The past few years have been relatively challenging for Kenyan manufacturers with the sector as a percentage of GDP declining from 11.8 to 8.4 per cent between 2011 and 2017, Kenya National Bureau of Statistics figures show.
Despite this downtrend, the underlying fundamentals are still encouraging and the potential for manufacturing to lead the country to a brighter economic future is stronger than ever.
Kenya has one of the most developed consumer markets in the region. Research by Oxford Business Group indicates that the country’s formal retail penetration rate is between 30 and 40 per cent, the second in Sub-Saharan Africa after South Africa and double Nigeria’s. This has partly been driven by the entry of international retail chains and underlines the huge opportunity to manufacture and market world-class consumer goods in the country.
Kenya is also the preferred gateway to East and Central Africa. Through Mombasa port, it provides the region with direct connectivity to over 80 ports worldwide, making it an ideal regional operations base.
To capitalise on the country’s comparative advantage in manufacturing, the government is employing a strategic mix of reforms and incentives under Vision 2030, the Kenya Industrial Transformation Programme and, most recently, the ‘Big Four Agenda’, which seeks to expand manufacturing as a percentage of GDP to 15 per cent by 2022.
For this rapid expansion to occur in a space of just three years, the pace of reforms needs to pick up. Issues such as fighting illicit trade and counterfeits, improving market access within key trading blocs like EAC and Comesa and removal of punitive taxes on high potential manufacturing sub-sectors should be removed.
The country also needs to urgently mobilise fresh investment in manufacturing, including domestic investment and, crucially, foreign direct investment, key to bridging the country’s domestic savings gap.
But attractive fundamentals are not enough; a deliberate effort to entrench green manufacturing is also needed. Globally, leading manufacturers are adopting a more long-term view on clean energy use amid mounting challenges such as climate change.
Industrial players are the largest consumers of electricity in Kenya, accounting for about 60 per cent of total consumption. To attract the top cadre of manufacturing multinationals, who are increasingly concerned about issues like clean energy, we need clear policies and incentives.
Recent investments in 21st-Century infrastructure such as roads, rail and ICT connectivity will position Kenya’s manufacturing sector competitively. However, the real game changer will be policies and incentives that promote clean energy and allow manufacturers to operate in a way that is good for the planet and the people.
This is the way to do business today and the route that offers Kenya the best chance of mobilising foreign investment to speed up the growth of the manufacturing sector while playing its part in combating climate change.
Ms Mwangi is the corporate affairs director, Developing Middle East and Africa, at Mars Wrigley Confectionery. [email protected]