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Why manufacturing sector is punching below its weight

Why manufacturing sector is punching below its weight
A manufacturing industry. Image used for representation purposes only. PHOTO/Pexels

Lack of access to markets, slow technology adoption and high electricity prices remain major challenges facing local manufacturing industry, Kenya Association of Manufacturers (KAM) Chief executive Tobias Alando says.

This is happening amid existing external market opportunities brought about by bilateral trade agreements between Kenya and trading partners.

Speaking during an online forum, Alando stated that most businesses in the manufacturing industry are not fully aware of the available market opportunities, a factor which continues to undermine the growth of the sector.

He, however, said they are on course to address the situation for the country to significantly benefit from the sector.

“Market access is a priority that we need to assure anyone producing here that they can access both local regional and international markets. Without a market, no one can really produce. If this is done and implemented, we will definitely see a trajectory,” Alando added.

The government recently signed trade agreements aimed at boosting the country’s exports to various markets.

As a result, businesses if well informed and facilitated can be able to access African markets through the Africa Continental Free Trade Area (AfCFTA) which gives them an opportunity to access about $3 trillion (Sh387 trillion) market.

In addition, the free trade are enables access to over 1.5 billion people thereby encouraging large scale production of goods and growing the sector.

Alando also disclosed that through the European Union (EU), local manufacturers can boost their earnings as a result of accessing about 300 million people. According to the union, the duty-free market access was to take effect on February 2, this year.

Additionally, Kenya and United Arab Emirates recently signed a Comprehensive Economic Partnership Agreement (CEPA) further strengthening the access of the gulf markets, which according to the Alando displays a huge potential for the sector.

“The other is on the Agoa which we anticipate renewal. Already these key markets including the local markets and the regional markets through the EAC we can be able to tap these markets and see a turnaround in the growth of the manufacturing sector and our contribution to the GDP,” he added.

Alando expressed hope that the agreements that have just been signed would be actualised, and every young citizen in the country.

“The youth also need not fear venturing into manufacturing even if as an SME because we do have an opportunity to access all these markets and grow the sector.”

At the same time, technology despite playing a huge role in market access has not been fully tapped hence leading to limited market access. He stated that through the use of technology businesses can tap a wider market and build a rapport with the customers.

“Without the adoption of technology, it is going to become quite difficult for them to maintain their presence in the market. In essence digitisation is going to be a big thing especially for manufacturers. We need to remove the lengthy process through this call and ensure maximum profitability,” Alando stated.

According to a report by the World Bank, this factor also plays a central role towards the growth of the economy.

“The returns from capital investment alone decline steadily. Growth in middle-income countries is boosted when economies take on new structures, enabled by a 2i strategy focusing on both investment and infusion. Institutions need to create an environment conducive to integrating global technologies into the domestic economy,” the report reads in part.

The cost of electricity is making manufacturing activities in the country a nightmare for the entrepreneurs as they rely majorly on it for the production process.

This has been fuelled by factors such as power purchasing agreements between private suppliers of electricity and Kenya Power and Lighting Company (KPLC).

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