Manufacturers in fresh stab to up sector GDP contribution

Local manufacturers have unveiled an ambitious plan to reverse the sector’s declining fortunes.

In a new plan, industry players hope to put the sector firmly on a growth path and incrementally grow it over the next seven years, upping up its contribution to the country’s gross domestic product (GDP) to eventually hit 20 per cent.

The sector over the last decade saw its contribution to GDP – the sum of all products and services produced by the country annually – go down to 7.2 per cent in 2021.

This is down from 8.4 per cent in 2018, according to data from the Kenya National Bureau of Statistics (KNBS).

The Kenya Association of Manufacturers (KAM) is, however, looking to grow this to 20 per cent by 2030, an ambitious target for the sector where players have struggled with a myriad of challenges.

The Kenya Manufacturing 20by30 Plan also aims at creating an additional one million jobs within the sector.

The new plan has the objective “to accelerate Kenya’s growth under the Kenya Kwanza government, surpass the Vision 2030 target and grow manufacturing sector contribution to GDP by 2030, from the current 7.2 per cent to 20 per cent.

This would create an extra million jobs and enhance value-added output from the current $8.5 billion (Sh1.04 trillion) to $50 billion (Sh6.1 trillion) within the same time period”.

This, the Association, said would be achieved through revamping the different sub-sectors as well as the government granting the industry incentives, including tax holidays as well as imposing higher duties on imports.

Certain incentives as well as industry initiatives, KAM believes, can enhance competitiveness for export-oriented Kenyan goods. “The plan is guided by four pillars, which, if implemented, shall transform our economy… driving global competitiveness, export-led growth, industrialising agriculture and SME (Small and Medium Enterprise) development,” said KAM Chief Executive Anthony Mwangi.

The lobby noted that the sectors that hold great potential include agriculture, which if industrialised, can enable that country to achieve food security as well as produce for export.

This, it said, can be achieved by bringing down the cost of farmers’ inputs and improving technical services that would enhance agricultural productivity. KAM also believes that SMEs can help the local manufacturing agenda but first need to access finance as well as get preferential treatment when it comes to procurement by both government and private sector.

Export revenues

Among the sub-sectors that KAM believes have vast potential but remain untapped is the leather sector, which if harnessed can “make Kenya a hub for leather value addition in Africa.”

It holds that export revenues from the leather sector can grow to Sh75 billion annually from the current Sh15, while locally, the industry can make Sh45 billion compared to the current Sh10 billion.

For this to happen, KAM wants the government to complete the Kenanie Leather Industry Park, which has been in the making for years now.

The manufacturer’s lobby also wants the State to “curb unregulated dumping of footwear by non-compliant manufacturers and imports” as well as “streamline the procurement process of footwear for all disciplinary forces and government entities.”

“Currently, most of the leather is exported in raw hides and skins, and a huge percentage is in the form of wet blue and crust, with an export value of about Sh14 billion. By restructuring the leather industry, reducing production costs, minimising waste and improving animal husbandry, the sector can generate Sh120 billion by 2030 from both the domestic and export market,” said Mr Mwangi.

“From KAM analysis, this will create more jobs  – from 17,000 to 100,000, of which 70 per cent will be in the informal micro and small businesses. This is the same story across hundreds of value-chain opportunities awaiting Kenyans with the right policy environment. Simply put, we are seating on gold mines but lack both knowledge and willingness to mine it.”

The Jubilee administration in 2018 unveiled the Big Four agenda. The plan, which became the third medium-term plan for Vision 2030, had manufacturing as a key pillar alongside food security, universal healthcare and affordable housing.

The plan was to increase the manufacturing sector’s contribution to GDP to 15 per cent by end of 2022, a target that was missed by a huge margin.