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Unmet pledges cost Kenya jobs and cash

By Moses Michira | Published Thu, February 22nd 2018 at 00:00, Updated February 22nd 2018 at 07:15 GMT +3
Industrialisation Cabinet Secretary Adan Mohamed. [File, Standard]

President Uhuru Kenyatta’s dream of creating 11 million jobs through industrialisation is yet to be achieved three years after he made the promise.

Among other things, the country is yet to market its premium crops tea and coffee as “Kenyan”, a move that was expected to double the value of exports.

Instead, tea and coffee, whose prices rise to five-fold the local price, are still being shipped out in gunny bags, denying the country more cash and badly needed jobs in processing and packaging.

According to the plans launched in July 2015, the country should by now have achieved huge development milestones that would have lifted small businesses through cheap loans and advisory.

But it would appear the development goals that have since been refined to the “Big Four” were only ambitious with almost nothing to show in jobs and agro-processing.

Industrialisation Cabinet Secretary Adan Mohamed said the plans were at various stages of implementation, and that results were already being felt in new jobs and new foreign investments.

Yesterday, Mr Mohamed through his spokesman John Mwendwa said: “We have made huge steps in improving business environment and employed 280,000 people in manufacturing last year.”

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He added some of the reforms were long-term (over 10 years to 2025), and that the contribution by manufacturing to the economy would be up to Sh300 billion a year.

Latest employment numbers from 2016 show manufacturing, which was the pillar for industrialisation is responsible for less than 11.8 per cent – the same level in more than a decade.

Economy shrinking

However, the contribution of manufacturing to the economy has been shrinking steadily from 11 per cent to 9.2 per cent over the five years to 2016, behind other sectors such as agriculture that rose in importance.

The Industrialisation Transformation Programme Action Plan gave a rundown of the specific interventions and their timelines, with most intended for immediate execution.

Without action, Kenya is lagging behind poorer neighbours in adding value to its agricultural exports.

Tanzania and Uganda process twice as much of their produce compared to Kenya – the regional economic powerhouse– accruing value and retaining more jobs at home.

Only 16 per cent of the agricultural commodities produced is processed before export, much less than 32 per cent in Uganda and 27 per cent for Tanzania.

Capital requirements

Mohamed blamed the high capital requirements for mechanisation, but acknowledged the opportunity to significantly add value specifically through agro-processing.

Most of the new jobs envisaged under the plan would be generated from manufacturing, and consequently mitigate the country’s biggest problem of youth unemployment widely described as a “ticking time bomb”.

President Kenyatta described the launch of the industrialisation programme action plan as a very exciting time for Kenya although there is little to show for it three years on.

The delayed implementation of the interventions has contributed to soaring unemployment even as millions of fresh college graduates pour into the market every year.

Mombasa would be transformed into a food processing hub targeting export markets as per plans. However squatters have already moved in to the proposed site for the project.

Mohamed, who is leading Mr Kenyatta’s Industrialisation dream while on a tour of the ambitious Sh100 billion Dongo Kundu mega project, was on Saturday confronted by the reality of squatters on the public land.

“Anybody who is settling here with the hope of being compensated is daydreaming,” he warned.

SME accelerator

He told the squatters of the Government’s plans to establish an industrial park and a special economic zone – where the processing for export would happen.

But the industrial park is only one of the many glossy initiatives, which should have started in 2015. but to date exist only on paper.

Within months of the launch, the Ministry of Industrialisation hoped to develop an SME accelerator, which would help grow small businesses to the next level through support.

In fast-developing countries, the focus has been on helping small indigenous business to grow through mechanisation and preferential access to credit which is usually unavailable from commercial lenders.

By June 2016, Mohamed’s ministry intended to have attracted investors to develop up to five large integrated meat processing projects and entrenched huge reforms in the cotton and apparels sector.

There were also plans to increase cotton growth through the attraction of an anchor investor reminiscent of the Konza Techno City dream, under President Mwai Kibaki regime.

For Mr Kenyatta, his development agenda would determine the kind of legacy he lives behind at a time manufacturing is at a record low following years of neglect and the rise of countries like China that produce for the world

James Kariuki, the chairman of traders’ lobby that does business in China and Dubai, said the focus for industrialisation should be from bottom up and not the “40-floor chief executive approach”.

“We are bound to fail again because our focus is on enabling the big companies whereas China has developed because they put their efforts in building the cottage industry- that is where the masses are,” said Mr Kariuki.

In his argument, thousands of artisans are using crude ways employed for many decades to make small items such as charcoal stoves yet they should be on the front row of the Government’s industrialisation agenda.

Kariuki added that the country’s development policies must focus on the smaller producers including the jua kali sector and small scale farmers to industrialise, rather than helping multinationals create jobs for locals.
 
“What Mohamed should do is see how to help the farmers produce more efficiently and help in processing of commodities at the local levels,” said Kariuki.

Tea, which is Kenya’s most important agricultural produce, was among the commodities that was targeted for further processing and packaging at the park.

Retail prices for the best grades in tea in the key markets such as the United Kingdom are anywhere about Sh1,500 per kilo – more than five-fold the going rates at the Mombasa Tea auction.

Inferior produce

In the latest sale, the buyers from around the world were paying less than Sh300 ($3) per kilo.

The international traders are the biggest players at the auction, exploiting the structural weakness in Kenya to make super profits at the expense of the local producers.

Last year’s production is estimated at 420 million metric tonnes, with over 95 per cent exported in semi-processed form in gunny bags.

Exporters use the premium quality teas from Kenya to blend with inferior produce from elsewhere to raise the quality of the mix, but at the expense of the “Made in Kenya” brand.

Edward Mudibo, the managing director of the East Africa Tea Trade Association, said  bulk sales of the commodity was robbing the country of jobs and money.

“We know who is making the money (at our expense),” he said, adding that Kenya had little leverage in determining the selling prices by selling in bulk.

Previously, the traders have been accused of manipulating the market to ensure prices remained low.

Mudibo estimates that through packaging the tea alone, an additional 5 per cent more jobs could be created along the supply chain while raising the selling prices significantly.

A firm grip on the Kenyan coffee market by multinational firms since pre-independence has also meant farmers are at the mercy of the global roasters which collectively determine prices.

A punitive regulatory environment that includes tens of licences has restricted farmers to the coffee plantations, ensuring they do not under the law touch the beans after harvest.

Through tough controls and segmentation of the supply chain, only wealthy traders are allowed to buy the beans before selling them to roasters constricting the actual producers to the least profitable yet labour-intensive section.

County governments in coffee-growing regions have since taken upon themselves to help small-scale farmers in value addition, but not without a fight from the established traders who stood as losers in the “revolution”.
 
The late Nyeri Governor Nderitu Gachagua started the market disruption that has since been adopted by others, including Kirinyaga.


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