Uhuru banks on buying local to propel growth

The public outside Parliament buildings on Tuesday. President Kenyatta told Parliament that the State would give locally manufactured goods a priority in public procurement. Photo/Denish Ochieng 

By VICTOR JUMA

In Summary

• President said the State will give locally manufactured goods a priority in public procurement in a bid to revive the industrial sector.
• Likely beneficiaries of the new policy stance include local manufacturers of furniture, pharmaceuticals, chemicals and motor vehicle assemblers.
• If strictly implemented, the plan could alter Kenya’s economic structure for the better, powering a resurgent manufacturing sector to create more jobs.

President Uhuru Kenyatta’s government has pledged to implement policies that will boost the country’s key agricultural and manufacturing sectors and reduce high unemployment rates.

In his first address to Parliament, the President said the State will give locally manufactured goods a priority in public procurement in a bid to revive the industrial sector.

“My government will review and amend the Public Procurement and Disposal Act to establish a legal obligation on government to buy Kenyan first and create procurement quotas for youth and women,” Mr Kenyatta said.

The manufacturing sector’s contribution to the economy has stagnated at 10 per cent in the past six years even as the services sector — which employs relatively fewer people — continued on a steady growth path.

Aside from creating more jobs and earning foreign exchange, the manufacturing sector is critical to reversing Kenya’s negative trade balance that saw the value of imports exceed exports by Sh804 billion in 2011.

The government remains the single biggest buyer of goods in Kenya and the President is keen on using this muscle to revive manufacturing, which has suffered from consumers’ preference for imports in the past two decades.

(Read: Uhuru hopes to grow economy on strong industries)

Likely beneficiaries of the new policy stance include local manufacturers of furniture, pharmaceuticals, chemicals and motor vehicle assemblers.

If strictly implemented, President Kenyatta’s plan could alter Kenya’s economic structure for the better, powering a resurgent manufacturing sector to create more jobs and reduce the high volume of imports that put pressure on the shilling.

Kenya’s services sector has steadily expanded in the past five years as manufacturing and agriculture stagnated or declined, setting up the country for a service sector-driven economy that needs a smaller workforce.

Banks, hotels, ICT and real estate are among sectors that have registered strong growth even as manufacturing declines on increased competition and high operating costs.

Kenya’s manufacturers will also get a boost from President Kenyatta’s plan to deepen trade in the East African Community, which has emerged as a key market for local products.

Mr Kenyatta said his administration will boost agricultural output by expanding irrigation to make more land productive. Arable land in Kenya is estimated at only 10 per cent, with large parts of the country being arid or semi-arid.

“We must invest in and modernise our agriculture and open up at least one million acres of new land through irrigation in order to end food insecurity,” he said.

Agriculture and manufacturing together with auxiliary sectors like retail employ nearly 80 per cent of Kenyan workers, but their contribution to the GDP has stagnated or declined in the past decade, weakening the country’s capacity to create new jobs even as the population grows by one million people annually.

The president said 40 per cent of Kenyans are currently jobless, adding that youth unemployment is as high as 70 per cent.

Mr Kenyatta also proposed specific major policy changes aimed at empowering ventures by women and youth, who have been identified as the most vulnerable in terms of economic opportunities.

These include the consolidation of the multi-billion-shilling revolving youth and women funds into a kitty that will be accessible at the constituency level, ending the current model where the funds have been run separately and centrally from Nairobi.

The new fund will be modelled on the Constituency Development Fund system. The outgoing youth and women funds have been criticised for high levels of default, mismanagement, and their inefficient disbursement system.