Capital Markets Authority acting CEO Paul Muthaura (left) with Nairobi Securities Exchange boss Peter Mwangi during the launch of the Financial Reporting Awards at the Sarova Stanley hotel in Nairobi on July 5. Photo/Salaton Njau
Over the past three months, Kenya’s industrial sector has received a shot in the arm from the fresh interests of global manufacturing giants.
India’s listed auto firm TVS Motors this week announced a partnership with Car and General to assemble two and three wheelers in Nakuru, a first for the Kenyan market.
Its rival, Japan’s Honda will in September open a Sh450 million motorcycle assembly plant while South Korean electronics giant Samsung is planning to open the country’s first television and printer’s assembly line.
These conglomerates intend to use Kenya as a
launch pad to the region boosting Kenya’s profile as an industrial hub, a
quest it has struggled to attain recently.
So far, the industrial sector is Kenya’s weak engine. Manufacturing stagnated a long time ago, though it has been the driving force of other successful emerging economies like China.
Ten years ago, Kenya’s industrial sector accounted for about 11 per cent of the country’s economy and its share holds to date despite a decline in the portion of agriculture from 30 per cent to about 23 per cent.
Kenya’s growth has been in the service industry, particularly transport and telecommunications, underlined by growth in the telecoms market and innovations like money transfer service M-Pesa.
The problem with this type of new economy is its thin supply chain, which illustrates its weakened job creation and the fact that it cannot generate a bigger export business to balance an economy skewed towards excessive imports.
This is the reason we are applauding the likes of Car and General, Samsung and Honda. We need to encourage enterprises that will aid in technology transfer and trigger auxiliary business through their long supply chains.
It offers Kenya the best route to wean its economy from the volatile and rain fed agriculture to become a regional hub for high-value industrial products.
But there is a catch: Kenya’s business environment is not conducive enough to attract big manufacturers as illustrated by General Motors decision to shift assembly of pick-ups from Nairobi to South Africa.
We need to ensure that our utilities like electricity and water are sound. The cost of doing business should also be favourable.
This means offering tax incentives and facilities like land—which is emerging as an expensive tool of production.
Regulatory bottlenecks and corruption must be wiped while our education system should be upgraded to a level that can feed the multinationals with skilled labour.
Therefore, Kenya’s new administration has its work cut out in the quest to turn the country into a regional industrial hub.
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