Reforms needed to help keep local industries in business

Institutional reforms are needed to keep companies afloat and revive collapsed ones. file photo | nmg
Institutional reforms are needed to keep companies afloat and revive collapsed ones. file photo | nmg 

The manufacturing industry is set to get a major boost following the Jubilee government’s disclosure that the sector is among four that it will focus on.

In identifying manufacturing as one of the key development areas, the government will focus on the blue economy, agro-processing, leather, textile, fishing, protection of intellectual property and fighting counterfeit trade.

Vision 2030 identifies manufacturing as one of the sectors with potential to create wealth and employment.

The main objectives of Vision 2030 are to grow domestic production, increase research and development, and create niche products for new markets.

It is clear that enhancing local production will lead to creation of jobs at the national and county levels. Boosting local production will lead to less youth unemployment hence reduced social ills like drug abuse, crime and prostitution.

A number of factories, such as Eldoret based Rivatex and Webuye’s Pan Paper Mills, have either relocated from Kenya or collapsed all together in the last 20 years due to a number of factors.

Some faced harsh competition from larger, well established multinationals leading to collapse. Rivatex, for example, faced unfair competition from mitumba imports.

Kenyan factories need not collapse if diligent and well meaning feasibility studies and audits are done. Other than corruption, the companies that either relocate or collapse face governance challenges as well as lack of funding and capacity.

In my view, institutional reforms are needed to keep companies afloat and revive collapsed ones. Privatisation can resolve some of the above hurdles. For example, sale of a substantial stake to investors who have the expertise to run firms and capital to keep them afloat would resolve issues of under-funding and lack of expertise.

Public private partnerships also come in handy where the government may retain ownership of an entity and partner with the private sector for funding and expertise.
There are many options to revive factories. Legislative reforms are required to house the Jubilee initiative.

Kenya has laws that support manufacturing as well as specific industries. The question is, are these laws adequate? If not, then reforms are needed. The government should come up with incentives such as tax exemption to boost the sector.

Manufacturing is a capital intensive sector hence the need for cheaper, easily accessible credit to spur growth. I appreciate the fact that the presidential directive has addressed intellectual property rights and anti-counterfeit initiatives.

Upholding intellectual property rights and investing in research and development are incentives to manufacturers.

Counterfeiting is a challenge to the sector and has led to closing of industries in some cases.

The government should implement existing laws, create strong institutional capacity and empower the Anti-Counterfeit Agency through more funding and capacity building.
It is ironical that despite Kenya being one of the few countries in the world with a stand-alone agency to fight counterfeiting, the vice is still rampant.

This is because the agency needs more governmental support to effectively carry out its mandate.