BY PRADEEP PAUNRANA
For Kenya to achieve its expected economic growth of 7 percent as predicted by the National Treasury, we must focus on the quick wins available to get us there. The Treasury, in its budget review, has named exports promotion with a focus on expanding regional markets, commodity exchanges and special export zones as some of the sureties to a steady growth in the next three years.
There is an obvious and immediate role for industrialization as a key driver for economic growth and sustainability in Kenya. Across the globe, industrialization has been credited for increased per capita income, growth in international trade, high levels of employment and increased investment. The growth of industry results in modernization of other sectors and more so agriculture – without industrialization we cannot continue to hope for increased productivity and quality of products. Industry has also supplemented government efforts to urbanize regions, providing access to public amenities and in the process reducing poverty levels.
The industrial blueprint
Last year, the government unveiled a blue print for Kenya’s industrialization in which it evaluated the competitiveness of our manufacturing sector and areas that could be exploited in the short to medium term to bring about the desired economic transformation.
We have sought for ways to shield our economy from external shocks in the global market and yet here the programme identifies opportunities to strengthen the economy by increasing our manufacturing base. The plan directs our focus to what have been our traditional strengths, in particular, sectors whose potential has been overlooked. It has 4 key targets which are to increase manufacturing’s contribution to the GDP to over 15 percent, to create 1 million jobs, to have a fivefold increase in our Foreign Direct Investment (FDI) and to secure a top 50 position in the Ease of Doing Business Index. Last year Kenya’s position in the Index moved up 21 places to position 108. Actualizing the Kenya transformation Industrial Programme will see us make great strides on the other indicators and improve the overall business environment in our country.
The Blueprint will be driven through 5 pillars which include; the launch of sector-specific flagship projects such as a food processing hub in Mombasa to process agro-based products and a textile cluster in Naivasha among others. It also aims to create an enabling environment to accelerate industrial development by building industrial parks and investing in industrial skills. Another key pillar is export promotion. The Ministry of Industry, Investment and Trade seeks to increase Made in Kenya branded exports to 25pc and hence the programme defines ways to increase market access for local businesses. The Ministry is therefore looking into the development of public support schemes and enabling policy for domestic producers.
Notably, value-addition has also been identified in the programme as a low hanging fruit considering the abundant natural resources of our country. Currently we process only 16pc of our agricultural exports and in order to become an agro-processing hub we need to expand our capacity significantly. Value addition will mean an increase in jobs in the manufacturing sector, effective use of locally generated power thereby reducing power wastage, increased competitiveness for locally made goods in the international market and therefore an increase in export earnings and much more. There are existing success stories with regard to the benefits of agro-processing a good example being the Netherlands, where agriculture is regarded the as the first stage development, while the degree of value-addition through agro-processing industry is proven to be the most valuable signifier of progress as far as their economic development is concerned.
The SME sector has also been identified as a key growth driver for our economy. Through sub-contracting mechanism the SME sector can feed into the larger manufacturing sector and successfully boost entrepreneurial development. The innovation and dynamism in SMEs will be a strong catalyst to effectively rolling out the KITP for industry. The plan takes into account the current challenges faced by growing companies such as access to finance and low expertise; it factors these in its goals with the aim to improve their access to markets through strengthening linkages as well as increasing their operational efficiency.
Establishing strong structures
At the takeoff point, it is crucial that the Ministry of Industrialization steers inter-agency collaboration with Government functions and other ministries to build strong structures for the roll out. The ministry needs to create an understanding of the benefits of the blueprint with all stakeholders including the EAC partner states. For this reason then, there is a need to establish an office in charge of the KITP that will be the focal point for coordinating all activities and ensuring that there’s progress.
The KITP office would be comprised of key industry players whose knowledge of the market dynamic and economic profile of our country would inform the development of an investment and industrialization strategy that can be devolved to the counties. Meaning that they would be tasked to ensure that County strategies for industrialization are in sync with the KITP.
In doing so the KITP office would also be in charge of scouting for available opportunities for investment in counties thereby taking on the role of informing and educating industry on how to position itself for optimum gains. At the same time the office will then assist the government by identifying key hindrances to a competitive business environment, namely, the issue of VAT refunds, multiplicity of taxes and levels, bureaucracy in proceeding export remission schemes and others.
Transforming our country into an industrial hub needs not be a long term vision because we have everything that we need at present to make it a reality. The Kenya Industrial Transformation Programme is attainable through coordination and collaboration between Government and Industry. This initiative holds great promise for sustainable growth and practical solutions to improve the livelihoods of the citizens of this country.
(The writer is the Chairman of the Kenya Association of Manufacturers)