WILL UGANDA MANAGE COMPETITION IN EAST AFRICA?

Kenya in $235m manufacturing plan to boost key sectors, revive factories

Kenya has approved an ambitious industrialisation roadmap that seeks to boost light manufacturing while reviving failed factories at an initial cost of Ksh20 billion ($235.3 million). Photo/FILE 

By JOINT REPORT The EastAfrican

Posted  Saturday, February 22   2014 at  13:31

In Summary

• The blueprint aims to take the country to middle-income status in the next nine years through targeted investments in the energy and transport sectors as well as agriculture sub-sectors — textiles, leather, agro-processing, beef and fishing — where Kenya has a competitive edge.
• The roadmap aims to grow the country’s GDP by between $4 billion and $6 billion per year and increase the country’s manufacturing base from 11 per cent of the GDP to 20 per cent in the next decade, driven by a projected rise in exports.

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Kenya has approved an ambitious industrialisation roadmap that seeks to boost light manufacturing while reviving failed factories at an initial cost of Ksh20 billion ($235.3 million).

The blueprint — tabled before Cabinet for approval two weeks ago — aims to take the country to middle-income status in the next nine years through targeted investments in the energy and transport sectors as well as agriculture sub-sectors — textiles, leather, agro-processing, beef and fishing — where Kenya has a competitive edge.

The government has also earmarked Ksh9.5 billion ($11.7 million) to finance existing factories, especially in the paper, sugar, coconut, coffee and pyrethrum subsectors that are either facing collapse or are already closed.

The roadmap aims to grow the country’s GDP by between $4 billion and $6 billion per year and increase the country’s manufacturing base from 11 per cent of the GDP to 20 per cent in the next decade, driven by a projected rise in exports.

Increased exports would help the country effectively deal with the fiscal and monetary challenges it has faced for the past 10 years as it will reduce the current reliance on domestic consumption as a major driver of growth.

The World Bank, in its latest assessment of the country’s economy, said Kenya’s bid to attain middle-income status depends on its ability to grow its exports.

The Ministry of Industrialisation is requesting Ksh27.9 billion ($324.4 million) to enable it to begin implementation of the grand plan in the next financial year. The allocation, if granted, will be four times the capitation of Ksh7.4 billion ($87 million) disbursed to the ministry in the current financial year.

The roadmap plans to increase the competitiveness of critical sectors such as tea, flowers, coffee and horticulture, which contribute nearly 50 per cent of all exports. In 2012, for example, tea and coffee contributed 26 per cent of the total exports; flowers 15 per cent and vegetables six per cent.

Some of the interventions to be used to improve the critical sectors are: Identifying and removing obstacles to growth — whether they be financial, logistical, or regulatory — and focusing on sector specific growth strategies. The roadmap also plans to grow the textile, leather, agro-processing, beef and fishing industries.

“The economy needs structural reforms to improve the business environment and increase foreign direct investment flows to Kenya,” said John Randa, the World Bank’s country economist for Kenya. “Such reforms will include tax and expenditure measures, which will see an increase in savings and investments in manufacturing exports.”

In the textile industry, for example, 90 per cent of land for cotton is unused, while the leather industry is yet to satisfy local demand. Data shows that in the cotton industry, the national lint demand stands at 111,000 metric tonnes (MT) while local production is at 11,000MT, serving only 10 per cent of the demand. Ginneries have been closed due to lack of raw materials as most Kenyans buy cheap second-hand clothes.

Kenya plans to increase duty on new and used textiles in the next 24 months to cushion the local cotton industry. This should also provide a direct market for farmers, encouraging them to take up cotton growing.

The government plans to invest Ksh9.5 billion ($11.7 million) in six agricultural sub-sectors. The sugar industry requires the largest investment of Ksh5 billion ($58.8 million). The sugar industry has decried inflow of sugar from other countries, which creates a surplus.

Mumias Sugar Company has more than 11,000 tonnes of white sugar in its stores, according to Peter Kebati, the company’s managing director.