Economy

Manufacturing in fifth year GDP contribution dip

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EABL plant in Ruaraka, Nairobi. FILE PHOTO | NMG

Manufacturing’s contribution to Kenya’s gross domestic product (GDP) declined for the fifth year in a row dealing a blow to one of four main priority sectors in President Uhuru Kenyatta’s legacy term.

Data published by the Kenya National Bureau of Statistics (KNBS) Thursday shows the sector's contribution to gross domestic product (GDP) stood at 7.6 percent last year down from 7.9 per in 2019.

It stood at 8.4 percent (2018), 8.7 percent (2017), and 9.3 percent (2016).

Manufacturing’s contribution has averaged 11 percent in the past decade, signalling a general stagnation of the sector.

Last year's drop coincided with a plunge in local factory activity as the coronavirus pandemic disrupted local and global supply chains, raising concerns faltering manufacturing would add to economic woes caused by slumping consumption.

The complete and partial lockdowns to rein in the virus locally and globally hit the manufacturing sector hard.

On one hand, the limited movement of goods, services, and personnel affected the production network.

The downturn in economic activity and the overall slowdown in production caused employment loss.

These supply impacts were further compounded due to reduced disposable income, savings, and increased uncertainties.

"In 2020, the performance of the manufacturing sector was adversely affected by a general slowdown in economic activities, largely due to measures instituted by the government to curb the spread of Covid-19," said KNBS.

"These measures resulted in reduced demand for manufactured products locally and internationally."

Kenyan manufacturers had welcomed President Kenyatta’s second term Big Four agenda, but cautioned it could only be achieved with improvement in policy and business environment.

Mr Kenyatta’s Big Four agenda seeks to expand manufacturing to 15 percent of GDP by 2022.

His Big Four plans aim to boost economic growth through spending, improving food security and rolling out universal healthcare, supporting manufacturing, and building affordable housing.

The high cost of production and inputs however remains a thorn in the side of Kenyan manufacturing firms, forcing them to lay off more people this year than they did last year even as other business conditions continue to improve.