The ‘Big 4 Agenda’ has effectively become a household name in Kenya. Every player in the economy is now being encouraged to align his or her processes with the Big 4 agenda. For those in the manufacturing sector, this new economic direction couldn’t have come any sooner. After many years of decrying a lack of intense focus from the government, the manufacturing fraternity is firmly focused on tapping into this new-found attention from the government.
Indeed, the latest statistics point to tough times in the world of manufacturing. The latest Central Bank of Kenya report shows that the sector witnessed the highest increase in Non-performing loans, by nearly Shs 6.4 billion owing to a tough operating environment. More often that not, the blame is directed at the high costs of production which make it difficult to compete with other manufacturing countries.
However, there seems to be little discussion around the lack of innovation in the manufacturing sector. Despite the rise of several innovation hubs across the city, very few of them are entirely devoted to the art and science of manufacturing. Much of the focus of the innovation landscape in Kenya is tilted towards the financial services, health care and education which have also greatly contributed to transforming the lives of Kenyans. So why has the manufacturing class lagged behind in finding its seat at the innovation table?
Perhaps one of the reasons has to do with the matter of orientation. For the longest time, the country has benchmarked with countries such as China and India, which are fundamentally different from Kenya in size and structure. Both countries have a population well over a billion people and a landmass that is nearly continental. As such, the economies of scale they enjoy is well beyond what is attainable in present day Kenya. That said, Kenya can draw plenty of inspiration from a country such as South Korea which has a comparable populationsize.
Similar to Kenya, South Korea does not have an abundance of natural resources but has still managed to be counted as one of the major manufacturing powerhouses in the world.What therefore has been the secret behind South Korea’s manufacturing success?
Since the 1970s South Korea has greatly invested in the Knowledge economy by greatly boosting the quality of education and developing the human capital which is essentially the country’s greatest asset.The Korean higher education system expanded, and the government developed state-funded research institutes in the areas of science and technology.
Between the 80s and 90s, the government focused its attention to high technology industries and later to knowledge intensive industries. The government invested a significant amount of money on developing industrial cities, as well as technology and science parks. Soon after, a National R&D Program was launched along with initiatives aimed at helping private companies develop high technologies. This investment had a large impact. By 2007, 80% of Korea’s R&D expenditure was within the private sector. This investment was supported by government tax incentives for R&D and the importation of foreign technology.
Indeed, innovation and technology are the key factors that have underpinned South Korean export competitiveness and fuelled the country’s remarkable economic rise over the past decades. In fact, South Korea is now spending the largest share of its GDP on research and development (R&D), even larger than the US and Japan, two of the global leaders in innovation based on R&D intensity.
To a certain extent, Kenya has begun borrowing a leaf from South Korea by strengthening the quality of teaching in Math, Science and Technology subjects which have been organized by Center for Mathematics, Science and Technology in Africa (CEMASTEA). The expectation is that through quality delivery of instruction in these subjects, a new cohort of innovative thinkers will be raised up and encouraged to creatively solve challenging problems.
The critical next step will be to create and deepen linkages between these institutions of higher education and industry to ensure the most innovative ideas are finding their way into product development cycles within the manufacturing companies. This will in turn ensure that our manufacturing sector has a competitive advantage ultimately leading to better export quality and quantity.
As Kenya seeks to be an emerging powerhouse in Africa, a significant part of its identity must be linked to innovation which will substantially increase its franchise value. The manufacturing sector will be the primary beneficiary in such a disposition and as such it has a big responsibility in ensuring innovation thrives within the sector.
Ken Gichinga is Chief Economist at Mentoria Consulting; Twitter: @kgichinga