Investment in manufacturing will spur growth: experts

Workers at Associated Vehicle Assembly [AVA] assembling Foton trucks from China in this picture taken on January 24, 2018. Heavy investments in manufacturing and agriculture sectors hold the key to reducing poverty levels at a faster pace, experts have said. PHOTO | LABAN WALLOGA | NATION MEDIA GROUP

What you need to know:

  • The government has struggled to cut down poverty.
  • The focus for expenditure in the last 10 years has been on infrastructure development through loans and grants from donors.
  • An economist says the government should now help spur growth of small-scale businesses in agriculture and manufacturing to grow income levels in poor counties.
  • Others say the State should invest in agribusiness, manufacturing, ICT, education and healthcare.

Heavy investments in manufacturing and agriculture sectors hold the key to reducing poverty levels at a faster pace, experts have said.

Despite spending trillions of shillings over the last decade, the government has struggled to cut down poverty with 36 in every 100 Kenyans still struggling to afford basic needs.

POVERTY

Kenya National Bureau of Statistics (KNBS) data released on Thursday shows that persons living below the poverty line stood at 36.1 per cent in the year ended June 2016, compared to 46.6 per cent a decade earlier.

That means the government has been lifting one in every 100 persons out of poverty every year on average, the Kenya Integrated Household Budget Survey (KIHBS) suggests.

About 16.4 million of the estimated 45.4 million population in 2016 survived on less than Sh3,252 a month, or Sh108.40 a day, in rural and peri-urban areas and Sh5,995 monthly, or Sh199.83 a day, in major urban centres.

That’s a drop from 16.6 million 2006 when the last survey was done. Economists, however, say there may not have been a drop in poverty given the growth in population in 10 years through to 2016.

“If you look at the last time we did KIHBS and now, it looks like we are not shrinking poverty quickly enough because the population has grown by almost eight million people. If you take that into account, actually more people are into poverty now than before,” Institute of Economic Affairs chief executive Kwame Owino said. “That is something that should concern us. What we need to ask ourselves is why because the amount of money the government has been spending has been high.”

EXPENDITURE

The focus for government expenditure in the last 10 years has been on infrastructure development where hundreds of billions of shillings has been sunk every year, largely through loans and grants from donors.

Ms Anzetse Were, a development economist, said the government should now help spur growth of small-scale businesses in agriculture and manufacturing to grow income levels in poor counties.

“If you unlock the Northeastern region, for instance, but there’s no productive capacity, then how would that road be paid for? The government needs to target technical training and stimulate financing to micro and small enterprises to make them more profitable,” Ms Were said. 

Stanbic Bank economist for East Africa Jibran Qureishi emphasised the need for government to slowdown expenditure on mega infrastructure projects in favour of supporting industrial and agro-processing.

“Broadly, we need to have a proper strategy for micro and smaller enterprises to help them grow because you’ll find that a lot of businesses in most of the poorest counties are informal small and micro enterprises. You need also to ensure there is enough security in all parts of the country to attract investments in some of those remote areas.”

Turkana is classified as the poorest county in the KNBS survey on 24,000 households with more than 79 in every 100 of its population living in poverty, followed by Mandera (78), Samburu (76), Busia (69) and Garissa (66).

Nairobi has the lowest proportion of poor people with 17 persons in every 100 living in poverty, followed by Nyeri and Meru with 19 each, Kirinyaga (22) and Narok (23).

INVESTMENTS

Manufacturing and agriculture as main engine of growing the economy, Mr Jibran said, will create more jobs and improve income levels of Kenyans.

“It is imperative that the government create an enabling environment for those two sectors to ensure this very youthful population can get absorbed. Apart from that, investment in education and healthcare will ensure there’s sustained long-term promise of productivity in the economy,” he said.

Federation of Kenya Employers executive director, Jacqueline Mugo, earlier this month backed investment in labour-intensive sectors such as agribusiness, manufacturing and ICT to gradually reverse growing youth unemployment in coming years.

“Infrastructural development, though good, does not at the end of the day lead to growth in jobs. If you look at the huge SGR (Standard Gauge Railway phase one) project that Kenya has implemented …, it has not actually absorbed many Kenyans into employment,” Ms Mugo said on March 5.

President Uhuru Kenyatta has signaled a shift in economic growth policy by slowing down heavy spend on infrastructure development in favour of four new priority sectors –the ‘Big Four’ policy agenda.   These are manufacturing, food security, low-cost housing and universal healthcare.