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Policy measures support manufacturing sector

KAREN KANDIE
KAREN KANDIE

The manufacturing sector has been earmarked as a crucial pillar in Kenya’s development strategy. As a component of the Government's Big 4 Agenda, Kenya targets to expand the manufacturing sector’s contribution to GDP from the current 8.4% to 15%. In the interest of achieving this ambitious target, Government has sought to introduce tailor-made policy measures that spur growth in the manufacturing sector.

Policies such as the Buy-Kenya Build-Kenya initiative are expected to provide much needed support in this key sector thus paving the way for Kenya to meet her Vision 2030 aspirations. Similarly, efforts tailored toward increasing the ease of business start-up and reducing cost of business are expected to have a positive impact on the growth of Kenya’s manufacturing sector.

However, the above efforts notwithstanding, a number of challenges are yet to be tackled, as highlighted by the Kenya Association of Manufacturers (KAM) in the recently concluded Changamka Kenya Shopping Festival, held on 03  – 07 April. According to KAM, areas that require increased focus include international competitiveness, illicit trade, market access and the policy environment supporting the manufacturing sector in Kenya.

 

In terms of international competitiveness, it is noted that Kenya’s manufacturing sector is often undercut by cheap imports from jurisdictions such as China and India. This points at the cost of production being much higher in Kenya as compared to other comparable jurisdictions, primarily due to the high cost of energy in Kenya. While the cost of energy in Kenya has been the subject of debate time and again, efforts targeted at lowering the cost of energy have had minimal impact on the overall cost of energy. However, with the modernisation of Kenya’s energy legislative framework, through the Energy Act 2019 and Petroleum Act 2019, it is expected that the cost of energy will subsequently decline, signifying a reduction in the cost of production and ultimately an increase in Kenya’s international competitiveness.

Similarly, KAM has emphasized the impact that illicit trade has on Kenya’s manufacturing sector, which a 2012 study indicating that Kenyan manufacturers lose an estimated KES 30 Billion annually to counterfeit products. This translates to lost tax revenue amounting to approximately KES 6 Billion. It is imperative that system level loop-holes are sealed so as to ensure that counterfeit products do not trickle into the market. Further, it is noted that access to international markets plays a prominent role in the growth strategy of Kenya’s manufacturing sector. Positive strides are being made in the area to ensure that Kenyan producers can easily access international markets. This includes ensuring that products manufactured in Kenya meet international quality standards and are competitively priced.

All the above measures, however, are moot if the policy environment supporting the sector is not conducive for growth. It is incumbent on the Government of Kenya to ensure that Kenya’s policy and regulatory environment supports the growth and development of the sector.

Karen Kandie – MD, IDB Capital