This archive report was first published on 5 July 2019.
Kenya's manufacturing sector is in dire need of tax incentives and capital financing to unlock its full potential, according to a recent survey by SYSPRO and Strathmore University.
Conducted among close to 100 companies across 12 different segments in the production and manufacturing industry, the study aimed to explore the productivity and competitiveness of the manufacturing sector in Kenya, the role of new technologies in improving the sector, and the state of adoption and use of these new technologies.
Presented at a launch event attended by Ms Betty Maina, Principal Secretary, State Department of Investment and Industry in the Ministry of Industry, Trade and Cooperatives, the findings highlighted the importance of favorable taxes and regional preferential treaties in increasing competitiveness for both local and export markets.
Other key factors included reduction in cost of production, upgrading current technologies deployed, and increasing production efficiency.
Speaking during the launch, Prof. Ismail Ateya, Principal Investigator and Dean of Research and Innovation at Strathmore University, noted that over 85% of companies in the survey were either semi-automated or fully-automated, with the majority holding on to outdated production units due to high costs of spare parts, unavailability of locally manufactured spare parts, and inability to differentiate quality from fake until used.
Counterfeits were identified as a significant hindrance to local purchasing, while high software and hardware costs, as well as the lack of skilled labor, were cited as major barriers to technology adoption.
Manufacturers who participated in the study proposed tax incentives for technology purchases, better training for local technology partners, improved availability of new technologies locally, affordable automation and robotics technology, and skilled technical workers as key areas of improvement.
On affordability for manufacturing software solutions, SYSPRO's Head of Channel, Pravir Rai, emphasized the importance of keeping IT costs low, stating that many software solutions in the market are unaffordable due to inbuilt capabilities that businesses may not need at a given time.
The study also revealed that more than half of the manufacturers interviewed felt that the government could still do more to make the sector competitive and attractive to potential investors, with development of infrastructure, provision of exemptions, grants, and subsidies, as well as purchasing guarantees from the government, being highly rated.
Support for apprenticeship, graduate internships, and technical courses in universities was identified as a major initiative that would make local manufacturing an attractive business venture, with over 50% of respondents feeling that Kenya's manufacturing sector would struggle to compete with counterparts in developed countries with advanced education and training systems.
Other notable factors that need to be urgently addressed include high cost of capital financing and energy, which was reported as the main external factor affecting business operations in the last 2-3 years.
