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September 24, 2018

Kenya is ready for industrial take-off

Kenya is ripe for industrial take-off. The country has a well educated and youthful population, positive economic growth trend and a stable political environment, all of which provide the right conditions for industrialisation. In practice, however, the pace of industrialisation remains low, despite the government’s funding efforts such as Youth Enterprise Fund, Uwezo Fund and Women Enterprise Fund. This is in addition to the institutions set up shortly after independence such as Industrial and Commercial Development Corporation, Industrial Development Bank and Kenya Industrial Estates. The result is that the rate of job creation is too low to meet the needs of the growing population, reduce poverty and dependency levels.

 The growth of Kenya’s industrial sector has stagnated at 15-16 per cent, with manufacturing stuck at 10 per cent per year for the last two decades. The sector is not able to fulfil its well recognised role in economic growth and job creation. The challenge is where the disconnect is and how to deal with it.

 The story line of “Africa Rising” is at risk of turning to a myth unless bold decisions are made to stimulate the manufacturing sector. For example, according to Tony Elumule Foundation, Cote d’Ivoire and Ghana produce 53 per cent of the world’s cocoa, the main ingredient in chocolates, but most of the supermarkets in their capitals are stacked with imported chocolates. In this case, raw materials are exported at low prices and later imported back at much higher prices and having created jobs elsewhere. This is duplicated across the continent.

 In Kenya, a casual look at the shelves of large supermarkets shows that a big fraction of basic products are imported. One recent example is biltong – dried meat – which is imported and yet pastoralist communities have made biltong for centuries! We need to turn this vast knowledge and skill into economic food processing activity.

 A lesson from Asia’s development is that the path to industrialisation is one paved with national interests at every policy level. In most of the countries, government-led policies were responsible for industrialisation. The enabling market-based policies led to creation of jobs and reduced poverty. In some of the countries, global companies are required to not only use local materials, but also contract out some of the work to local cottage industries and supervise the quality. In the long run, this has built a strong manufacturing base and enabled some of these cottage industries to grow and compete at a global level.

 Kenya, needs the self-confident to develop different policies that work for the market and stick to them. Africa needs policies that make certain the market works for society.

Kandie is a financial and  risk 

consultant at  First Trident

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