Invest more in manufacturing to reverse the 2017 downturn

Kenya’s scorecard for last year is out, and the performance of the main sectors is not inspiring. There were fears that 2017 could easily be the worst year under President Uhuru Kenyatta, but not to the extent shown. We now know, from the Economic Survey 2018 report, that we are losing our most critical sectors; agriculture and manufacturing.

Not even the vibrant financial services sector was spared, but the problem is fairly easy to diagnose and remedy, with broad proposals on patching up the interest rate regulations.

National Treasury and Planning Cabinet Secretary Henry Rotich has said he is planning a range of amendments to address reduced access to credit while still ensuring that consumers are protected.

Productivity from farms grew at a paltry 1.6 per cent, the slowest pace in over a decade, yet agriculture remains the biggest employer. Maize, tea, and coffee production fell even though high prices helped to compensate the shortfall, hence the marginal growth. Once again, dependence on rain exposed the economy to the ravages of the prolonged drought, which slashed harvests and sent food prices through the roof.

Manufacturing has not been so sluggish since 2009, meaning that we are increasingly more reliant on imported products and, by extension, are exporting jobs.

It has dawned on the Government that the trend is unsustainable if it is it achieve its dream of creating more jobs for our young adults joining the labour force and attaining middle-income status in a decade.

However, what we are seeing are only statements of intent. These must be followed with deliberate and clear actionable plans that must be supported by funding if we are to expect any improvement. President Kenyatta has outlined his development agenda, narrowing it down to four pillars; affordable housing, food security, manufacturing, and universal healthcare.

Private sector funding can help deal with the housing crisis if the Government provides an enabling environment to cushion investors and land.

It is possible to revamp the public medical insurer and turning it into the National Health Insurance Fund to complement the investments in developing infrastructure in public hospitals. Attaining food security and expanding manufacturing would be the real test to President Kenyatta’s legacy. Lessons can be taken from the past, when Kenya was food-reliant and systems in the agricultural sector worked. Extension officers would visit farms to teach best practices and arrest diseases before they became a crisis.

Credit and certified inputs were readily available to farmers through the Agricultural Finance Corporation – before its plunder. All indications are that Kenya is now richer than ever before, meaning there would be no reason for not reverting to the structures that have worked before, with focus on the farmer.

A pooling system for mechanisation of farming is one such initiative where specialised tools could be made available to groups to enhance their yields. It would be futile to allocate large budgets for agriculture, as we have seen with the Galana/Kulalu Food food security project that gobbled up billions of shillings and delivered little.

With manufacturing, again, the priority should be small and medium enterprises that are currently stifled by layers of licensing regulations. Before we dream of building cars and heavy equipment, there are easier and more practical commodities that are consumed by the masses that we can manufacture locally.

Policies that cushion small local industries from global competition should be put in place urgently, including heavy tariffs to discourage importation and spur manufacturing. Other more developed countries have embraced protectionism in attempts to protect their budding industries.

Finally, we must acknowledge that we erred in closing down and ‘upgrading’ technical colleges into universities that are producing graduates the economy does not need.

Perhaps we should consider reverting the polytechnics to middle-level training institutions with a bias to offering technical skills to support the manufacturing dream – rather than the thousands of degree holders who cannot do half the work of a diploma graduate.