufacture of handtools has grown steadily, investment in cutlery has lagged almost completely. This study investigates the problems of industrialization for handtools and cutlery in Kenya. The issues investigated relate to: capacity utilization; marginal and average costs of production; economies of scale; local production costs and c.i.f.·plus local transport costs (no duties) of competing imports; pr6tection of local manufacturers; and product differentiation. The results of this study show that capacity exists to make many handtools and cutlery in Kenya economically. But on average only 22.9% of the capacity is used. This represents gross underutilization. The underutilization is largely due to competition from imports. The study also shows that producers of handtools and cutlery could achieve significant economies of scale if imports were kept out and thus the market consolidated. The local producers could also be competitive vis-a-vis imports because their average costs would be lower than the c.i.f. plus transport (no duties) of competing imports at that higher level of production. But because large quantities of handtools and cutlery are still imported, local producers are caught up in a low level production trap and hence high costs. At present, though local manufacturers are positively protected, the tariffs are either not high enough to keep out·imports or there are loopholes which allow the tariffs to be avoided.