The Competition Authority of Kenya (CAK) has issued the approval to Kenafric Manufacturing Ltd for its acquisition of rival, Economic Industries Ltd, in a move that will see the former tighten its grip on Kenya's stationery market. 

According to the CAK, the transaction meets the legal definition of a merger under the Competition Act, and will see Kenafric assume control of Economic Industries’ business and assets. 

"The parties indicated that the transaction will enable the Kenafric expand its activities in the stationery business in Kenya. The target intends to exit and liquidate the business," CAK statement noted in part.

Kenafric, controlled by Zarrar Holding Limited, is already a household name in Kenya, recognized for its wide-ranging portfolio that includes PVC and EVA products, rubber footwear, and an extensive array of stationery. Adding Economic Industries to its fold bolsters Kenafric’s presence in the stationery domain, which encompasses products such as exercise books, writing pads, and notebooks.

Prior to the merger, Kenafric held a 12.3 percent market share, while Economic Industries controlled 10.3 percent. Post-merger, Kenafric is projected to command a combined market share of 22.6 percent, positioning it as the second-largest player in the sector behind Twiga Stationers and Printers Ltd, which dominates with 49.4 percent. This enhanced position allows Kenafric to intensify its competition with Twiga and Kartasi Industries, the latter holding an 18.2 percent market share.

Despite its strengthened stance, Kenafric remains below the dominance threshold defined by competition laws in the country. CAK’s analysis revealed that the merger would not lead to a substantial lessening of competition, as other players still control a significant 77.4 percent of the market.

Low barriers to entry support competition

The stationery market in Kenya is characterized by relatively low barriers to entry and a steady influx of new competitors. According to CAK, the cost of diversifying into this sector, particularly for ventures with national reach, ranges between KES10 million and KES100 million. Recent years have seen the emergence of new companies such as Twaweza Printing Press and Red Ring Industry Limited.

Additionally, the raw materials for the industry are readily available, with manufacturers enjoying direct access to commodity chemicals, a factor that CAK says helps to promote market vibrancy. Additionally, the relatively modest role of research and advertising in the sector minimizes operating costs, enabling businesses to scale up with ease.

Public Interest Considerations

CAK’s noted that its decision factored in public interest concerns, which are integral to merger analysis under Kenyan competition laws. These include potential impacts on employment, the competitiveness of small and medium-sized enterprises (SMEs), and the broader economic landscape.

"Specifically, there will be no employment loss. All employees will be

retained under their current terms of engagement," CAK explained.

By absorbing Economic Industries, Kenafric gains access to an expanded product portfolio and a broader distribution network, crucial assets for penetrating deeper into Kenya’s education and commercial stationery segments.

Data from 6Wresearch indicates that Kenya’s stationery market recorded a year-on-year growth of 23.33 percent in value shipments in 2021. This robust growth signals an ease of entry and expansion in the market, offering lucrative opportunities for established players and newcomers alike.

Moreover, the acquisition allows Kenafric to leverage its manufacturing expertise and economies of scale. This could potentially disrupt market dynamics, challenging the dominance of larger players while providing consumers with better value.

The stationery sector remains a vital component of Kenya’s economy, driven by rising demand from educational institutions, businesses, and individual consumers. As the second-largest player post-merger, Kenafric will be well-positioned to influence the industry’s direction, fostering innovation and setting new standards for quality and affordability.

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