Manufacturers now eye 20pc contribution to GDP growth

Manufacturers have detailed what it would take to move the sector’s contribution to 20 per cent of the country’s Gross Domestic Product (GDP) in just seven years.

Kenya Association of Manufacturers (KAM) has also pointed out some of the shortcomings in the economy that need to be addressed to realise this goal.

The lobby has proposed raising Kenya’s global competitiveness, deploying an export-led growth strategy and developing Small and Medium enterprises as some of the pillars of a robust manufacturing sector.

KAM Chief Executive Anthony Mwangi noted how the sector has been shrinking over the recent past, from 11.16 per cent of GDP in 2011 to the current 7.2 per cent.

But despite the drop, Mr Mwangi noted, the sector’s output has been growing.

“It is because other sectors of the economy like wholesale, telecommunication, banking and retail have been growing at a faster rate than manufacturing,” he said.

However, the sector's potential, particularly its trickle-down effect on the economy and the labour market makes it a pillar of development.

He said the global competitiveness of manufacturing should be enhanced.

“We are competing with everybody - the Chinese, and the Americans - so we cannot lock ourselves in and say we are the hub of manufacturing by comparing ourselves with Uganda and Tanzania, who are very aggressive as well,” said Mr Mwangi.

He underscored the importance of manufacturers to other facets of the economy such as agriculture.

“We are the off-takers of the products grown by our farmers. But do farmers actually know or do we have a direct relationship with our farmers? Do we know where those products come from ourselves?” he posed.

“Can we step back and share information? If it is maize flour, for instance, we buy 200,000 metric tonnes of maize annually, but farmers do not know that.”

Mr Mwangi noted that at the moment due to a shortage of peanuts in the country, a 90kg bag of the nuts currently goes for Sh23,000, most of it being imported from Malawi.

“We import tomato paste and sauce from Egypt, things that we can grow. But do farmers know when they grow peanuts or tomatoes there are off-takers?” he posed.

The lobby proposes a raft of measures to improve the ease of doing business in the country, among them a review of the tax regime and the cost of power as well as ending the duplication of the roles of some of the regulatory bodies.

KAM also wants an end to illicit trade, which eats into manufacturers' market by 40 per cent.

"We have been seen for some time as a big boys' club, but on the contrary, 52 per cent of our members are SMEs. So how do we ensure we integrate SMEs into this and work for big organisations? How do we ensure we have them part of manufacturers like Simba Corp, Mitsubishi or Isuzu?" posed Mr Mwangi.

KAM Head of Policy and Research Job Wanjohi reflected called for predictability in the tax regime.

“If we know inflation adjustment will not be changed every year but every three years, that brings predictability and sustainability,” said Mr Wanjohi.

He said the commitment by President William Ruto to this effect would be a big win for manufacturers of excisable goods, who have been adversely affected by tax increments in the recent past as a result of upward adjustments in stamp duty and inflation.

Mr Wanjohi at the same time urged the State to consider intervening in bringing down the cost of industrial inputs.

He faulted the ongoing process of setting up a Kenya Sugar Research Institute, noting that some of the responsibilities the institute is poised to take up are already under the ambit of other organs among the National Environmental Management Authority (Nema).

“We have two fees charged over the same role. If we can see a reduction it would drive down costs and increase our global competitiveness,” said Mr Wanjohi.

On the cost of power, he urged the government to tame system losses, noting that prices have gone up to 0.20 US cents per kilowatt hour from 0.18 US cents.

“We have been complaining about the cost of power, but now it has increased. This is over and above forex depreciation, labour and minimum wage,” he said.

“Instead of (upward) revision of tariffs, why can’t we look at system losses, which stand at 22.4 per cent, meaning for every 100 units, we are losing 22.4 units.”

 

Source: The Standard