Letters

LETTERS: Manufacturing’s key role in economic growth

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Workers at an export processing zone factory. FILE PHOTO | NMG

Kenya can be the manufacturing workshop of East Africa and yonder. Recent research indicates that wages in industries in China and South-East Asia are rising rapidly and moving manufacturing to Africa is the obvious choice. This is already happening in Ethiopia and Rwanda.

This proves that there exists inertia in the African continent that can be tapped to trigger the next “industrial revolution.” But what are the pre-conditions for fostering industrialisation in Kenya, particularly?

The way production is organised is thus vital, with specialisation taking a key role in the division of labour. This means that growth is a critical requirement for any development to take place.

It pulls market extension and hence trade as the main driver of growth. Trade therefore becomes the major concomitant for growth and development in an economy.

This begs the question: What role does logistics play? In emerging and established global markets and dispersed geographies, customers are now demanding higher quality products and in a shorter time.

The design of such global and regional networks is such that they provide the speed and flexibility required to respond to market opportunities.

The role of logistics in the efficient and effective operations of these production networks has surpassed tasks such as inventory, warehousing, materials management and transportation. The integrating and coordinating mechanisms of logistics in all supply chain activities thus take the centre stage.

A competitive priority like delivery-performance has a focus on delivery-reliability and capability to deliver products on time. For a just-in-time environment therefore, quick deliveries are just as bad as slower deliveries.

The process of industrialisation embodies distinct transportation orientations and appropriate infrastructure requirements.

Logistics clusters are then arguably a main driver for industrialization process which is a pre-requisite to the take-off into sustained growth. Clustering allows firms to achieve lower transportation costs and greater supply chain flexibility.

There is a positive and significant relationship between the demand for industrial space consumption and freight flows, such that as freight flows increase, so too does the demand. Freight flows it must be borne in mind, are a direct derivative of logistics structures, processes and functions.

Kenya now has a golden opportunity. China for instance is moving to the position of a high-income country by 2025. This ins essence means that about 85 million jobs in China’s labour-intensive jobs have to be relocated, as Chinese workers will be too expensive.

READ: Ambitious plan to rev up manufacturing

Those can be Kenyan jobs, provided we start working on our economic transformation, starting by creating viable logistics environments that can facilitate trade.

The industrialisation of Japan started with a system of focused companies and networks as the main catalysts. Their absorption of new technologies required factories that had minimal-process-times with the institutionalization of inclusive employment systems.

This was the birth of just-in-time production systems. Kenya should at least make efforts towards achieving the less complex just-in-sequence production systems. That is the only way to create a meaningful manufacturing environment. For Kenya to become a prosperous nation with industries and jobs for hundreds of thousands of people will not happen overnight.

Job creation and trade (–not aid –) will lift Kenya’s multitude from poverty. To jumpstart local economies and economic transformation, Kenya needs to start by building factories for the bottom of the job pyramid.

This will only work when three essentials are available: manufacturing know-how, enabling county governments and the ability to sell to the global markets. Fitting into global supply chains requires proper logistics and time-based strategies.