Bold decisions needed to grow manufacturing
By Anthony.Mwangi, November 2, 2022On 19th October 2022, President William Ruto presided over a high-level manufacturing summit convened by the Kenya Association of Manufacturers (KAM).
During the event, all stakeholders present agreed that increasing value addition and enhancing production by driving manufacturing growth is a sure way of reviving Kenya’s economy, creating jobs and eradicating poverty. Yet, the industry’s contribution to the Gross Domestic Product (GDP) has been declining, from 9.3pc in 2016 to 7.2pc in 2021 (KNBS, 2022), despite its potential to transform the economy. Agriculture contributes 22pc to the country’s GDP and creates 40pc of jobs. However, we still import food worth Sh200 billion annually. This demonstrates the opportunities that lie in agriculture alone.
In the non-food agro-based value chains, leather and leather products are among the most traded commodities in the world, with their current value estimated at $129.3 billion (Kenya Leather Development Council 2020). Africa owns 20pc of the global livestock population but accounts for only 4pc of the leather produced.Kenya has the third largest herd of livestock in Africa, behind Ethiopia and Botswana. Currently, most of the leather is exported in raw hides and skins, and a huge percentage is in the form of wet blue and crust, with an export value of about Sh14 billion.
By restructuring the leather industry, reducing production costs, minimising waste and improving animal husbandry, the sector can generate Sh120 billion by 2030 from both the domestic and export market.
How can we enhance value addition and production to transform Kenya into Africa’s manufacturing hub? KAM and the Ministry of Investments, Trade, and Industry has developed “Kenya Manufacturing 20 by30”. The Plan, guided by four pillars, seeks to increase the manufacturing sector’s contribution to the GDP from the current 7.2pc to 20pc percent by 2030.
First is driving global competitiveness. Competitiveness is our ability to sustainably produce goods and services for which there is a market – at a price and quality that the market is willing to pay for. Improving our competitiveness requires policies and sustainable frameworks that boost production and attract investments. This is because manufacturing is capital-intensive and requires long-term investments, calling for a stable and predictable taxation and regulatory regime.
Second is export-led growth. Manufacturing sector growth will not be achieved by solely relying on domestic markets. We must shift our focus and understand that with increased globalisation, it is critical that our products and services are competitive in the global marketplace. This calls on Kenya to leverage products where we have a comparative advantage to grow our exports. This will enable us to improve our balance of payments and foreign currency reserves and enhance trade regionally and in the continent.
Third is through industrialising agriculture. When starting with agriculture, we ought to look at the markets we will serve, at what cost, and of which quality. Therefore, the linkage between agriculture and industry is crucial. We need to find solutions to enhance Kenya’s food security through increased productivity, higher value addition and increasing exports. On the other hand, identifying crops with potential for higher value addition and huge export market opportunities will accelerate growth and hedge us against adverse trade shocks.
Finally, SME Development. SMEs have demonstrated their ingenuity and capacity to meet the country’s needs over the years. We laud Government’s directive to roll out the Hustlers Fund to provide affordable financing to SMEs. It is also critical that the government addresses regulatory and tax concerns affecting the competitiveness of SMEs.
Additionally, SMEs need incentives to enhance their capacity to venture into local, regional, and international markets. Realising Vision 20 by 30 calls for bold, pragmatic decisions to develop and implement transformative industrial policies that will favour the manufacturing sector and attract investors.
—The writer is the Chief Executive Officer of Kenya Association of Manufacturers. ceo@kam.co.ke.