The Industrialization Space in Kenya

The Africa Industrialization Index development blueprint is a framework that was developed by the African Development Bank and other stakeholders to track the implementation and growth of manufacturing policy and sector respectively in African countries. Developed in November 2022, the findings from the index demonstrate each country’s achievement through a ranking system of its cumulative performance, direct and indirect contribution determinants. Ubiquitously, African has been obliterated by other continents and this has seemingly been more potent than before due to implications stemming from shifts in demand and supply. Kenya’s position, in particular, is above aboard compared to its regional counterparts but underweight compared to countries in North and South Africa. Holding the overall 9th position, Kenya’s stronghold is in its indirect contribution whereas it falls short in the performance and direct determinants sub-indices. To what end, therefore, does having a viable business-friendly environment promote if the capacity to produce and export manufactured goods is substandard?

According to the findings from the KNBS 2022 economic survey, the manufacturing sector contributed about 6.9% towards overall GDP. The country has witnessed the development of different policies under different regimes that have shaped its manufacturing bandwidth over the years. These policies are; the Sessional paper No. 10 of 1965 which advocated for rapid progress, the Import substitution policy of 1970 and thereafter the Structural Adjustment Program of the 1980/90s whose implications were to, inter alia, strengthen the capacity of the industrial field, then came the ‘new millennium’ policies which included the Economic recovery for wealth and employment creation policy of the 2000s, the Vision 2030, the Kenya Industrial Transformation Programme and the Kenya National African Continental Free Trade Area implementation strategy 2022-2027, which attempted/attempts to increase manufacturing contribution to the economy. Yet despite all these efforts, there is still the lack of headway and substantial breakthrough in the achievement of significant export volumes.

Local manufacturing initiatives have long been overtaken by importation, as demonstrated by trade imbalance which seem to grow by year. As at 2017, Kenya’s trade deficit stood at KES 1.1 billion and by 2021, the mark had dropped to KES 1.4 billion. Translating this to the current USD rate, Kenya’s 2021 trade deficit mark was USD 10,460.28 million, which in comparison to South Africa’s trade surplus of USD 550.65, clearly shows that Kenya fails in effective implementation and adoption of functional policies.

Best Practices

Kenya’s manufacturing sector challenges doesn’t stem for the lack of policies rather it chokes on the inadequate structural frameworks that ought to support policy implementation. These frameworks include a clear communication of the mandate of relevant institutions, access to market information through regular updates on bilateral and multilateral trade agreements and financing options and exploration of new value chains that could enhance the country’s visibility in international markets. In addition, it is equally important for all stakeholders to agree on the development of an appropriate monitoring and evaluation framework that could help identify areas that require fine-tuning and improvement while curbing potential spillage and risk inefficiencies.

The importance of the education system in supporting industrialization efforts cannot be understated. This critical infrastructure churns out the needed labor force for the manufacturing sector to succeed hence plays a critical role in its development. Developed nations have succeed in creating robust manufacturing capabilities because of their ability to connect institutions of higher learning to national structural development agenda which includes industrialization through research. For instance, leading universities in the United States such as MIT and Harvard lead efforts in conducting research on various policy, economic and technological issues which align with the National Government’s development agenda. In fact, these institutions receive substantial funding from their ex-chequer and private entities thereby churning out relevant, futuristic and implementable solutions that can be adopted by stakeholders. It is no wonder that countries that are considered highly industrialized are also top in conducting and releasing research globally (China & United States). The rapid adoption of technology and artificial intelligence in manufacturing in developed nations could spell doom for developing countries such as Kenya unless swift and modern changes are set. Improving the technical capabilities and physical infrastructure of TVET institutions could position the country as a leading exporter of technical services such as 3D printing regionally, continentally and globally. In addition, the country’s overall entrepreneurial endowment could be enhanced therefore opening opportunities in new manufacturing fronts.

Although Kenya ranks high in indirect contributors to industrialization, it is yet to fully utilize and reap from foreign direct investment. The sector still falls behind newbies such as fintech companies in attracting foreign direct investment and this stalls its growth momentum. Investments and effective promotion of special economic zones and industrial parks could go a long way to incentivize investors interested in manufacturing to set up shop in the country.

What is of most importance to note is the need for an effective governance structure. One that does not selfishly interfere with manufacturing innovation, creativity and business participation. Kenya stands to gain from its economies of scale and developed potential as well. With constructive policy implementation, collaborations and investment, drastic and impactful manufacturing efforts will gradually be evident.

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