This archive report was first published on 23 October 2019.
Kenya's manufacturing sector has been underperforming, with its contribution to the country's GDP averaging 10% and declining over the years. According to the Kenya Association of Manufacturers (KAM) Chairperson Sachen Gudka, the sector's contribution to GDP was 8.4% in 2017 and 7.7% in 2018.
Speaking during a high-level manufacturers economic forum on Tuesday, Mr. Gudka noted that the sector's poor performance is a far cry from the Big Four Agenda's target of 15% contribution to GDP by 2020.
The forum, which brought together representatives from academia, government, economic think-tanks, and industrialists, cited Kenya's declining competitiveness in the region as a consequence of little or no implementation of existing policies and a consistent disruption of well-intentioned development programs by each election cycle.
Panelists at the forum agreed that lack of prioritization and ineffective implementation of policies have gravely impacted the sector.
“Industrialised countries have experienced an average GDP growth rate of 7% sustained for over 25 years. This has to be the case for Kenya if industrialisation is to materialise,” said Mr Gudka.
He added that countries like the Asian Tigers (South Korea, Taiwan, Singapore, and Hong Kong) achieved manufacturing-led growth due to good policy implementation, less rigid laws and regulations on labour and taxation, and low-cost manufacturing.
Other experts, including Institute of Economic Affairs CEO Mr Kwame Owino and Ipsos Managing Director Mr Aggrey Oriwo, emphasized the need for a structural shift in Kenya's economy to achieve economic transformation and create new sources of employment.
“Structural transformation will enable us to attain the desired change into a middle-income country as a generation and create new sources of employment. We need to change our industrial, investment, regional integration, competition, and productivity monitoring policies to achieve a 15% contribution to the GDP by the manufacturing sector by 2020,” remarked Mr Kwame.
Professor Nick Wanjohi, a Political Science Scholar, explained that the political economy has a direct implication on the manufacturing sector's growth, citing increasing budget deficits, declining competitiveness, low demand, low liquidity, and an unpredictable regulatory environment.
Ernst and Young Partner Mr James Gachihi advised that the Kenyan economy requires stimulation to shore up demand, adding that an economic stimulus programme will address challenges facing the manufacturing sector, increase their productivity and competitiveness, and create wealth and deliver sustainable employment and wages.
