The manufacturing sector in Kenya has been growing slower than in other countries in the East African Community region in the last decade, Parliamentary Budget Office has said.
PBO said the sector has been growing faster in neighbouring countries although manufacturing in Kenya is widely recognised as the largest in the region.
“The implication of such a trend, combined with increasing cheap imports from Asian countries in the region is that the market share of Kenya’s manufacturing exports in those countries may be declining,” PBO said in a report.
It said the lacklustre performance of the sector has been attributed to a combination of factors.
It named the reasons as poor quality of labour, high cost of transport and electricity, and lack of access to affordable finance (mainly by SMEs) among others.
According to Kenya Industrial Transformation Programme, poor quality of labour occasioned by skills mismatch, high electricity and transportation costs and other overheads constitute 20 per cent of production costs, making such a critical sector not to be competitive.
While manufacturing purely remains a private sector initiative, the role of government in providing the necessary infrastructure is critical, PBO said.
According to the National Industrial Policy and the Kenya Industrial Transformation Programme, the government committed to developing at least two Special Economic Zones and five SME industrial parks.
This is in addition to establishing an Industrial Development Fund with a minimum of Sh10 billion for long-term financing of manufacturing enterprises.
To this end, the government introduced various projects to achieve these initiatives, PBO noted.
“The pace of implementation of these projects however has been slower than expected with inadequate funding and budget cuts always cited as the main reason,” the report said.
“Consequently, the Special Economic Zones and the industrial parks have been slow to attract investments.”
