This archive report was first published on 15 December 2019.
Kenya's manufacturing sector has been struggling to compete in the African market, with the country losing its export market to China and India. According to data, the country's export of manufactured goods has declined sharply over the past eight years, with the market for key products such as textiles, glassware, cement, wood, and carbon dioxide shrinking significantly.
One of the hardest-hit sectors is the cement industry, which has seen its export earnings drop by 80% to Sh1.5 billion in 2018 from Sh7.5 billion eight years ago. This has led to massive job losses, with some companies downsizing or even shutting down due to financial difficulties.
For instance, ARM Cement was placed under receivership and later sold to Devki Steel after it fell into financial trouble. East African Portland Cement Company has also sent home most of its workers as it struggled to remain afloat in the face of declining demand.
Other manufactured goods that have been hit include export of wood products, which has plunged by 65% with the country earning Sh225 million in 2018 compared to Sh648 million in 2010. The export of textile yarns and made-up textiles has also fallen by a third, while the export of glassware has reduced by half.
Experts attribute the decline of Kenya's manufacturing sector to several factors, including the high cost of production, punitive taxes, bureaucracy, and high cost of credit. The sector's contribution to the economy has dropped from 10% in 2010 to 7.7% in 2018, with the country's trade surplus narrowing as imports have increased.
Uganda, for example, has seen its exports to Kenya rise nearly three-fold to Sh49.4 billion in 2018 compared to Sh19.3 billion in 2016. Other countries that have brought more goods to Kenya include Egypt, which has taken advantage of being in the same trade bloc.
According to the Statistical Abstract 2019, the job losses in the manufacturing sector have been significant, with 18 sub-sectors shedding a total of 12,743 jobs between 2014 and 2018. The affected sub-sectors include textile, manufacturing, fish, vegetable and fruit processing, which were identified as part of President Uhuru Kenyatta's job creation ambition under the Big Four Agenda.
Manufacturing is expected to create one million jobs by the time the President leaves office in two years, but current figures could be even worse given the closure of Mumias Sugar, once the country's biggest sugar miller.
Experts note that one of the reasons Kenya is losing out is because it does minimal value addition. 'We do very little value-addition on tea and coffee,' says Timothy Njagi, a research fellow from Tegemeo Institute. 'Most of the Kenyan tea is used for blending.'
