Kenya: New president needs strategy to reverse manufacturing decline, KAM says

Manufacturing accounted for 13% of Kenya’s GDP in 2010, dropping to a share of 7.2% in 2021, Alando says. He cites incentives offered by Ethiopia and Uganda in areas such as textiles and agricultural processing as among the reasons for the decline. The drop is “clear evidence” that the new president will need to focus on manufacturing, he says.

Kenya is a net importer overall, as is its manufacturing sector. Alando argues that it’s realistic for the country to become a net exporter within the next five years, which would mean greater foreign currency earnings and protect the economy from shilling weakness. The KAM this year published a manifesto for manufacturing, with the key aims of increasing exports and job creation, reducing the regulatory burden on manufacturing and lifting foreign direct investment (FDI).

Export growth has already been achieved in areas such as automotive, food and beverages, steel and cement, Alando says. Discussions between the KAM and the main candidates have shown that both the main parties agree that manufacturing must be a priority, he adds. “If the government follows the manifesto then the share of manufacturing in GDP will rise.”

Protection for domestic manufacturing, he says, needs to be part of the mix.

• Import duties “need to rise on goods that can be sourced locally,” for example for automotive and steel products, he argues. “We need to provide incentives for local assembly.”
• The DRC’s membership of the East African Community is grounds for optimism, Alando says.
• Infrastructure challenges in the DRC are likely to prevent Kenyan factories from being built there in the short term, with manufacturers more likely to address the market from domestic factories built near the border, he adds.

Russia-Ukraine

Current deputy president William Ruto’s main rival in the presidential race is Raila Odinga. Election campaigning ends on Saturday ahead of  the vote on 9 August. It’s crucial that the election passes off peacefully, Alando says.

Alando was made acting KAM CEO on 1 July following the departure of Phyllis Wakiaga. He is a candidate to become the permanent CEO. The KAM needs stability in its organisation to enable it to engage with the government on policy, Alando says. The process of choosing the new CEO is now in its final stages and Alando hopes that a decision will be made by the end of August.

The Russia-Ukraine war has led to shortages of wheat and maize in Kenya, and pushed up prices for edible oils. The KAM has been discussing with presidential candidates the need for greater domestic food production and a long-term agro-processing strategy,  Alando says.

• Previous attempts to produce more maize domestically were hampered by corruption, he says, but the war means that there is now “more political will. The presidential candidates “see the logic of the proposal.  Now, every citizen is concerned.”
• Kenya needs to diversify from its strengths in tea and coffee production by exporting more food, for example peas and avocados, he says.
• The outgoing administration of Uhuru Kenyatta has achieved “tremendous work” in improving road infrastructure, making better distribution possible in future, he adds.
• The country’s economy has shown a historical pattern of slowing growth prior to an election followed by acceleration afterwards, Alando says. He’s confident the pattern will be repeated this time and that FDI plans will come to fruition after the vote.  “A lot of expansion has stalled due to the election.”

Bottom line

A peaceful vote will be key to the anticipated post-election FDI pick-up.