Is Keiretsu Catching Up with Kenyan Business?

Published on 14th August 2007

When sworn rivals Safaricom and Celtel seemed to warm up to each other, they placed an ad in the press to warn their customers against con-men who were out to take advantage of them in the name of promotion. Has the Kenyan market adopted the Sino-giant campaign of Japan as a way of life?

The announcement that Uchumi is set to reopen some of its branches and settle half of its debts to suppliers is a miraculous pull-around. Uchumi is exhibiting the nine lives of a cat. Kudos to the receiver manager, Jonathan Ciano, and his team! Share-holders usually hold their breath upon hearing news that their company is under receivership.  

Uchumi supermarket’s rights issue left many in awe. Its deep relationship with bankers, suppliers, creditors, government and the public at large left a lot of questions unanswered. The P.T.A Bank and Kenya Commercial Bank stuck with Uchumi throughout its financial doldrums, with P.T.A restructuring the loan owed to it by Uchumi.

Uchumi’s management has put in place cost cutting measures that are expected to save about Kshs. 170 million in the course of the current year. Uchumi’s excellent strategy saw it offer creditors and suppliers its shares in the stock market to clear or minimize the debt it owes them. 

Several suppliers took up the shares with Brookside buying a substantial amount. We have seen more of this kind of setting in the media especially when the famine relief idea of “Jaza Lorry” was muted. The media houses in conjunction with several other organizations formed a team that implemented this task. The setting was also demonstrated when media houses staged a debate that saw the proponents and opponents of  Kenya's draft constitution take place prior to the referendum. 

So much time can be lost in fighting each other. The bitter fight between East Africa Breweries and South Africa Breweries limited deserves a mention here.It went as far as competitors ripping off each others' billboards. The heat was however turned off when SABL relocated to Tanzania, leaving EABL to distribute its products in Kenya and vice-versa.

This is what Keirestsu, a Japanese term that defines companies which are financially interlocked and work together to strengthen each other, is all about.In Kenya, it is only skin deep.

There are two types of Keirestu, vertical and horizontal. Vertical Keirestu typically consists of large manufacturing company such as Toyota, Nissan, Hitachi or Toshiba and many of its suppliers, producers, distributors and retailers working together in a cooperative group. This provides the basis for a stable relationship with mutual benefit to all companies in the group. The supplier continually improves with management methods and technology provided by the parent company while the parent company gets better quality, reduced cost and deliveries in time.

A horizontal Keirestu involves, for instance, a main bank, insurance company, a trust banking company, a trading company and a few dozen large manufacturing companies. The members remain independent but share information and financial risk. When Mitsubishi Keirestu launches a new large –scale enterprise such as space communication, for example, the group’s satellite venture involves all the twenty-eight group members to invest capital. While each individual’s company risk is minimal, they have tremendous resource to make decisive action as a group.

Similar collective strategies exist in Germany. For example, the Deustche Bank group intervened on behalf of the Germany economy to buy Mercedes–Benz's shares when Arab investors threatened to take it over. This arrangement frees managers from emphasis on quarterly profits and short time performance in the stock market. Bank ownership helps firms to plan and raise money for corporate strategies.

In Japan, government and industry cooperate to achieve desired societal objectives.The Ministry of International Trade and Industry (M.I.T.I) coordinates all the Keirestu groups through industrial policy to benefit all the Japanese. When the fifth generation computer was developed, M.I.T.I included, within its electronics firms, six of the groups so that the result of their cooperative research would be broadly disseminated. In such as arrangement, individual consumers and workers get both stability in employment and improved products.

M.I.T.I officials also maintain close relationship with major industrial trade and business association.The relationship offers a two way communication. Complaints, suggestions, proposals and other grassroot action can be easily communicated to M.I.T.I and M.I.T.I can communicate its societal objectives to the companies throughout the Japanese industry.

Kenya seems to be warming to this startegy. Why should Safaricom and Celtel be at each others neck when the untapped market for the cell phone is over 7 million subscribers? The same with the banks - nearly over 60 percent of the working population does not have access to banking services. The cooperation of these organizations can offer more than enough to chew than what they have now at their tables. 

Export Promotion Council (EPC) seems to be a start but not panacea.The strategic partnership with local producers, manufacturers, donors, commercial attaches and embassies, abroad are a stride in the right direction. E.P.C with other stakeholders like the Ministry of Trade and Industry, Kenya Association of Manufacturers, Kenya Bureau of Standards, Pyrethrum Board of Kenya, and Ministry of Agriculture among others offers the type of Keirestu the business fraternity is longing for though not to its full extent.

The exporters’ fraternity is crying foul over the exorbitant fees charged by foreign warehouses. Affordable warehouse ought to be built to reign in costs that are hitting the ceiling. Keirestu needs to be strengthened to keep abreast the business community with the services they need.The market, competitors and global trends should be analysed with a view of improving the Kenyan economy. In this way, we will see much of Keiretsu in the coming times.

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