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Economy

Kenya unveils grand industrialisation roadmap

Chinese Ambassador to Kenya, Liu Xianfa (left) with Industrialisation and Enterprise Development secretary Adan Mohamed during the launch at a Nairobi hotel on September 16, 2015. PHOTO | SALATON NJAU
Chinese Ambassador to Kenya, Liu Xianfa (left) with Industrialisation and Enterprise Development secretary Adan Mohamed during the launch at a Nairobi hotel on September 16, 2015. PHOTO | SALATON NJAU  

Kenya on Wednesday unveiled a grand industrialisation roadmap that seeks to make Mombasa a food processing hub targeting the export markets even as it locks in the billions of dollars East African nations spend on imports.

Industrialisation minister Adan Mohamed said the plan had identified critical sectors that would drive the sector’s growth through mechanisation.

The minister said Kenya would use the plan to earn a significant fraction of the Sh400.4 billion ($3.8 billion) that East Africa spends on processed food imports.

“We want to take advantage of the Mombasa port to serve the regional and global markets with processed food,” Mr Mohamed said during the launch of the blueprint in Nairobi.

Execution of the plan is set to start with the creation of a local processing hub at Mombasa’s Dongo Kundu special economic zone to be followed by another hub at the one million-acre Galana-Kulalu irrigation scheme in Tana River and Kilifi counties.

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Mr Mohamed said construction of the necessary infrastructure for the hubs would start next June, paving the way for private investors to build plants on the 3,000-acre Dongo Kundu free trade area.

Investors will have access to a Sh10.5 billion ($100 million) State-backed fund aimed at accelerating industrial investment, especially among financially challenged firms.

“The fund will be scaled upwards, depending on demand and readiness of commercial banks to be part of it,” said Mr Mohamed, adding that interest rates will be “favourable” to the borrowers.

Launch of the blueprint comes one week after President Uhuru Kenyatta signed into law the Special Economic Zones Bill, clearing the way for the formation of industrial hubs.

The focus on food value addition is informed by the fact that agriculture accounts for slightly more than a quarter of Kenya’s gross domestic product and over half its exports.  

Kenya has for long relied on rain-fed agriculture to produce its food but has more recently put in place a grand plan aimed at irrigating thousands of acres in the Galana-Kulalu basin to produce food for local consumption and exports.

East Africa’s largest economy mainly exports tea, horticultural produce, coffee and pyrethrum.

Manufacturing’s contribution to the GDP has averaged at 11 per cent in the past 10 years showing a general stagnation of the sector.

The food processing hubs will occupy slightly over a fifth of the land set aside for special economic zones with the rest hosting other industries.

Under the arrangement, the special zones will process both locally sourced and imported raw materials for re-export – a move that could improve Kenya’s current account and create jobs that would help reduce the high unemployment rates currently standing at 40 per cent.

Government records show that only 16 per cent of Kenya’s agricultural exports are processed, lagging behind Tanzania (27 per cent) and Uganda at 34 per cent.

Mr Mohamed expects Kenya to earn an additional Sh63.2 billion ($600 million) per year from processed exports and 110,000 new jobs.

“Dongo Kundu’s location near the port city is perfect for an export processing zone,” said Bitange Ndemo, an associate professor at the University of Nairobi’s Business School.

Kenya’s industrialisation plan covers 10 years and focuses on strengthening key sectors such as agro-processing, textiles, leather, construction, ICT, hydrocarbons and mining.

To achieve this, the government is seeking to reduce the cost of doing business, create a large pool of skilled workforce and empower small and medium enterprises.

Mr Mohamed said the expected industrial growth should add 435,000 more jobs to the economy in the next 5 years, and inject up to Sh300 billion into the economy.

Chinese officials on Wednesday said they were ready to offer Kenya the technical know-how in the development of industrial parks.

Chinese rapid growth as a manufacturing powerhouse has been partly attributed to the creation of special economic zones.

Kenya looks to develop other industrial parks around its geothermal fields in Naivasha and Nakuru that will see firms incur lower power costs due reduced transmission distance.

Preparations for the rollout of the special economic zones are in top gear and are expected to attract foreign direct investment and encourage export of value-added commodities.

The government is betting on the lower operational costs and expected industrial agglomeration to attract investments, largely Greenfield, where firms break ground to set up new plants.

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