Marketing edge best gauge for growth

The competitiveness of a country means its ability to sustainably produce goods and services for which there is a market, at a price and quality, which buyers are willing to pay for.

It may be local or regional and is increasingly global as the internet and other infrastructure allow for almost seamless exchange of goods and services across the continents.

Kenya has come a long way in creating a conducive business environment to nurture local industries and attract foreign direct investment (FDI).

Perhaps an obvious signifier of this is our recent ranking in the Global Ease of Doing Business report at position 61, which is 12 places up from 2017 and 31 from 2016.

However, ease of doing business is a ‘necessary but not sufficient’ condition to improve growth and prosperity.

This reminds me of an East African country where one can register a business in hours.

“I can set up in hours, but then, what do I sell? How do I make money?” This is a competitiveness question.

COMPETITIVENESS

Global competitiveness is therefore crucial to industrialisation and sustained productivity to ensure a country’s capacity to provide productive jobs, decent wages and, consequently, a dependable social support system.

Competitiveness may be due to natural factors — such as climatic and geographic conditions or physical location.

In some cases, it is built on the sheer will and determination of a nation.

Japan and Singapore are examples of such powerhouses that emerged despite — and some may argue, because of — not having physical or geographic advantage.

The most potent form of global competitiveness is where natural factors are combined with will and determination to create unbeatable powerhouses.

A classic example is Kenya’s floriculture industry that has combined location, weather and altitude with investment — local and international — to create a world-beating industry especially in cut roses.

ENABLER

In a liberalised economy, cutting a niche is found and nurtured by the free market.

Economic actors find and discover what the markets want and then compete to provide goods and services at a competitive quality and price.

However, the State is, today, a major player in affecting competitiveness.

In a positive sense, it can build infrastructure that eases movement of goods and people, educates the populace, provides healthcare and does other things that affect the macroeconomic factors.

Some states give exporters tax breaks, rebates and other incentives. But that can provide perverse incentives and shield the country’s industrial sector from global markets, ironically reducing their global edge.

Conversely, state action can negatively affect competitiveness. For instance, taxation and lack of policy coherence can disincentivise investment in certain sectors or a country.

PRODUCTIVITY

A major challenge is that, while ‘all politics is local’ and reacts to local pressures, competitiveness is global and has no allegiances to nation or region — the money and the customers will move to where they can get the best value.

Consequently, the government constantly needs to assess the impact on global competitiveness as we formulate and implement policies affecting manufacturing.

Labour policy, perhaps, best demonstrates the tensions between global competitiveness needs and local political issues.

While it is considered politically prudent to increase wages and limit the issuance of work permits to foreigners, its impact on productivity and global competitiveness can be dire in many industries.

Ideally, wages ought to be pegged to productivity, and firms acquire the best skills they can to enhance productivity, which would include some element of foreign staff.

PRICES

Similarly, in agriculture, Kenya has spent billions of shillings in taxpayers’ funds in an attempt to revive moribund industries in sugar, meat and maize production.

In all three, however, we have some of the highest prices in the world of the finished product, and are no longer globally competitive.

Hence, it is possible for Brazilian eggs to be shipped across the seas and land cheaper in Nairobi than those from Thika, a few kilometres away.

Our core question ought to be: How come Brazil has an edge over us in agriculture?

As we look at the manufacturing pillar of the ‘Big Four’ Agenda and our ambitions to grow manufacturing beyond 15 per cent of GDP, our key question must be as simple as it is foundational: What can we make in Kenya today at a quality and price that can compete globally?

Mr Kunyiha is the vice-chairman of Kenya Association of Manufacturers. [email protected]