The manufacturing sector is undergoing a slow and painful death.
We have always bet our future on the sector, and we prioritised and invested a lot of resources in it. However, all these effort has not borne noticeable fruits.
Vision 2030 envisaged that the sector would contribute at least 10 percent per annum to GDP.
The objectives then were to: strengthen the capacity and local content of domestically manufactured goods; increase the generation and utilisation of research and development results; raise the share of products in the regional market from seven to 15 percent and develop niche products for existing and new markets.
In order to achieve these noble objectives, the government identified specific goals and targets to steer industrial growth. These include:
- Development of the iron and steel industry through establishment of an integrated steel mill.
- Development of small and medium enterprise (SME) parks, industrial and technology parks, and industrial manufacturing clusters.
- Upgrading of products from small and medium enterprises.
- Skills development for the technical human resource for the manufacturing Sector.
- Commercialisation of research and development results, attraction of strategic investors in strategic sectors i.e. iron and steel industries, agro-processing, machine tools and machinery, motor vehicle assembly and manufacture of spare parts.
Kenya is largely considered the most industrially developed country in Eastern Africa and was a good candidate to follow the footsteps of Asia’s Newly Industrialized Countries (NICs).
That dream, however, continues to be a mirage and we seem to have squandered the advantages we used to have.
In 1980, industry and manufacturing contributed 21 percent to GDP. For most of the 1990’s and the first decade of 21st century, the sector contributed about 14 percent on average. In this second decade, the sector’s contribution to GDP has decorrelated to 8.4 percent in 2017.
The expansion of manufacturing especially towards the end of the last century was hampered by poor transport systems, dumbing of cheap imports including counterfeits and insufficient and costly energy.
In spite of the problems, successive governments (through Moi’s 1995 Industrial Transformation Strategy, Kibaki’s 2007 Vision 2030 and Kenyatta 2017 Agenda Four) have always prioritised manufacturing.
There are also many policy pronunciations around the development of micro, small and medium enterprises as well as investment in research and development.
The Achilles heel of Kenya’s industrial transformation remains the issue of policy implementation and greed.
The Vision 2030 objectives have not been implemented. Studies show that Kenya has commercial quality and quantity iron ore deposits in Katse area (Mwingi North Constituency in Kitui County), Tharaka-Nithi County, Homa Bay and Busia Counties.
Greedy people continue with importation of cheap products, mostly counterfeits, in spite of the fact that a policy framework exists and there is ample research that clearly identifies the opportunities that exist.
Some studies, for example, show the precise location of the resource are available but such resource as iron ore are not being exploited especially now when construction is booming. There are also other policy proposals in Agenda Four like housing that will require steel.
Instead, greed stands in the way. Mining licenses are given to amorphous companies that have no capacity to exploit the resources instead of allocating licenses to real investors who can drive manufacturing.
Micro, small and medium enterprises (MSMEs) cannot grow unless we build incubators, handhold them, and accelerate their development. Left alone, as we have done, they go nowhere. They will, however, continue to replicate one another and die as they do.
The solution is simply helping them to innovate. The development of Kenya Innovation Agency and National Research Fund in 2012 was to inculcate a culture of leveraging research to innovate. Wealth comes from innovation. These institutions are that were meant to bring together industry, government and academia (the triple helix) seem not to understand their mandate.
Growing micro enterprises to small, medium and large enterprises is a deliberate policy practice everywhere in the world. Our practice, however, is to copy any policy that appears to be good from any anywhere then assume some magic would happen for the policy to be realised.
We don’t need any new policy to grow our MSMEs. We need leadership to mobilise the private sector under the public private partnership (PPP) to build industrial parks or revive the wasted rural shops into mini industrial parks to add value into agricultural produce that is wasted.
Co-opt universities to facilitate innovation through commercialisation of research and upgrading of products realised by MSMEs in these mini industrial parks.
It is through such partnerships that we can link skills development on industrial production. Many youths shun industrial training that has no pathway to employment. Indeed, many have trained but have no jobs.
With industrial parks, some of the skills development can be done on the job. Ethiopian Prime Ministers, Meles Zenawi and Hailemariam Desalegn, visited Kenya and we showed them Konza Technology Park blue print. They moved with speed to develop Hawassa Industrial Park, before building even more other industrial parks while the Konza City concept has faced delays upon delays.
Ethiopia’s GDP soared from $19.71 billion (Sh1.97 trillion) in 2007 to estimated $91 billion (Sh9.1 trillion) in 2019 to narrow the gap between Kenya’s leadership as the largest economy in Eastern Africa. Kenya’s GDP in 2007 was Sh3.2 trillion and is estimated to be reach Sh9.8.3 trillion in 2019.
If there is a time our ambassadors understood trade, it is now. There is an opportunity in the US/China trade relationship while Kenya enjoys the American Growth Opportunity Act (AGOA). There is need to create collaborations to manufacture in Kenya for exports in a turbulent world.
China is especially losing in light electronic production to India. Kenya must position itself better. Instead of importing used electronic gadgets, we must begin to manufacture locally.
Our labour is too expensive and some of the laws are restrictive. We must make some adjustment to attract more employment opportunities.
Secondly, our labour productivity has been plummeting. Between 2012 and 2017, it has largely been in the negative. It is either our labour is too good and very productive or cheap and willing to improve its productivity.
Therefore, in order for us to be productive, we must be willing to learn and invest in technologies that will make us attractive to emerging jobs. The unions must understand these dynamics otherwise we lose out.
Enterprise profitability and efficiency is closely linked to productive use of labour in order to be competitive. We therefore must step back to develop skills and ability to compete globally if we have to succeed as a manufacturing destination.
It is for this reason that the Vision 2030 envisaged productivity centers across the country through reskilling of the youth to meet the fourth industrial revolution requirements.
This means that youth polytechnic syllabi must change to include entrepreneurial skills and continuously inculcate the culture of vocational lifelong learning.
Although it seems that the manufacturing sector has had everything to shore up its performance, there are weaknesses in policy implementation with so many disparate institutions.
For the country to save the manufacturing sector from collapse, there is need for a coherent policy implementation process, investment in research and development to enhance innovation and a deliberate support of MSMEs to grow.
The fight against corruption, especially importation of counterfeit, must be stepped up to attract investors into locally available resources that can boost manufacturing.
The writer is a professor of entrepreneurship at University of Nairobi’s School of Business. @bantigito