Manufacturing Kenya’s future as key industrial hub for Africa

Agro-processing is the second largest export for the Export Processing Zones.

Fabricators work on posho mills and other agricultural equipment at a workshop in Olkalau, Nyandarua County on May 29, 2016. PHOTO | FILE | NATION MEDIA GROUP 

IN SUMMARY

  • Our major undoing has been our lack of competitiveness due to the high cost of doing business as a result of decades of under-investment in the enablers.
  • While manufacturing accounted for 16 per cent of GDP globally and 14 per cent of employment by 2015, in Kenya, it had been averaging between nine and 11 per cent of contribution to GDP.

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This story line never gets old. Around 1960, South Korea was, on average, poorer than Kenya. Fast forward to the 21st century and the divergent fortunes of the two are equally awe-inspiring as they are acclamatory. What is now evident is that where we lacked in driving our economy forward, South Korea put industrial economic planning at the fore.

Since creation of their Economic Planning Board in 1961, the then largely agricultural country has been  transformed into a modern industrial nation.

Our major undoing has been our lack of competitiveness due to the high cost of doing business as a result of decades of under-investment in the enablers.

With massive investments in the energy sector, infrastructure (rail, road and airports), expanding Mombasa Port and progress in the ease of doing business, providing access to markets (EU, AGOA, and EAC) the stage has been set for industrialisation.

INDUSTRIES

The upcoming Naivasha industrial zone will locate industries at the source of clean geothermal power that is green (clean) and at nearly 50 per cent less cost, a critical efficiency enhancer for large manufacturers. With the directive by President Uhuru Kenyatta that the cost of power reduces by 50 per cent from 10pm to 6am, this is a key plank for manufacturers to make production more cost effective.

While manufacturing accounted for 16 per cent of GDP globally and 14 per cent of employment by 2015, in Kenya, it had been averaging between nine and 11 per cent of contribution to GDP.

In 2015, we launched a 10-year industrialisation blueprint aptly dubbed, ‘Kenya’s Industrial Transformation Programme (2015-2025). This plan was meant to increase manufacturing sector jobs to 435,000 and add Sh200 billion to Sh300 billion to the GDP.

PRICING REGULATIONS

We have focused on pricing regulations, while looking to attract a 50 to 100 per cent price premium by marketing exports through the ‘Made in Kenya’ brand. 

The contribution of leather industry will e be boosted through development of a leather industrial city in Machakos County and upgrading clusters and cottage industries to supply local and global markets with finished leather.

This could net Sh15 billion to Sh20 billion of GDP and 35,000 to 50,000 new jobs.

The 10-year AGOA extension will increase our share in the US market from Sh30 billion to Sh100 billion by 2025. -Leveraging on processing opportunities could create an additional 110,000 jobs with Sh60 billion for the economy.

Agro-processing is the second largest export for the Export Processing Zones. Fish processing can create 100,000 jobs in the counties surrounding Lake Victoria. 

FOOD PROCESSING

Our strategic location in Mombasa through the set-up of a food processing hub (“Agropolis”) will tap into the Sh380 billion food imports into the region as well processing of food crops.

Thirdly, in a Sh6 trillion regional infrastructure market, we have to build capacity that blends well with our ambition to build 500,000 new low-cost houses.

Fourth,  Kenya is well-positioned to benefit from the Sh128 billion IT market. Fifth, small and medium enterprises will be nurtured to build an entrepreneurial culture. The SME regime could be remodelled along the lines of globally successful ones in the US, India, Germany and Turkey.

PROGRESS

We have made remarkable progress, ranking 80th globally (out of 190 countries) from 136th in 2013 in the World Bank Ease of Doing Business, leading to rising investment (FDI) levels of over $2 billion by December last year from $350 million in 2013. Our target is to be a position 50 in the next two years. With new firms locating in Kenya, we are signalling to the world that the country is ready for business.

The last four years have been about laying the foundation for creating a competitive manufacturing base and improving business environment. The time is now to put manufacturing at the centre of our economic future.

Mr Mohamed is the Cabinet Secretary for Industry, Trade & Cooperatives 

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