Last week I attended and made a presentation at a roundtable on manufacturing in Kenya hosted by the Overseas Development Institute (ODI).
The roundtable was under ODI’s Supporting Economic Transformation Programme (SET), which is supported by DFID. As part of the roundtable I developed a paper on manufacturing in Kenya and thought it would be useful to share some insights I unearthed during my research on manufacturing in East Africa.
At the moment, the manufacturing sector in Kenya is the largest in the east African region. However, in terms of growth other countries in East Africa are growing faster.
Data from ODI indicate that the growth of the sector in Kenya is far slower than Ethiopia, Rwanda, Tanzania and Uganda.
If this trend continues, other countries will begin to dominate manufacturing in the region.
Further, governments in East Africa seem to be putting in more effort to build manufacturing through the creation of industrial parks in countries such as Ethiopia and, making land available for manufacturing particularly for labour intensive manufacturing.
Uganda and Tanzania are also determinedly positioning themselves as investment destinations for manufacturing in Africa. This impetus needs to be more strongly echoed in Kenya from the highest levels of county and national government.
Furthermore, while Kenya remains an attractive investment destination for manufacturing, other countries in the region are aggressively courting such investment.
There is a growing sense that the bureaucracy and corruption in Kenya as well as difficulty in getting the right information on requirements linked to building manufacturing plants in the country are hampering investment into the sector.
That said, the good news from a regional perspective is that the East African Community (EAC) is seeking to position itself as the next global manufacturing destination.
This is positive and long overdue because clearly there is room for growth in the sector.
According to the African Development Bank, the combined manufacturing sector of seven countries in Eastern Africa as a whole is only about one-third the size of the manufacturing sector in Vietnam, which has a population one-third the size of the seven countries.
If the East Africa region is to become the “go-to” location for investment in manufacturing in Africa, more coordination of manufacturing policy and activity across the EAC as well as with Eastern African countries outside the EAC is needed.
However, from a Kenyan perspective there are issues within the East Africa region that negatively inform the growth of manufacturing in the country.
An on-going issue that adversely affects the uptake of manufactured products from Kenya in the region is pricing. Cost of production in Kenya remains high which makes the end price of Kenyan manufactured goods lofty.
This cost issue essentially promotes the purchase of cheap manufactures from India and China that have aggressively entered the regional market and routinely undercut Kenyan manufactured equivalents on price.
Another dynamic affecting the growth of Kenyan manufacturing in the region is related to the emerging competition between manufacturers in East Africa.
Due to development of manufacturing in neighbouring countries, a scenario is emerging where neighbouring countries seem to want to reserve domestic markets for own products.
Thus there is a sense that neighbouring countries in the EAC seek to prevent Kenyan goods from entering their countries because they want to keep domestic markets to themselves. Perhaps EAC market is not as open as one would hope.
What is clear is that challenges exist for the Kenyan manufacturing sector from a regional perspective. At the same time, there is ample opportunity for the region to sell itself as the manufacturing hub of Africa.
The question is how to balance national ambitions with regional development goals; perhaps it is time for a candid conversation on this issue.
Ms Were is a development economist. Email: anzetsew@gmail.com
Source: Business Daily

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