Manufacturing sector posts growth far below 10 per cent target

Deputy President Rigathi Gachagua is taken through the lab during the launch of Ol'Borana, one of the most advanced semiconductor manufacturing systems designed in Africa at Dedan Kimanthi University in Nyeri County on December 19,2022. [DPCS]

The manufacturing sector posted a performance that was below 10 per cent in 2022, despite being the leading industry providing wage employment in the private sector.

The sector has a share of the gross domestic product (GDP) of 7.8 per cent in 2022. The value of output increased by 17.6 per cent to Sh2.7 trillion in the year under review.

Intermediate consumption increased by 17.3 per cent in 2022, leading to an increase in the value added by 18.1 per cent in the same period. Manufacturing of food, beverages and tobacco led the industry's rally at 4.3 per cent, with other manufacturing, repair and installation contributing 3.5 per cent.

The sector recorded a sustained growth of 5.1 per cent in wage employment in 2022 compared to 6.7 per cent in 2021. The decelerated growth, noted the Economic Survey 2023, could partly be attributed to globalisation and competition from cheap imports.

The sector enjoyed an upturn in credit access, with commercial banks and industrial financial institutions approving in excess of Sh529.6 billion in credit in 2022, an increase from Sh465.4 billion in 2021.

Credit advanced by industrial institutions in the period under review also increased to Sh2.4 billion.

Direct employment in the Export Processing Zones (EPZ) also expanded by 25.3 per cent to 82,764 persons in 2022 compared to 66,053 persons in 2021, while the value of capital investment in these zones increased by 7.9 per cent to Sh134.3 billion in 2022, the Economic Survey noted.

The sector's growth slowed down to 2.7 per cent in 2022 compared to 7.3 per cent in 2021. Drought was blamed in part for slowing down the manufacturing of food, beverages and tobacco. "The decelerated growth was partly attributed to low agricultural production especially food crops that are the main inputs to agro-processing," the survey says. Gross value-addition attributed to food manufacturing rose by 0.6 per cent in 2022, driven by manufacture of beverages (2.6 per cent), sugar (13.8 per cent) and bakery products (6.3 per cent).

The manufacturing sector employed 330,000 employees in the private sector in 2022, up from 314,000 in 2021, and 23,000 in the public sector from 23,300 in 2021.

Total wage payments in the sector hit Sh203.6 billion, up from Sh178.8 billion in 2021 and had 3.2 million informal workers, only second to wholesale and retail trade, and hotels which had 9.3 million informal workers.