The Value of Investing in Human Capital

The economic stability of any country is measured by the strength of its local industries. The value of a concrete manufacturing base can not be understated especially when we look at its contribution to employment, public finance, investment, value addition, international trade and foreign exchange earnings. According to 2014 statistics, the output from the manufacturing sector was valued at Kshs. 1,821 billion,  directly employing 288,000 people and contributing to 11% of the Country’s GDP.

The desire to increase the contribution of the sector from 11% spurred the Government to come up with the Kenya Industrial Transformation Programme.  A lot has indeed been said about the existing avenues and opportunities in value addition and leather processing, and many others. But the one area I would like to reiterate is that of labour. For the vision of an industrialized economy to materialize it is essential to look into the ways in which we can empower and equip our workforce.  Collectively, as the citizens of this country, we have a shared idea of what economic stability looks like; however in our different capacities at times it is difficult to sustain this idea perhaps because most often than not the  working environments are not as enabling as we imagine they could be.

The issue of proper compensation and providing a sufficiently safe and comfortable environment for our workforce is definitely key.  But more than that is the significance in adding value to human capital by augmenting their skill and knowledge to enhance their own currency and build their capacity for securing the future of our industries.

One way to do this, to this is to leverage our demographic dividend to lay down good foundations for a stable economy in the future. India is one country that has realized how to utilize the working-age populations to build strong industries now for the future. In a study commissioned by the Indian government, Estimating the Skill Gap on a realistic basis for 2022, the demographic dividend for China will be over by 2015 whilst India’s will continue till 2040. We may not have a huge population as the latter, however, we can begin to look at how having a large youthful population benefits our economy towards achieving Vision 2030.  This will depend on our ability to meet the skill challenge by creating jobs along value chains for our agriculture sector and to upgrade existing technology and education in the manufacturing sector.

Human capital development is key to industrial transformation process of economies globally.  A world bank report released two weeks ago, Kenya- Youth Unemployment, Challenges  and Opportunities, sites that the rate of joblessness in the country is almost 40% of our youth, that is 5.2 Million young people. Our unemployment rate stands at 17% compared to those of our trading partners in the EAC specifically Tanzania and Uganda who are at 6%. With 800,00 youth entering the job market each year this trend is alarming. The market is said to create only 625,000 jobs presently, leaving out a huge part of the population . At the same time the report, indicates that gaps in the education and training systems can lead to these high rates of unemployment.

The Education sector would therefore play a key role in the provision of human capital which is futuristic and dynamic. Constitutionally, both national and county governments have a role to play in skills development which in turn is a guaranteed investment attraction by both local and foreign investors. Additionally, the quality and quantity of human capital determines productivity levels in industry including innovation and inventions.

It is also in our interest as industry to get involved in the curriculum development of our schools to produce a workforce that will be agile and visionary in building our nation. It is with this in mind that KAM’s Manufacturing Priority Agenda for 2016 focuses on skills development as one of its key pillars. We are keen to ensure that higher education meets the requirements of Industry. To this end, it is very encouraging to see that the Kenya Institute of Curriculum Development has now embarked on a complete overhaul of the national curriculum, which is intended to address these gaps. Vision 2030’s  Medium Term Plan also singles out education and training as the vehicle that will drive Kenya into becoming a middle-income economy.

Similarly, the Kenya Industrial Transformation Programme (KITP) has also identified human capital investments as key to Kenya’s transition to a higher middle income economy by 2025. The policy framework aims to create over 700,000 jobs and add into Kenya’s gross domestic product (GDP), between $.2 to 3 billion over the same period. The KITP enabler 3 states that Kenya needs to invest in industrial skills for the future economy.

The German Model is a well known example of how to bridge the skills gap. Apprenticeship is a “dual system” in which a balanced curriculum of structured training within a company is accompanied by part-time classroom tuition in vocational and general subjects. Regulation and partnerships are the two principles that make this system so successful.

Kenya is already underway in skills development and enhancing local quality production. For example, Bata is currently carrying out sub-contracting which incorporates start-ups and small businesses to build their technical capacities. At the same time there is a staff training academy at the Bata Kenya Factory in Limuru is dedicated to teaching the SMEs and start-ups of new technologies and strategies that will enhance productivity

Both industry and the Government have a role to play in human capital development.  We all need to step up efforts to ensure that higher education curriculum envisions the expansion of our industries for the future . Kenya’s education policy should be aligned to the requirements of the Vision 2030 as well as the Kenya Industrial transformation Programme.

A skilled and capable workforce that shares in, and contributes to, the benefits and opportunities of  economic expansion and an inclusive growth path is what our country needs. Skills need to be aligned to the dynamic structure of industry and with the vision of securing industry.

Written by Phyllis Wakiaga.

The writer is the CEO of the Kenya Association of Manufacturers and can be reached on ceo@kam.co.ke