Motor vehicle industry has great potential for creating more jobs
By Carole Kariuki - Jun 30th 2022
Kenya has registered continuous growth in its Gross Domestic Productive (GDP), thereby creating a promising environment for investments.
Agriculture, manufacturing, wholesale, retail, and financial services are the highest contributors to Kenya’s GDP, and as a result, they have been prioritised under the economic pillars of Kenya Vision 2030 that provides the national development goals in promoting inclusive and sustainable growth to make Kenya a globally competitive.
Automotives play a critical role in the economy by facilitating free movement of goods and people. Globally, the automotive industry has been a pillar of industrialisation for many economies and a key driver of macroeconomic growth and technological advancement.
The industry has consistently contributed directly and indirectly to the GDP, foreign investment, employment, and innovation in developed countries such as Germany, the United States, Japan, South Korea, Italy, China, and several other emerging economies (Egypt, Morocco, South Africa, India, Thailand). If we take a look at a country like the US, the automotive industry is one of its most important industries.
It has historically contributed three to 3.5 per cent to the overall GDP. According to international estimates, the average annual turnover of the world automobile industry is more than USD 2.75 trillion.
In Kenya, the automotive industry has the potential to significantly contribute to the manufacturing sector’s growth, and the government targets to increase its share of the GDP from the current 9.2 per cent to 15 per cent by 2022 as part of the Big Four Agenda. This will also be instrumental in achieving the aspirations of Vision 2030, of creating a globally competitive and prosperous country.
The automotive industry has a long value chain creating both backward and forward linkages. The backward linkages include design and manufacture of vehicle bodies and other components, not forgetting that the automotive industry consumes steel, iron, aluminum, plastic, glass, carpeting, textiles, computer chips, rubber, and much more. The industry creates forward linkages through vehicle dealers, garages, leasing firms, insurance firms, and financial institutions, among others.
As stated, the private sector is in support of any policy that will support the growth of local businesses. Therefore, we support the Ministry of Industrialisation, Trade, and Enterprise Development's initiative to develop a National Automotive Policy which will help to grow the automotive industry.
Passing the Kenya Standards 1515 which lowers the importation age of trucks, buses, and prime movers is an important incentive to increase the volume of vehicles produced locally, hence attracting investment into the industry.
The automotive industry has a great potential for creating more jobs than the importation of used vehicles because of the big value chain. The industry can create five to 11 more jobs within its value chain for each job in the assembly plants. The local automotive industry can grow the country through technology transfer since the automotive industry is one of the fastest adopters of technology.
-Ms Kariuki is Chief Executive Officer, KEPSA
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