Reduced spending jolts manufacturing sector

A worker prepares his machine at Rivatex Weaving department Eldoret Uasin Gishu County [Peter Ochieng, Standard]

The manufacturing sector registered a slow growth rate at 0.2 per cent in 2020 compared to 2.8 per cent in 2019.

This was attributed to reduced demand for their products in the country as Covid-19 slowed down economic activities and eroded earnings, leaving individual Kenyans and companies with reduced spending power.

New data shows that sector also shed 10 per cent of its jobs last year.

The sector employed 353,300 people in 2019, but this had reduced to 316 900 by end of 2020, according to the Economic Survey 2021 released by the Kenya National Bureau of Statistics (KNBS) yesterday.

The impact was a further reduction in the contribution of the manufacturing sector to the economy.

The sector’s share of GDP stood at 7.6 per cent in 2020, from 7.9 per cent in 2019. The sector, a pillar of the government's Big Four Agenda, has seen its contribution to GDP drop over the years. This stood at 9.4 per cent in 2015.

The industry recorded slower and even negative growth rates across different sub-sectors. There were few outliers that registered accelerated growth that include pharmaceuticals that benefited from increased demand for medicines and medical supplies after Covid-19 hit as well as cement which was boosted by infrastructure projects where government spent heavily.

“In 2020, performance of the manufacturing sector was adversely affected by a general slowdown in economic activities, largely due to measures instituted by the government to curb Covid-19. These measures resulted in reduced demand for manufactured products,” said KNBS in the survey.

“The sector’s real value added contracted by 0.1 per cent compared to a growth of 2.5 per cent in 2019. The share of manufacturing sector GDP, was 7.6 per cent in 2020, while sector’s volume of output expanded by 1.0 per cent in 2020 from a revised growth of 1.8 per cent in 2019.”

According to the Economic Survey, the subsectors within manufacturing that registered major growth especially in output include manufacture of sugar, cement, tea, chemical and chemical products and pharmaceutical products.

“However, subsectors such as… leather and related products, beverages, motor vehicle, trailers and semi-trailers, rubber and dairy products recorded significant declines in the review period,” said KNBS.

Pharmaceuticals sub-sector grew 5.6 per cent in 2020, a much faster growth rate compared to 1.6 per cent in 2019.