Kenya launches Priority Manufacturing Sector to stimulate Kenya’s economy

Nairobi, Kenya: The Ministry of Industrialization and Entreprise Development in partnership with World Bank and manufacturing sector stakeholders have today launched the Priority Manufacturing sector, value chain reports to stimulate Kenya’s economy.

The reports show that the performance of the timber-furniture, textile-apparel, and leather and leather products value chains in Kenya are significant to the country’s job and wealth creation.

The reports provide an updated and comprehensive analysis of competitiveness for these key manufacturing sectors in Kenya and offer suggestions strategies and policies to accelerate their growth and increase the productivity and innovation of Kenyan firms in them.

According to Cabinet Sectary for Industrialization Adan Mohamed, the launch of the value chain reports provides is in tandem to the realization of Kenya’s Industrial Transformation Programme and Kenya’s Vision 2030.

While Kenya has made some headway in the global apparel market, there is need to focus towards addressing bottlenecks to competitiveness – says the Apparel and Textile Industry report.

With regard to the Apparel and Textile Industry report, Mr. Mohamed disclosed that subsequent to the renewal of AGOA for another 10 years, the textile-apparel sector remains the country’s growth engine for industrial exports. “We are uniquely positioned to grow and expand this sector more than ten-fold beyond the current market share of 0.4%. We intend to enter new markets and expand our product range into higher value and niche products,” said Mr. Mohamed.

According to the Export Processing Zone (EPZ) Authority, Kenya’s AGOA exports, employment, and investment in the past four years (2010-2014) grew by 17 percent, 12 percent, and 21 percent per year, respectively, taking up a third of all apparel exports from Sub- Saharan Africa to the US. “Kenya’s textile and apparel sector has the potential to grow, increase its contribution to GDP, and serve as a source of gainful employment for its fast growing, young population - says Diarietou Gaye, the Bank’s Country Director for Kenya.

The Furniture Industry report finds that Kenya is both the largest market for furniture and the largest producer of furniture in East Africa. Its market is expected to grow at an 8 percent Compound Annual Growth Rate (CAGR) between 2013 and 2018, driven by the growing population, urbanization, and increasing purchasing power.

According to the Kenya Leather Industry report, Kenya is the third largest livestock holder in Africa, but a number of factors hinder the growth of its leather industry. Amongst

Kenyan tanneries, a major difficulty is the lack of quality effluent facilities, which increase the environmental and health costs associated with processing finished leather. In the handbag and travel ware sector, where target markets are high-end international tourists and exports markets, challenges include the high cost and low availability of quality hides, scarce design and process skills, difficulties in accessing and understanding export markets, and the insufficient availability of growth capital. In the footwear subsector, where the competition is largely domestic and based on price, Kenya’s market share has been eroded by imports of new low-cost leather footwear (mainly from China and India) and donated, second-hand footwear (mitumba). On a cost basis, “it is approximately 30 percent more costly to produce a pair of low-cost men’s leather shoes in Kenya than in Ethiopia,” said Maria Paulina Mogollon, World Bank Finance and Private Sector Development Specialist

“For the Leather value chain, we are aware that over 90% of our USD 94 million leather exports are unfinished wet blue leather. This state of affairs denies us the opportunity for over 35,000 jobs and upto USD 250 million in GDP. We want to ensure that we fully take advantage of the largest livestock base of 60 million,” concluded the Cabinet Secretary.

The value chain reports were prepared by the World Bank through the Kenya Investment Climate Program 2, which is generously supported by DFID and the Dutch Government.

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Ministry of IndustrializationWorld Bankvalue chain