Exports to Africa can spur industry
Since the 1980s, the manufacturing sector’s contribution to gross domestic product has been fluctuating, stagnating at 11 per cent over the past five years to decline to 8.4 per cent last year.
But manufacturing sector value addition outputs has seen continuous growth, meaning as its pie expanded other sectors gained more space.
In 2011-2017, its value grew from Sh438 billion to Sh648 billion and is projected by the Integrated National Exports Development and Promotion Strategy to hit Sh2,235 trillion by 2022 for Kenya to achieve a 15 per cent share of GDP as envisaged in the ‘Big Four’ agenda.
President Uhuru Kenyatta on Tuesday launched the export blueprint, an integral part of his administration’s economic transformation plan that would usher Kenya into the 4th Industrial Revolution.
The strategy aims to grow exports by 25 per cent in the medium term, a key talking point at the ongoing second Trade Week and Exposition.
BIG FOUR AGENDA
Industrial transformation would require 60 per cent of outputs, especially from manufacturing, to be exported. Africa presents an opportunity of a 17 per cent share of the world market for Kenya with others being Asia (60 per cent), the European Union (9), Middle East (2.9), Latin America and Caribbeans (8.3) and the Nafta bloc (5.9).
A focus of the 2018/19 budget on the Big Four will boost the country’s quest for industrial transformation.
Improved healthcare, housing and food security are a prerequisite for a productive human capital necessary for a competitive manufacturing sector.
The deliberate focus on manufacturing subsectors such as leather, textile and agro-processing will enable Kenya to achieve targets in manufacturing and, by extension, value added exports, realising the objective of 1.3 million jobs.
A healthy economy anchors exports as an ingredient for manufacturing sector expansion. The public and the private sectors need to partner to foster competitiveness towards an export-oriented economy.
Over the past five years, the government has created a robust infrastructure network including the standard gauge railway (SGR), lowered energy costs, improved customs services and eased the cost of doing business. Kenya is ranked 80th in the ease of doing business index and aims to be ranked below 50 in the medium term.
The government’s commitment to continually improve on the business environment is a show of commitment to improving the wellbeing of Kenyans.
One of the key areas of focus to take advantage of the market access opportunities is to enhance our productive capacity.
The realisation of the 15 per cent share of the manufacturing sector would require massive investments in the production of raw materials and value addition and fully taking advantage of the infrastructure to reach the world with the ‘Made in Kenya’ brand.
Kenya has signed and ratified the Africa Continental Free Trade Area (AfCTA), signifying its interest to deepen exports to the continent.
Economic history shows improving productive capacity and enhancing market access to neighbouring countries builds a nation’s or region’s base for economic transformation.
The history of the EU, where about 28 countries created a monetary union, invested in massive infrastructure such as SGRs and affordable energy, can be emulated.
In addition, they have created efficient labour and services frameworks.
All these have worked well in wealth creation for the bloc with a population of 515 million, resulting in a robust system of earning foreign exchange, making Europe the most economically transformed continent.
The strong focus by Kenya to realise the AfCTA is a realisation that such an economic model will transform the continent into an economic giant.
Africa’s world market share, the second-largest after Asia, gives Kenya an opportunity for manufacturing sector transformation.
FREE TRADE AREA
Africa is Kenya’s leading value-added exports destination, which needs to be ventured into. Realisation of the Africa Economic Community, in line with the 1991 Abuja Treaty, is on course.
Kenya was the first country to ratify the AfCTA, which envisioned a continental free trade area by last year, customs union by 2019, common market by 2023 and economic and monetary union by 2028.
Faster achievement of the AfCTA will be a key economic transformation milestone for Africa but the 22 countries have to ratify the treaty.
The African market will grow the small- and medium enterprises.
Hence, the National Exports Development and Promotion Strategy has identified key sectors to take advantage of this opportunity: Manufacturing, handcrafts, livestock, textile and leather.
We must seize the moment and support and contribute to our quest for industrial revolution through the Big Four. The ongoing 2018 Trade Week and Exposition gives us an opportunity.