A World Bank report ranks the manufacturing sector as Kenya’s best bet to in reducing unemployment and creating more wealth should certain strategic support measures be put in place by the Government. According to the report, these measures include improved business environment, removal of market distortions that undermine competition, improved productivity and innovations, enhanced access to markets and enriched collaboration across sector levels.
The World Bank’s Apparel and Textile report finds that manufacturing is crucial to job creation, industrial development, and growth, but has lately been underperforming compared to other growth sectors. Growth in the sector has been shrinking or stagnating, with figures from the Kenya National Bureau of Statistics (KNBS) showing that the sector’s growth in this year’s second quarter shrunk when compared to performance registered in the first quarter.
The report highlights some of the challenges that have bedevilled the value-chains of two manufacturing sub-sectors–apparel and textile and furniture–which have by extension frustrated efforts made towards increased employment and wealth creation in the sector.
The situation was aggravated by challenging in the country’s business environment, a balance of power that is skewed against manufacturing and limited collaboration across value-chains and within sub-segments of each value-chain, indicated the report. Other challenges include uncertainty around sector sustainability, dismal labour productivity, especially in the informal sector, difficulty in accessing viable markets and cheap imports, which threaten locally manufactured products.
The sector was the second largest contributor to Gross Domestic Product (GDP) in 2014 and formally employed 287,500 people. However, according to Kenya Association of Manufacturers (KAM) Chief Executive Officer Phyllis Wakiaga, the sector, which is largely informal, employs more than a million people. The World Bank report noted that official reports do not capture the actual size of the manufacturing sector. For example, only medium and large companies are captured in the Kenya National Bureau of Statistics’ industrial census.
The furniture industry employs 160,000 people, starting from the forestry and going all the way through the manufacturing. The sector produces about Sh46.2 billion of furniture per year and exports Sh22.5 billion. Kenya is the largest producer of furniture products in East Africa.
Employment in Kenya’s leather industry is estimated at 14,000 during peak times. The informal sector accounts for 10,000 of the 14,000 workers. Currently, Kenya exports leather and leather products worth Sh1.4 billion. With the US sponsored African Growth and Opportunity Act (Agoa), Kenya’s apparel exports to the lucrative US market increased from Sh867 million ($8.5 million) in 2000 to Sh33.8 billion ($332 million) in 2014.
“Almost 37,750 workers were employed in the Export Processing Zones (EPZ) to produce this export figure,” read the World Bank report in part. While the country’s fastest growing sectors, financial services and communications, added less than 10,000 jobs per year between 2009 and 2013, a single new apparel factory in the Export Processing Zone (EPZ) created 2,000 plus jobs, according to the report.
The report notes that the four sectors with the highest productivity growth between 2009 and 2013 only accounted for seven per cent of total employment. According to the Economic Survey 2015, the total value of manufacturing projects approved by financial institutions rose by 30.3 per cent to Sh237.9 billion in 2014.
In the private sector, manufacturing sector constitutes about 16 per cent of the total wage employment. In the public sector, it took up about 3.8 per cent. The sector took up 12 per cent of the total wage employment.
However, the World Bank report makes a strong case for Kenya’s manufacturing sector noting that the country has strong local and regional demand fundamentals and that this is supported by the its access to Agoa and other preferential trade terms.
Source: The Standard

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