Taking the leap from value addition to industrialization


KENYA: Kenya’s 50th independence anniversary is an opportunity to take stock of the country’s past. But more importantly, it is a moment to look to the future.

The last two decades have been dominated by constitutional discussions. This was inevitable. Kenya’s post-independence constitution was designed to maintain socio-economic continuity. It reinforced Kenya’s position as an agricultural economy supplying raw materials to Western countries.

Kenya got accustomed to this role and continued to be defined by its coffee, tea, flowers and tourism. But no country can build a durable future on the basis of export of raw materials. Despite today’s fascination with Africa’s raw materials, the continent’s future lies in shifting to innovation-led economies.

There is widespread belief that Africa needs to focus on adding value to its natural resources. This view has been part of Kenya’s policy thinking since independence. This may work for some sectors. However, the prospects for building a viable industrial base for Kenya through value addition are limited. 

First, Kenya is not as endowed in natural resources as other African countries. This is a blessing in disguise because the country is not heavily vested in resource-based growth strategies. Second, the country’s main raw material exports have limited scope for value addition. Third, the raw materials that Kenya exports can be either produced by others or will be displaced by technological substitution.

Newly industrialised countries have over time decoupled their innovation strategies from their raw material exports. Taiwan’s largest exports in the late 1950s were mushrooms and asparagus. The country did not become a world leader in semiconductors by adding value to mushrooms or asparagus.  Similarly, Thailand did not dominate the world market for disk drives by adding value to rice. Neither did Kenya develop the mobile money transfer industry by adding value to coffee or tea.

This does not mean that raw materials are not relevant for Kenya’s future. To the contrary, they are important sources of revenue for investing in technological leapfrogging. This requires thinking beyond the confines of specific raw material exports. Industrialisation cannot be pursued as a passive by-product of raw material exports. What is needed is an explicit strategy to transform the structure of the economy through technological catch-up and leapfrogging. This is what Kenya failed to do over the last few decades for several reasons.

First, in its first two decades after independence Kenya relied more on maintaining its economic status quo as an agricultural exporter and tourist destination. Part of this policy focus was driven by preferential trade arrangements with industrialised countries.

Industrial development

Attempts to shift industrial development were guided by nebulous concepts such as ‘diversification’ that failed to focus on the development of specific industries. The country did not exhibit the diplomatic drive needed to forge regional markets. No serious local forces emerged to champion industrial development.

The lack of focus on industrial development affected the performance of key government advisory institutions such as the as the National Council for Science and Technology (NCST). Originally located in the Office of the President, NCST played a key role initiating technology projects such as the design of improved cook stoves.

The last 50 years have seen dramatic expansion in higher education. But the growth was hardly been linked to economic transformation. The country’s most important resource, youth, has yet to receive the kind of policy attention that would make it a strategic driver of economic transformation.

The immediate political challenge is changing the quality of the educational system so that it can focus on creative fields that include engineering, science, technology, entrepreneurship and the arts. There are numerous lessons that the country can learn from itself and others to expand technical education as a source of entrepreneurship and economic dynamism.

There are many opportunities for ramping up technical training. The first is linking higher technical training to new infrastructure projects. Such projects provide the quickest opportunity to upgrade the country’s technical competence.

Research universities

Second, line ministries should play a key role in incubating research and entrepreneurial universities. For example, the Multimedia University should be an integral part of the Ministry of Information, Communications and Technology.

The main task of the Ministry of Education should be to create a flexible policy environment for similar universities to emerge in the various line ministries. What is needed is diversity in higher technical education and not mindless uniformity in the character of universities. Devolution also demands diversity in higher education so that curricula and pedagogy can be adapted to the needs of the different counties.

Second, the Government should create incentives that encourage private and public corporations to create research and entrepreneurial universities. Models of such universities exist in countries such as South Korea and Brazil.

Learning economy

Embarking on such a transformative agenda will take a number of decisive steps. First, it will demand a vision of Kenya that defines the country as a learning economy. Second, the Government — in partnership with the private sector and other sections of society — needs to focus on building the technical competence of the citizens. The power of change lies in human capabilities, not in natural resources. Third, upgrading technical training and entrepreneurial institutions should be undertaken by all Government ministries. The task of transforming Kenya into a learning economy cannot be adequately pursued unless the Head of State is supported on a regular basis by a presidential science, technology and innovation advisory council. The current structure of science and technology institutions needs to be reviewed to ensure that leadership is not exercised either on the basis on arrogance or ignorance.