Economy: Unregulated importation hurting industrialisation

Riziki Dunstan

Kenya’s manufacturing sector is yet to find a lasting solution to its various structural problems. This has resulted in a slow growth rate in terms of output and exports, low level of investment, high concentration of manufacturing industries, which are necessary to be put on positive directions for successful implementation of President Uhuru Kenyatta’s Big Four agenda and Vision 2030.

The sector is characterised by low saving investment ratio, low growth, high interest rates and taxes, low productivity and low technology.

Uhuru’s  commitment to industrial growth would aid the revival of moribund and near comatose industries such that jobs that would address unemployment and poverty are created.

Manufacturing generates the strongest forward and backward linkages across other sectors of the economy, which are important transmission links to growth and job creation.

With a strong multiplier effect, manufacturing has the potential to generate faster growth of the employments in the organised sector than other service sector this will ease the unemployment plague that is currently facing the nation. 

Apart from generating employment, rapid manufacturing growth drives rapid employment in other sectors too, as the production processes increases demand for raw materials, energy, construction and services from a broad array of supplying industries. Additionally, manufacturing activity raises growth of non-traded services through income effect.

There is a need for the government to provide incentives to support industrial hubs, review the local fiscal and regulatory framework with a view of supporting industrial clusters especially at our ports and along the transport corridors.

The government, in partnership with the private sector ought to revitalise Export Processing Zones through the regulatory incentives  and establish more special economic zone and provide a dedicated  infrastructure to support the hub’s productivity.

This can be best achieved through the facilitation of technology acquisition and transfer within the special economic zones by making available research outputs from local and international research institutes on the manufacturing growth.

Manufacturing prism should be considered as a child of necessity in every nation’s economy for it to accelerate the process of both economic growth and economic development.

The importance of the manufacturing sector in the economic development can not be overemphasised, thus to turnover the economy lies in its manufacturing sector which makes it a heartbeat of economic development.

The dream to transform the economy from non-industrialised sector to an industrialised founded economy should be the motivation of all political regimes, fortunately Jubilee government appreciates this through the Big Four agenda.

The extremely low capacity utilisation in the Kenyan manufacturing sector, caused by huge importation of goods that could be produced locally, Jubilee government should advocate for the expansion of protectionist policies for indigenous producers to save them from extinction.

Most companies in Kenya, after all, are merely struggling to remain in business due to competition with imported cheaper goods. Kenya is, embarrassingly, a dumping ground for all kinds of imports ranging from second hand goods to new ones and from disused ones to even toxic others.

The result, of course, has been a complete erosion of the homegrown capacity to produce and a sabotage of the nation’s interest. Which is why policies are needed to protect local industrial manufacturing in the country and create jobs.

A lot has been said about the destructive culture of heavy importation, whereby the country relies almost entirely on imported goods that can be produced locally.

This unhealthy trend leaves local producers of these items in danger because the imported ones are often far cheaper than the locally produced ones especially because the cost of producing them locally is astronomical.

The result is a warped economy in which the nation’s foreign exchange reserve is often depleted, to revive our middle level industries then there is a need to suggested the enactment of protectionist policies in favour of local production of goods as well as other incentives for them, because no doubt indigenous industries have the capacity to meet local demands.

Our nation has been an penchant for inconsistency in policy formulation and execution, there should be a sustainable industrial policy in place to promote the textile sector most of the manufacturing industries collapsed due to inconsistency in the industrial policy in place.

There are investors who are desirous to resuscitate the comatose industries but who can do nothing without steady power supply and an enabling policy environment. So Kenya must get its priorities right in order to take the necessary leap into industrialisation. The writer is a lawyer and policy consultant at Riziki Consulting House.