Karishma Banga (Senior Research Officer, ODI)
18 December 2018
This blog is part of our ‘Making Firms Work’ series. Read other blogs in the series: on Tanzanian textile manufacturer A to Z, Nepali ICT firm CloudFactory, Kenyan garment firm Hela and Midal in Mozambique.
Funkidz, a one-of-a-kind Kenyan small or medium enterprise (SME), has successfully managed to leverage digital technologies to increase its global competitiveness. Founded by a female entrepreneur, Wanjiru Waweru-Waithaka, Funkidz manufactures furniture for children locally. It has successfully embraced digital technology to innovate, diversify and survive in a challenging market place.
Information and communication technology (ICT) is already regarded as a key development pillar in Kenya, and efforts are currently being focused on leveraging the digital economy to expand manufacturing, as one of the ‘pillars’ of the Kenyan government’s Big Four agenda. However, there is still a significant digital divide in access to digital technologies in Kenya compared with other developing economies, as well as a digital divide in use of such technologies within the country’s manufacturing sector. While digitalisation brings with it certain challenges, it also presents new opportunities for economic growth and employment creation. It is crucial for African countries to identify these opportunities and to capitalise on them in order to not be left behind.
The window of opportunity in Kenya’s furniture manufacturing industry
Given the relatively low levels of digitalisation in Kenya, compared with developing countries in Asia, there may still be a window of opportunity for the nation to move into sectors less affected by technology and global changes. But how long will this window of opportunity remain open? With regard to the furniture sector in Kenya, operating a robot becomes cheaper than Kenyan (formal) labour in 2034. Moreover, operating a robot in the US furniture industry becomes cheaper than Kenyan labour in 2033. This indicates that the window of opportunity in the Kenyan furniture sector is around 15–16 years, following which there may be increased automation within the sector, or possible re-shoring of furniture manufacturing to developed economies. This will affect both growth and employment in the sector.
It is also worth noting that the furniture sector is a relatively low-skilled, labour-intensive tradable sector with relatively high robot density. In other sectors with higher robot density, such as automobiles and electronics, the window of opportunity is likely to be shorter; in other sectors, such as garments, it is likely to be longer, given issues related to economic and technological feasibility.
Funkidz: Harnessing digital technologies to become globally competitive
What makes Funkidz different from other furniture SMEs in Kenya is that it has invested heavily in technology, particularly in Computer Numerical Control, or CNC, machinery – that is, the automation of machine tools by means of computers. In modern CNC systems, there are two technologies at play: first, the mechanical dimensions of the furniture parts are defined using computer-aided design (CAD) software; and second, they are translated into manufacturing instructions using computer-aided manufacturing (CAM).
The CNC technology Funkidz has installed, along with large digital printers, enables the multiplication of furniture designs, with exact specifications and high quality. As a result, the beds, desks, cots, etc. manufactured have similar characteristics to what you would find at Ikea – those of good-quality furniture that is flat and packable. The firm’s new range of furniture is in fact completely packable, easier to transport and multifunctional. The company also offers flexibility in price via different customisation options. For example, a bed can be purchased either unpainted or painted, with choices of different prints depending on the customer’s preferences.
Funkidz has also recently launched an augmented reality app – one of the very few in Kenya – that will allow customers to log in from their phone, browse the firm’s e-catalogue for furniture and use 3D modelling and scanning to virtually place it in their house. It is also possible to change the colour of the furniture and its position for a better user experience.
Leveraging digital technologies has allowed Funkidz to increase its global competitiveness by lowering the cost of furniture manufacturing and enabling exact specification mass production that has generated economies of scale. In a span of about five years, the firm has expanded beyond the domestic market of Kenya and is now exporting to Rwanda and Uganda, and since more recently, to the UK.
Finding innovative solutions to manufacturing challenges
One of the biggest constraints the firm faces is lack of relevant skills in the workforce to operate the machinery fitted with digital technologies such as CNC systems. There is a dearth in Kenya, and in Africa in general, of the technicians needed to operate computer-controlled machines, making it necessary to hire expensive engineers to do the job. There is thus a need to retrain workers in new skills and to upgrade education. A subsidiary of Funkidz, known as Funkidz Tech, has partnered with Safaricom to design its own curriculum that provides training on how to make furniture with different specifications and dimensions, and also provides training in CNC numerical cutters.
While power supply is not the biggest constraint for the firm (the factory receives 3-phase power at rural electrification rates for light industries), rising timber prices, as well as financial and market access, present important challenges to its operations. There is a ban on logging in operation in Kenya at present, which has increased the price of wood drastically; a wooden plank now costs 96 shillings a foot compared with 42 shillings before. To address this problem, the firm has embraced innovative thinking and research and development, and is now making use of ‘urban mining’ – that is, recycling and reusing waste from cities. It has started acquiring pallet wood, one of the easiest and cheapest types of wood waste to recycle, which then undergoes nail removal, finishing and sanding within the firm. Electronic waste such as batteries, electrical circuits, computer hardware, etc. is being used as design components in table tops, showpieces and lamps. Imported second hand clothing, known in Swahili as “Mitumba”, is being used as cushion covers for furniture.
The way forward
To ensure the Kenyan manufacturing sector is able to leverage digital technologies to boost manufacturing and job creation, both the public and the private sector will need to make continuous joint efforts. Targeted policies and effective public–private collaborations are needed to:
- reduce the cost of raw materials
- increase access to and affordability of internet and ICT hardware such as routers, sensors, computers, etc. for manufacturing firms
- retrain the workforce to increase its employability but also to ensure retention of labour once trained
- increase absorptive capacity of the workforce to understand, adopt and adapt digital technologies to meet local challenges and needs and
- promote advancements in firm-level capabilities and innovation.
Photo: Use of CNC machinery to cut wood, FunKidz factory, Kenya, 2018. Karishma Banga, all rights reserved.