Government’s role in boosting local manufacturing industry

By Maureen Mwangi

Like many other developing countries around the globe, Kenya’s traditional mode of industrialisation is agriculture. Therefore, Kenya has vested a lot in manufacturing agricultural products since its independence through government-owned firms. These firms were highly protected against unfair competition from imports in a bid to grow the sector and create employment for Kenyans.

In 1990, the country adjusted its structure to create a competitive market for the private sector and the global market. However, the lack of a strong private sector led to the emergence of many intermediaries and cartels between the farmer and the market. This dwindled the growth of the manufacturing sector and encouraged the exploitation of farmers.

Mismanagement has led to the collapse of most government-owned manufacturing firms, says Principal Secretary of the State Department for Industrialisation, Dr Juma Mukhwana.

The textile industry in Kenya has been wiped out of the market due to the importation of ‘mitumba’ clothes.

“I grew up as a young man growing cotton and supplying to ginneries. In the current market, the textile industry has collapsed and cotton has lost its local market,” said Dr Mukhwana during an interview with Engineering in Kenya magazine in his office in Nairobi.

 “We have identified 24 counties in Kenya mostly in Western, Eastern and Coastal regions to revive cotton growing. We will partner with private stakeholders to set up ginneries in these regions to grow the textile industry.”

 The PS says the pyrethrum market, East African Portland Cement Company and sugar factories have as well collapsed, giving room for the private sector to invade the sectors. “Our work as the government is now to make rules and regulate the sector to make sure it runs fairly, openly and transparently,” he says. The PS now calls for the revision of liberalisation and other government laws on importation to revive and protect local manufacturing firms.

Dr Mukhwana is concerned that the manufacturing sector in Kenya is skewed towards benefiting only a few large-scale manufacturers, with Small and Medium Enterprises experiencing slow growth rates due to inadequate capital and an unfavourable economic environment.

Kenya’s manufacturing industry faces a myriad of challenges, including the use of outdated technology, returns taking a long to be realised, Kenyans’ preference for imported goods over locally manufactured products, unstructured payment systems that discourage foreign investors, unhealthy business competition as well as the boom of counterfeit trade.

Future of Manufacturing

Dr Mukhwana says the future of manufacturing in Kenya is in the development of Small and Medium Enterprises (SMEs). He says the ministry is focused on growing SMEs through the development of industrial parks and increased incentives for Kenyans to venture into manufacturing. The industrial parks will be set up in each county for common use by the local entrepreneurs, and the government will allocate Ksh100 million to each county for work.

The PS says the ministry is currently conducting a feasibility study to determine what is viable to be manufactured in the identified areas. The industrial parks will be co-financed by individual county governments. Additionally, he said, the ministry will develop specialised industrial parks for all construction materials; for instance, a textile park in Eldoret, an automotive park through Numerical Machining Complex and Furniture Park at Jamhuri Grounds along Ngong Road.

“For factories to grow there is a need for mentorship of SMEs by large-scale factories to develop value chains. Our industrialisation is stuck because we have a few elephants on the road that are not mentoring the small-scale factories. Instead, the large-scale factories are fighting small-scale ones, hindering growth and causing unhealthy business competition,” says Dr Mukhwana.

To solve the problem of delayed payments, which has been one of the biggest obstacles to the growth of SMEs, the ministry presented the Prompt Payment Bill to Parliament that, if passed, will compel the buyers to pay the manufacturers within 14 days of procurement.

“The payment system in Kenya is discouraging local manufacturers from growing their firms as most retailers and government agencies take products on credit. This has led to the collapse of many business firms in Kenya. Nakumatt, for example, collapsed with nearly Ksh13 billion worth of Kenyan,” says Dr Mukhwana.

He says the counterfeit market is now outgrowing the manufacturing sector and the country has not done enough to protect the economy from sub-standard products. Therefore, there is a need to create policies to protect the local market from low-quality goods. The ministry is working with relevant industry players such as the Kenya Association of Manufacturers to create a directory for manufacturing firms in Kenya with the products that they produce. This will make it easier for the ministry to identify and arrest counterfeit products before they get to the consumer.

Kenya remains the manufacturing hub for East and Central Africa, and the African Continental Free Trade Area (AfCFTA) will be a game changer for manufacturing in Kenya. The PS says the ministry is working closely with other African countries to ensure the agreement is signed and ratified.

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