•The decelerated growth last year has partly been attributed to low agricultural production, especially food crops that are the main inputs to agro-processing.
•High inflation, high production costs, competition from imports and depreciation of Kenya shilling against major trading currencies also remained a major challenge.
Image: FILE
Growth in Kenya’s manufacturing sector remained subdued in 2022, official government data shows, as the sector took a hit from high production costs and increased competition from cheap imports.
The sector’s growth slowed down to 2.7 per cent in 2022 compared to 7.3 per cent in 2021, the Economic Survey 2023 by the Kenya National Bureau of Statistics (KNBS) indicates.
This paints a frizzy picture for the sector whose players, and the government has set an ambitious target of having it contribute up to 20 per cent to economy by 2030, and create at least one million jobs annually.
The decelerated growth last year has partly been attributed to low agricultural production, especially food crops that are the main inputs to agro-processing.
In 2022, the manufacturing sector also continued to recover from the effects of Covid-19 pandemic.
Being an electioneering year, reduced economic activities as investors remained in a ‘wait and see’ mood also played out.
High inflation, high production costs, competition from imported goods and depreciation of Kenya shilling against major trading currencies also remained a major challenge for the sector.
Even so, gross value added attributed to food manufacturing rose by 0.6 per cent in 2022 mainly driven by manufacture of beverages (2.6%), manufacture of sugar (13.8%) and bakery products (6.3%).
That of non-food manufacturing activities grew by 5.3 per cent during the review period.
“This was mainly buoyed by notable growths in manufacture of motor vehicles, trailers, and semi-trailers (25.8%), basic metals (14.6%) and structural metal products (11.6%),” the KNBS survey states.
However, processing of tobacco and key agro-processing sub sectors namely; animal and vegetable oils; dairy products; grain milling; and prepared animal feeds recorded a declines in volume of outputs.
Overall volume of output by the sector expanded by a meagre 3.8 per cent in 2022 compared to a growth of 6.5 per cent in 2021.
During the year, Export Processing Zones (EPZ) program however experienced an upward trend in performance with total sales increasing by 16.7 per cent to Sh115.3 billion in 2022.
Exports from the EPZ increased by 17.6 per cent to Sh106.1 billion while imports increased by 31.7 per cent to Sh63.6 billion in the same period.
EPZs and Special Economic Zones remain among target areas by the government to drive industrial growth in the country.
The government has also prioritised leather, textiles, dairy, edible oil and pharmaceutical sectors among others, to drive our country’s industrial growth.
This will be driven through the County Aggregation Industrial Parks across all 47 counties.
IMF managing director Kristalina Georgieva on Wednesday lauded Kenya’s decision to prioritise investment in agriculture and Micro and Small Enterprises (MSESs), that offer quick turnaround results.
President William Ruto who hosted Georgieva at State House, Nairobi, said the government has deliberately invested in agriculture and MSESs, to create opportunities, income, and wealth for as many Kenyans as possible in line with the Bottom-Up Economic Transformation Agenda.
The Kenya Association of Manufacturers (KAM) has since noted that whereas there are endless opportunities for value addition in the agriculture sector, they are largely untapped.
“Low-value addition in Kenya has made it impossible to realise the full potential of the manufacturing sector, hence denying citizens extra jobs, wealth retention and incentivization of the sector to increase production and economic growth,” KAM chairman Rajan Shah notes.
In the agriculture sector, the country exports products with little or no value added, hence missing out on increased income.
“It is paramount that we create linkages between farmers and manufacturers to reduce the share of agricultural products that are exported in primary form to derive more value from exports,” said Shah, during the launch of KAM’s Manufacturing Priority Agenda (MPA) 2023.
The association has also challenged the government to create an enabling environment for businesses and investors.
This is through sound policy, regulatory and institutional frameworks that foster forward and backward linkages, dynamic economies of scale and innovation.
This year’s MPA, themed, Resetting Manufacturing to achieve Agenda 20BY30, shall be guided by four pillars: Global Competitiveness, Export-led Industrialisation, SME Development and Industrialising Agriculture.