The manufacturing industry plays a pivotal role in Kenya’s economic development. However, the industry has stagnated for decades, and the ‘Buy Kenya, Build Kenya’ slogan is barely in action.
Hustle East Africa magazine talks to Phylis Wakiaga, the CEO of manufacturers lobby, Kenya Association of Manufacturers to shed light on the challenges, opportunities and outlook of this sector. Excerpts
By Hustle East Africa Magazine team
Hustle: What’s the mandate of KAM as a local manufacturers lobby?
KAM: As the voice of the manufacturing sector, we use a fact-based policy advocacy to champion for the industrial transformation of our country to create a sustainable economy for future generations.
KAM strives to create an enabling business environment to steer competitive manufacturing. Such an environment has trickle effects to the economy in the form of job creation and prosperity in the long-term.
KAM develops a Manufacturing Priority Agenda that highlights the most burdensome challenges that face our local industries. We look at how these challenges can be solved to make Kenya more competitive.
We develop the agenda from engagements with our members as well as observations and other regulations to review the business environment.
We have collated the agenda into five pillars that can be strengthened to create a more competitive environment for the industry.
One of our top agenda is the need for a regulatory policy framework that addresses the concerns of the manufacturing sector. We would like to see the national and county governments addressing the issues raised so far with regards to national policies, county revenue laws, levies and charges.
The other four pillars include a competitive manufacturing sector, a level playing ground for manufacturers, making Kenya a manufacturing hub for exports and securing the future of the industry.
Hustle: Is the government playing any role to promote local industries?
KAM: The government has demonstrated high level commitment to revitalize the manufacturing sector. It introduced the industrialization program dubbed KITP that’s focused on increasing the revenue from the manufacturing sector to over 15% of the GDP, create a million jobs, increase FDI by a factor of five and improve Kenya’s ranking in the ease of doing business to top 50 by 2020.
The expansion and improvement of infrastructure include projects such as the Standard Gauge Railway, and the generation of an extra 5000MW of electricity to cut the cost of electricity.
In the coastal region, the Lamu port, South Sudan Transport Corridor Programme is on course and is creating lucrative incentives for local and foreign investors.
Hustle: How has KAM intervened for local manufacturers?
KAM: Over the years, KAM has made gains in its advocacy work.
From the reduction of number of licenses required to start a business, to the introduction of the Single Business Permit, our work in expanding markets is clear through EPAs and extensions of facilities like AGOA which lead to massive job creation.
We have also played a key role in the fight against counterfeits and other forms of illicit trade.
Hustle: Why does the ‘Buy Kenya, Build Kenya’ slogan seem like it’s fading? Aren’t consumers supportive?
KAM: At times, consumers prefer imported products and this erodes the market share of local manufacturers.
The ‘Buy Kenya, Build Kenya’ policy is yet to be fully actualized. The government’s policy to have 40% of all of its procurement sourced locally is yet to kick off. Consumers tend to think that imported goods are superior to locally manufactured ones. They need to change their mindset.
Hustle: Does this mirror the negative growth of the local industries?
KAM: Indeed, the manufacturing sector has been on a downward trend for the last few years. Our economic growth has slowed down in three out of five past election years with the exception of 2013.
Our value addition is fairly low, meaning that the industry has lots of opportunities for growth.
The sector is stagnant because we have open markets and goods are moving freely across the globe. We have to be more competitive as a country.
Hustle: Any challenges facing local manufacturers?
Kenya is losing her competitive edge due to high cost of energy, influx of cheap and fake goods.
Local companies also have to deal with increased taxation, multiple levies and other money tariff barriers. In a nutshell, local manufacturers have to deal with an inconsistent regulatory environment that impacts their pricing.
However, we hope the sector will pick up pace and create jobs, increase productivity and improve our country’s GDP.
Hustle: What are the trends in the manufacturing sector?
The Banking Act 2016 that capped interest rates is one of the trends. Since this law came into effect, the relationship between private sector credit and economic growth is not clear.
So far, the interest rate cap has locked out most Small and Medium Enterprises since commercial banks are reluctant to lend to borrowers who are considered to be ‘high risk’.
The interest rate caps weren’t intended to make it difficult for SMEs to get access to finance. However, now that it’s happening, we need an intervention on this matter to allow SMEs and the manufacturing sector to thrive.
Hustle: Any gaps in the manufacturing sector?
KAM: There’s an increase in demand for skilled workers. We launched a TVET (Technical and Vocational Education Training) project in partnership with GIZ in 2017 to fill this gap.
The project aims to improve access to technical and vocational jobs and economic opportunities for the youth.
The project will place over 500 technical and vocational graduates on internships in various industries and create jobs. It will also give refresher training to industry employees based on the identified skills gaps.
Hustle: What’s the outlook of the local manufacturing sector?
We are looking at innovation and more research and development in the sector as we aspire to create unique locally manufactured products with a unique selling point.
We also need to diversity our products to expand external markets.
There’s also a push to make sure that learning institutions produce quality graduates fit for the industry.
