Export to drive manufacturing growth

The Kenyan economy has grown at an average of six per cent per annum in the past decade to be among the fastest-growing.

The growth impetus has been on the rise because of the government’s investment in infrastructure, increased production bases and ease of doing business.

Kenya, a lower middle-income economy with an average income per capita of Sh124,500, aims at achieving higher middle-income of Sh400,000 by 2030.

The transformation of infrastructure — with the expansion of roads, rural electrification, power incentives to the industrialists, incentives to spur agriculture sector, and the attainment of direct flights to the United States — has played a key role in boosting Kenya’s foreign exchange.

Ratification of the economic partnership market access agreements to the European Union and the extension of the Agoa trade partnership with the US adds up to increased exports opportunities.

BIG FOUR AGENDA

President Uhuru Kenyatta’s pronouncement of the ‘Big Four’ agenda for his second term — food security, manufacturing, affordable housing and universal health coverage — is timely and ensure a precise take-off for Kenya to higher incomes for Kenyans.

Manufacturing is supported by economic history, having transformed the G7 countries, the Brics (Brazil, Russia, India, China and South Africa) and the Asian Tigers.

The key focus for economic growth and development of countries such as the US, China, Japan, Korea and Brazil is heavy investment in productive capacity as well as market access. The momentous growth of their manufacturing sectors is a result of an exports drive to their neighbouring regions and the rest of the world.

With improved infrastructure in Kenya, human capital, information, ease of doing business, electrification and affordable power supply, information, communication and technology, the manufacturing sector is set to take off. Kenya’s industrial revolution age is here.

BILATERAL ENGAGEMENTS

The reason why exports will be key to that revolution is Kenya’s achievement in enhancing market access regionally and globally.

Over the past five years, the country has activated numerous bilateral engagements with key trading partners with the President taking a lead role.

The market access works within the EU agreement; the extension of Agoa framework, opening to Kenya duty-free access to the US market until 2025; and strengthening of partnerships with fellow East African Community (EAC) member states, South Africa, Nigeria, Israel, China, India, Korea, Japan, Sudan and the United Kingdom.

That has acted as a catalyst to the growth of the manufacturing sector.

ENHANCE VISIBILITY

The aggressive drive to enhance Kenya’s visibility globally is with the realisation that majority of our products’ consumers live outside Kenya.

The total exports market opportunity for Kenya is about 99.994 per cent, since the 49 million Kenyans constitute 0.006 per cent share of the world population.

The ongoing market access improvements will turn around Kenya’s manufacturing sector, which has been sluggish in the recent past, at least with regard to its contribution to the exports basket regionally and internationally.

LACK OF COMPETITIVENESS
The past decade has seen the share of manufacturing contribution to the Kenyan wealth decline due to slower expansion compared to agriculture and other sectors.

While agriculture contributes about 30 per cent of gross domestic product (GDP), the manufacturing share last year was 8.4 per cent.

But that doesn’t come as a surprise. It has been pointed out that lack of competitiveness in the sector, marked by, in part, a high tax administrative burden, outmoded technologies, existence of tariffs and non-tariff barriers in accessing market and low labour productivity.

Kenyan manufacturing sector exporters have cite high tax administrative burden (including the withholding value added tax), inadequate long-term affordable credit and a surge in counterfeits, contraband and substandard imports as among the leading deterrents to exports development.

BOTTLENECKS

In addition is the multiplicity and duplication of legal and regulatory requirements in the counties.

The government has approved the National Exports Development and Promotion Strategy, aimed at addressing the identified bottlenecks to Kenya’s exports business.

It seeks to grow exports by 25 per cent by 2022. That will make Kenya achieve surplus trade, thus double-digit growth of the economy.

Exports-led manufacturing and economic growth is necessary for Kenya’s industrial revolution, even as we gear towards the 4th Industrial Revolution.

Mr Biwott is the Chief Executive Officer, Export Promotion Council. [email protected].