Light manufacturing can spur Kenya's industrial revolution

Despite an enviable head start in agribusiness and manufacturing sectors among fast emerging post-independence economies, Kenya is shamefully stuck in agrarian-like era as a producer of raw materials.

Kenya is the leading exporter of agricultural produce to the EU, especially horticultural and cut flowers. It is also a top tea producer globally. But the path to industrialisation has been far from impressive to the point farmers cannot enjoy benefits of their produce sold in the global market.

Value-addition has been minimal. Leather industry exports, for example, take the form of unprocessed hides and skins. Producers only take home a paltry amount, yet our finished products play a significant role in the Sh10 trillion global industry where almost everyone wears or carries a leather product.

Kenya is trapped in a generation of low-skill, low value products and services incapable of obtaining a significant share in the value added and highly competitive global trade.

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It is hard to blame the farmer. Many farmers lack capacity to add value to their produce before it reaches the customer. Beyond value addition, Kenya myopically imports items like pencils and other easy to manufacture items like bicycles that can easily be generated locally by the jua kali sector.

But not all is lost. More organisations are using the value chain approach to increase productivity, competitiveness, entrepreneurship and the growth of small and medium enterprises (SMEs).

SMEs constitute 98 per cent of all business and create 30 per cent of jobs annually. They contribute three per cent to GDP. But more can be done to increase their productivity, which can grow the competitiveness of agriculture and industrial products. There is need to modernise the jua kali sector by organising it into production cooperatives and linking industry to core production needs, including agriculture. 

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In East Asia, industrial parks were innovated in Taiwan and spread to Korea and China, which along with India catalysed their shift to industrialisation. Progressive counties have demonstrated that industrial parks with incentives and master plans can cost-effectively create the infrastructure for production.

Moving jua kali into industrial parks can enable them to modernise equipment with higher efficiencies and standards to meet the requirements of the highly competitive local and global markets. The focus on strengthening Technical and Vocational Training Institutions (TVETS) is critical to ensure a sustained human resource that meets the current skills gap.

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To address local demand, industries should be built on a four-tier system. The government should get 20 per cent to secure ownership and guarantee institutional and policy reforms. It will also provide land and the seed capital for infrastructure development.

Incentives are critical to attract strategic investors to take at least 40 per cent. County and local residents are also key to ownership of the enterprise through cooperatives. Other countries have demonstrated that there is a strong need to regulate industrial parks with public ownership. Listing of the ownership through the Nairobi Securities Exchange will provide the necessary governance and compliance checks.

Industry will not only result in improved value addition but also better access to new markets. Africa is deemed to be the next frontier for the fourth Industrial Revolution, with Kenya taking a lead mainly through digital innovations. But to fully consolidate its place, Kenya must embrace practical components of value addition, manufacturing and industrialisation.

-The writer is the Managing Director of CPF Group; an organisation that has interests in financial services, insurance, ICT and property services.  

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