Manufacturing sector’s sluggish performance

By John Oyuke

The country’s manufacturing sector slowed down to a 3.3 per cent growth last year, compared to a revised growth of 4.5 per cent in 2010.

The sluggish performance of the sector identified as key to the growth and addressing of incidences of high poverty levels and unemployment resulted from contractions in food processing, leather and footwear, paper and paper products, rubber products and electrical machineries sub-sectors.

According to the Economic Survey 2012 released on Tuesday, the growth of the sector was negatively affected by the soaring cost of fuel and a weak shilling, which lowered the demand for manufactured products.

The weak shillings value was attributed to increased demand for foreign exchange to finance imports of machinery and capital goods to support investment in infrastructure and  larger oil import bill.

drought

In addition, drought experienced during the year under review resulted in reduced availability of raw materials for the agro-based industries.

Good performance of the sector can help avoid over-reliance on imported materials and remarkably reduce costs of imported goods, stabilisation of balance of payments, for a country that is already a net importer of oil.

For instance in 2011, Kenya spent $4.1 billion (about Sh343.9 billion today) on oil imports, equivalent to approximately 100,000 barrels per day.

The manufacturing sector has been also been identified as one of the key sectors to support the Kenya Vision 2030 strategy.

The blueprint aims to transform Kenya into a newly industrialised middle-income country, providing a high quality of life for its citizens by 2030.

The sector also provides the impetus for achieving the Millennium Development Goals particularly eradication of extreme poverty and hunger, environmental sustainability and global partnerships.

The vision of the sector is the development of a “robust diversified and competitive manufacturing sector”.  Concerted efforts have been going on to revitalise the sector in order to achieve the vision 2030 goals.

restructuring

This will be achieved through the implementation of the following strategies such as restructuring key local industries that use local raw materials but are currently uncompetitive, for example sugar and paper manufacturing.

Other strategies lined up are exploiting opportunities in value addition to local agricultural produce, adding value to intermediate imports and capturing the “last step” of value addition, for example in metals and plastics.

developed

Although Kenya is the most industrially developed country in East Africa, manufacturing still accounts for only 14 per cent of the Gross Domestic Product. Industrial activity, concentrated around the three largest urban centres of Nairobi, Mombasa, and Kisumu is dominated by food-processing

industries such as grain milling, beer production, and sugarcane crushing, and the fabrication of consumer goods.

Kenya also has an oil refinery that processes imported crude petroleum into petroleum products, mainly for the domestic market