The recently launched 2019 Manufacturing Priority Agenda (MPA), a recommended action plan by the Kenya Association of Manufacturers (KAM), documents key missing links in Kenya’s industrialisation growth. The report outlines actions required to lift the manufacturing sector GDP contribution from a paltry 8.4 percent to 15 percent. This is a big dream which I believe can be achieved if all parties are fully aligned to the agenda.
The action agenda is directed at various governmental agencies which directly or indirectly influence manufacturing sector performance through policy, legal, regulatory or fiscal support and interventions. The report further lists interventions successfully implemented by the government agencies in 2018.
Yes manufacturing is a journey with a long incubation period and there is no single reason why the end cannot be reached. Opportunities exist in creation of new grassroots industries; expansion of existing capacity; or revival of collapsed and limping industries.
Key sector enablers include market demands (both local and export); cost effective inputs (raw materials and energy); and supportive enabling policies. If any one of these links is missing, industrial growth will be stifled as is the case currently.
Kenya has strong and fairly prosperous consumer demands driven by a growing middle-income group. Unfortunately these demands are mostly met by runaway imports especially from China. Manufacturing success will come only if a significant share of local demands is ring-fenced for local sourcing. It has to be a proactive, affirmative, focused, and a non-apologetic push for imports control. The corollary is exporting more to balance imports in the name of balanced trade.
US President Trump, in his trade disputes with China, has taught us that trade is mutual, and that every endeavour should be made to achieve a reasonable balance between trading partners. Kenya should be decisive and firm about balancing trade with China to give a fair chance to local manufacturing, agriculture and jobs.
In Kenya, both manufacturing and trade are under one cabinet secretary. There is therefore no room for an inter-ministerial passing of the buck. Urgently rebalancing the trade to empower manufacturing is key to delivering on the Big 4 Agenda.
We are also our own enemies as we engage in illegal imports when local capacity to supply exists. Government officials have often corruptly closed their eyes or abetted illegal imports thus crippling our local productive capacity. This is through smuggling, counterfeits, transit fraud, and even officially sanctioned unnecessary imports.
The other misgiving raised by KAM is the cost burden to industries. High business costs are a cross-cutting concern as these hit all economic sectors, and this is why the cost problem should be addressed holistically.
High energy and transport costs; unaligned taxes with unintended economic consequences; multiple charges imposed by various counties; and delayed payments to suppliers all negatively impact manufacturers cash flows while reducing capacity to grow and compete with imports .
While KAM appears to focus more on existing industries, I think the biggest missed manufacturing opportunity is in the much talked about (but hardly prioritised ) agro-industrial value addition. This has the largest economic integration capacity as it also touches on food security, jobs, local and export trade. It is in this area that we find many limping or closed down industries.
The ministries of Industrialisation and Agriculture and the counties have a shared responsibility to step up agro industrialisation. But I have little hope this will happen. While the Agriculture CS appears busy fighting endless sector fires, the Industrialisation counterpart is perceived as busy hosting conferences and publishing numerous reports.
The two CSs need to create time to mutually synchronise the agro-processing agenda. Solutions are known, it is implementation that the nation is waiting for. Sugar industries revival, cotton milling, pyrethrum processing, paper and fiber pulping, value addition of surplus perishable produce (potatoes, fruits, vegetables), fish processing and exports, are all glaring examples of pending actions.
The KAM agenda is quite actionable and has the potential to boost manufacturing and other related economic activities. Without serious policy support it will be a tall order for manufacturing to significantly deliver on the Big 4 Agenda.