Manufacturing funds cut as allocation to credit scheme reduced

The government has allocated Sh10.1 billion for the promotion of local industries in this year's Budget, down from Sh10.4 billion in the current Financial Year ending in June.

Out of this allocation in the upcoming 2022-2023 Financial Year, Sh1 billion will go to the Credit Guarantee Scheme to enhance access to affordable credit by Micro, Small and Medium Enterprises (MSMEs) involved in manufacturing.

Of this, Sh626 million has been set aside for the provision of credit to MSMEs through the Kenya Industrial Estate.

The budgetary allocation to the Credit Guarantee Scheme is down from last year’s Sh2 billion.

This is despite the consistent pleas from the manufacturing sector to be given more access to credit.

Industrial Parks and Special Economic Zones will also receive marginally sliced allocations, with Sh2.6 billion directed towards the Dongo Kundu Special Economic Zone and Sh295 million towards the development of the Special Economic Zone Textile Park in Naivasha, Kinanie Leather Industrial Park and Athi River Textile Hub.

Another Sh50 million will go to the Freeport and Industrial Park Special Economic Zone in Mombasa.

“Other proposed allocations include Sh410.4 million for the modernisation of (textile manufacturer) RIVATEX and Sh3 billion for supporting access to finance and enterprise recovery,” said Yatani.

The government also intends to invest more cash in the revival of industries that are key to the value addition of Kenya’s cash crops.

“In this respect, I propose an allocation of Sh212.1 million for modernisation of cooperative cotton ginneries and a further Sh250.4 million for the cotton industry revitalisation,” said Yatani.

Last year, Sh210.4 million was set aside for coffee industry revitalisation, with Sh59.2 million directed towards the modernisation of cooperative cotton ginneries. A further Sh50 million was set aside for the cotton development “as subsidy and extension support.”

The Kenya Industry and Entrepreneurship Project will be allocated Sh1.3 billion meant to equip the youth with essential training and internship opportunities.

The Kenya Youth Employment and Opportunities Project will, on the other hand, receive Sh2.2 billion, with Sh500 million going to the Industrial Research Laboratories and Sh200 million for Constituency Industrial Development Centres.

The manufacturing sector, one of the Big Four Agenda projects, has struggled to live up to expectations despite government efforts to bring industries back to life, extend credit and offer tax incentives to support economic growth.

In the 2022 Manufacturing Priority Agenda document, the Kenya Association of Manufacturers noted that Kenya’s manufacturing sector’s contribution to the gross domestic product (GDP) had been on a steady decline from 12.05 per cent recorded in 2011 to 7.61 per cent in 2020.

This is a huge difference from the 15 per cent target.

“It will require massive growth for the manufacturing sector’s GDP contribution to reach 15 per cent as desired under the Big Four agenda,” the manufacturers’ body said.

CS Yatani said that the implementation of appropriate policies coupled with enhanced investments in the manufacturing sector has created a conducive business environment to support and protect local industries, generation of jobs and improve livelihoods.