This archive report was first published on 28 October 2019.
Manufacturing in Crisis ¶
Kenya's manufacturing sector is facing a grave crisis, with its contribution to GDP plummeting from 15 percent to 7.4 percent. This decline has severe implications for tax revenues and the economy as a whole.
Experts in the sector have expressed concerns about the sector's future, citing the increasing preference for imported goods over local produce. A casual survey of two foreign-owned retailers revealed that only three percent of local content can be found on their shelves.
This trend has severe consequences for local farmers, who will have nowhere to sell their produce in their own country. As a result, they will be discouraged from farming, leading to increased poverty.
However, it doesn't have to be this way. A correct policy approach can stimulate local production and create a multiplier effect in the economy, benefiting farmers and ultimately leading to sustainable development.
Unfortunately, the current trade policy falls short of its intentions. The 2017 National Trade Policy promises to transform Kenya into a competitive export-led and efficient domestic economy but fails to deliver.
The policy's chapter three on revitalising domestic retail trade completely misses the opportunity to stamp out misbehaviour by multinational retail companies. Instead, it recommends promoting domestic trade development through establishment of Brand Kenya initiative product development incubators/centres.
However, this approach is not effective in turning around the problems faced by Micro Small and Medium Enterprises (MSMEs). The correct policy should mandate investors to collaborate with local entrepreneurs to progressively increase local content, especially manufactured goods.
At a meeting with experts, it emerged that large vertically integrated companies influence policy at the regional level and undermine MSMEs in the country. These companies have the resources to demonise local products/produce as primitive, indigenous, poor quality, sub-standard, and with many other pejorative descriptors.
It is time for Kenya to adopt a more sustainable approach to economic development, one that balances regulation and the risk of unemployment. A good regulatory regime allows for progressive implementation of desired outcomes, and shutting down a factory employing hundreds of workers may seem brave but is also inconsiderate to families that will go without food as a result.
MSMEs cannot transform where both large and multinational companies are bent on eliminating them. There is no space for fair competition where very few companies have the monopoly and power to influence policy under the guise of a free market economy.
Other countries have had to alter the original thoughts of capitalism to create an ideology that is sustainable but with a human face. It is not anti-capitalism to demand a fair method of distributing wealth sustainably. It is government policy that can dictate this way of thinking.
Kenya's manufacturing sector is an Agenda Four priority that will define President Uhuru's legacy. It is time to act on it before it is too late.
