The manufacturing sector last year snapped a 10-year-long decline in its share of the gross domestic product (GDP) as its contribution rose for the first time since 2013.
The sector, which recorded a 2.7 percent growth rate in 2022, now contributes 7.8 percent of GDP, up from 7.4 percent in 2021.
The Kenya National Bureau of Statistics (KNBS) said in its 2023 Economic Survey report that growth in the sector was supported largely by activities in non-food processing activities such as motor vehicle assembling.
“The gross value-added for non-food manufacturing activities grew by 5.3 percent during the review period. This was mainly buoyed by notable growths in the manufacture of motor vehicles, trailers and semi-trailers, basic metals and structural metal products. The majority of the activities in the non-food sub-sector registered positive growth in 2022,” said the KNBS in the report.
However, the sector saw headwinds from low agricultural production, especially food crops, which consist of the main inputs to agro-processing.
Despite the lift in the sector’s contribution, manufacturing is still a far cry from years when its share of the national cake stood at double digits.
The sector’s contribution to the GDP, for instance, stood at 10.7 and 10 percent, respectively, in 2013 and 2014, with the period presenting peak years for the industry.
The decline of manufacturing over the last decade was mirrored by the exit of legacy firms from the Kenyan market, including Cadbury, Colgate-Palmolive, Reckitt Benckiser, and Eveready.
The existing firms have found better-bargain locations, including Egypt and South Africa while some companies have made considerations for Uganda and Tanzania.
Manufacturers have traced their peers’ flight to higher costs, especially electricity and other energy costs, which contribute to about one-fifth of the manufacturer’s expenditure.
Last year, for instance, Kenyan firms were confronted with the choice to either absorb costs from higher fuel costs or pass them on to consumers as the price of petroleum commodities reached a record high.
“Despite the high cost of production, manufacturers are making all necessary efforts, to the greatest extent possible, not to pass on the cost to consumers in the form of increased prices for goods,” said Kenya Association of Manufacturers head of policy, research and advocacy Job Wanjohi.
