Kenya is situated in a strategic location with massive potential. A strong domestic manufacturing sector is critical for a strong economy.
Manufacturing was among the pillars President Uhuru Kenyatta listed in his ‘Big Four Agenda’ that will aid in facilitating economic growth in the country. The other pillars are Food Security, Affordable Housing & Affordable Healthcare.
During the National Leadership Forum, Chief Executive of Kenya Association of Manufacturers(KAM) Phillis Wakiaga said that manufacturing which is the center of job creation is everyone’s business. She also insisted that as we grow the services sector, the manufacturing sector should grow too. Regardless of the flat growth in the Manufacturing sector in year 2017, the sector targets a 15% contribution to the country’s GDP by year 2030. The sub-Saharan region average shows that African economies are growing at a 5.5 percentage and the manufacturing sector is only contributing 10% that growth.
Manufacturing sector could be the engine of the ‘Big Four Agenda’ only if the following problems are solved;
(a) Competitiveness which is due to the existence of higher unit costs in producing locally than it is for an imported product duty paid to land in to the market is really affecting the Buy Local policy; that is purchasing in both Kenya & East Africa. This is a major constraint to the growth of local manufacturing & production industries. To tackle this problem, the CS Ministry of Industry, trade & Cooperatives Hon. Adan Mohammed during the National Leadership Forum 2018 said that “We need market access to attract investors that produce in big quantities so that the unit cost can reduce hence we’ll be able to compete with others.”
(b) Lack of stable & Reliable energy
Unreliable and high power costs in the country are majorly costing the manufacturing sector. KETRACO CEO acknowledged that the firm is looking towards boosting the quality, increasing stability and providing reliable energy. “Energy is a very key enabler of our economy especially in the manufacturing sector, hence KETRACO is planning on investing in 400 KV lines which will help boost energy quality,” said KETRACO CEO.
(c) Unpredictability of policies
Existence of challenges in the flow of money within the economy and payment to the manufacturing sector has led to increase in the cost of production & competitiveness of the sector. At the end of the day, such fluctuating policies will have an impact on how the competitive the sector can be for local people to take up its goods & services.
(d) Culture of Corruption which is really affecting the Buy & Build Kenya strategy since in some cases, imported products are preferred for certain reasons. “Through elimination of corruption and some societal cultures, we can be able to increase the local content,” said KAM Chief Executive Phillis Wakiaga.
(e) Scaling up
For the manufacturing sector to be able to scale up, the sector needs to get big contracts to be able to supply & become more competitive and this can be achieved through government procurement.The other three Big Four critical sectors can help the manufacturing sector to scale up by majorly using locally made products. KAM Chief Executive mentioned that preference & reservations regulations is a critical issue and a strong manufacturing sector has the ability to increase economy growth due to strong linkages, capital accumulation & job productivity in the sector.
“The government should kindly stop calling us Jua Kali, we are SMEs, we are cottage industries and we are going to change this country,” said Funkidz CEO Wanjiru Waweru.
(f) Lack of formalization of the informal sector
“There exists 5.8 million businesses operating in the informal sector,” said Phillis Wakiaga. This has led to constantly burdening of the formal sectors such as the manufacturing sector with additional taxation as the non-formalized businesses are running outside the government’s protection, regulation & taxation.
(g) Wrong mindset
The Chief Executive of KAM, Phillis Wakiaga said that we need to have the mindset of supporting local industries and having pride in them. The social importance of the manufacturing sector that most people ignore is the sector’s ability to reduce social inequality to deal with issues of inclusion and poverty alleviation. Supporting local industries and domestic production has a positive impact on job creation in our country.
(h) Poor Governance policies
“Due to poor governance in Kenya, its hard to do business outside Kenya-that is- doing business in other African countries,” said Rakesh Rao CEO of Crown Paints Kenya.