How Kenya can stop the exit of manufacturers

Battery packaging at the Eveready East Africa Ltd factory in Nakuru, which closed down last month in cost-cutting measures. PHOTO | SILEIMAN MBATIAH 

By CAROLINE MUGO

In Summary

• Building a knowledge economy would make the country more attractive to investors.

The recent evacuation of factory operations by two legendary companies out of Kenya is the latest in a spate of exits by multinationals that is sending a chilling message about the local business environment.

Cadbury, as most still refer to it, (later to become Kraft and currently Mondelez) and Eveready have pointed to lack of competitiveness in their local manufacturing operations as the reason they are relocating part of their businesses to other countries.

Companies like Colgate-Palmolive and Reckitt Benckiser made similar moves some years ago.

Corporations, especially multinationals, are constantly on the hunt for bargain production locations much like they do tax havens.

The bargain locations in the case of Cadbury and Eveready are Egypt and partly South Africa. There are obvious advantages to these locations.

As Kenya grapples with the factory exits on the basis of physical infrastructure hurdles and significantly high cost of doing business, the ground has shifted again.

Competitive advantage has taken a whole new dimension while we are still mapping out roads and the standard gauge rail.

It is no longer just about the hard infrastructure that we are working so hard to put up, but increasingly about a critical element that has emerged in recent years – knowledge.

READ: Eveready opts for Egypt imports as high costs bite

Knowledge is the new frontier in business and has been for some time. In the 21st century, knowledge has emerged as the most important tool for growth that a country could ever develop.

It is has overtaken the conventional focus on physical infrastructure, energy and any other factors of production.

Kenya now has to contend not only with the tangibles but also the intangibles if it is to continue to attract investors.

The definition of knowledge is vast. The dictionary defines it as “the understanding that germinates from a combination of data, information, experience, skill and interpretation”. Knowledge is also defined as “the sum of what is known”.

For the future of any society there is need to equip every member with knowledge and skills, ranging from low to highly specialised, and all should possess equal capabilities to use and apply this knowledge productively for their own social and economic advancement.

This is where the concept of a knowledge economy came from. In this economy, the role of knowledge is to increase people’s capacity for effective action for the benefit of their own livelihoods and the economy.