Manufacturing Sector Recorded Slower Growth in 2015

The manufacturing sector grew by 3.5 percent in 2015 compared to 3.2 percent recorded in 2014. The growth was partly attributed to reduced cost of inputs such as petroleum products and electricity.

Overall, credit to the manufacturing sector increased from KSh 237,422 million in 2014 to KSh 290,069 million in 2015. The value of manufacturing projects approved by industrial financial institutions also increased to KSh 1,092.0 million in 2015 from KSh 569.1 million in 2014. The sector was negatively affected by cheap imports, high cost of capital and disincentives to export because of delayed Value Added Tax refunds. 11.2.

In 2015, enterprises operating under Export Processing Zone (EPZ) program recorded increase in employment, exports, imports, and expenditure on local goods and services. Total EPZ sales went up by 12.1 percent from KSh 57.2 billion in 2014 to KSh 64.1 billion in 2015. 11.3. Producer prices as measured by Producer Price Index (PPI) increased by 3.9 percent from 109.17 in 2014 to 113.43 in 2015. The increase was mainly due to high cost of imported raw materials arising from depreciation of the Kenya Shilling against major currencies.

Formal employment in the manufacturing sector went up by 2.7 percent from 287.4 thousand persons in 2014 to 295.4 thousand persons in 2015. The sector contributed 11.9 percent of the formal jobs in the country. Food products and beverage industry contributed about one third of employment in the manufacturing sector.

Intermediate consumption grew by 3.9 percent compared to 4.7 percent in 2014. The slowed growth was due to lower cost of energy in 2015. Value added increased by 19.4 percent to KSh 644.1 billion. As a result, value of output at current prices increased by 8.5 percent to KSh 1,986.7 billion in 2015.

The manufacturing sector quantum index (volume) recorded a slower growth of 3.9 percent in 2015 compared to 6.3 percent in 2014. Most industries in the sector, recorded growth, key among them being the manufacture of pharmaceutical products; beverages; meat and meat products; and non-metallic minerals and plastic products. There was a notable decline in fish processing; other food products, which include tea and coffee; tobacco products and leather. Manufacturing and related products; rubber products and basic metal.

Production of meat and meat products registered a 9.3 percent growth in 2015. Beef production went up from 419.1 thousand tonnes in 2014 to 459.4 thousand tonnes in 2015. Production of sausages and processed chicken went up by 10.7 per cent and 0.1 per cent, respectively. However, production of processed fish dropped significantly by 21.8 percent. As a result, the quantities of fish and fish preparations exported declined by 29.0 percent from 15,213 tonnes in 2014 to 10,801 tonnes in 2015.

Preparation and preservation of fruits and vegetables increased by 2.3 percent in 2015 after a contraction of 15.9 percent in 2014. Quantities of prepared and preserved vegetables went up by 12.1 percent while that of prepared and processed fruits dropped by 2.3 percent during the year under review. Manufacture of animal and vegetable fats and oils increased by 6.5 percent in 2015. The amount of processed vegetable oils increased by 12.2 percent and that of vegetable fats grew marginally by 0.8 percent during the review period. There has been a rising demand for vegetable oils compared to vegetable fats over the years mainly due to health awareness and concerns.

Read: State of the Manufacturing Industry in Kenya

Production of dairy products registered a growth of 8.2 percent in 2015. Quantity of processed milk increased by 4.3 percent from 419.3 million liters in 2014 to 437.5 million liters in 2015. The rise is attributable to favorable weather conditions in 2015, which led to increase in pasture and fodder. Production of yogurt and other fermented milk went up significantly by 24.5 percent during the same period. Grain mill products recorded an impressive growth of 7.8 percent in 2015 mainly driven by increased processing of wheat flour which grew by 11.1 percent from 988.7 thousand tonnes in 2014 to 1,098.6 thousand tonnes in 2015. Maize milling in the formal sector rose marginally by 1.7 percent while milled rice went up by 3.1 percent from 60.5 thousand tonnes in 2014 to 62.4 thousand tonnes in 2015. Production of animal feeds grew by 4.5 percent.

Manufacture of bakery products increased by 7.2 percent in 2015, of which biscuits and bread went up by 9.5 percent and 7.0 percent, respectively. Production of sugar increased by 6.6 percent from 592.7 thousand tonnes in 2014 to 632.0 thousand tonnes in 2015 mainly attributable to improved supply of cane. However, the sugar industry is still under global and regional threat due to high cost of production, and is therefore noncompetitive in the region and locally. Other challenges are low yields; obsolete milling technology, which leads to inefficiency; and poor transport infrastructure in accessing the cane from the farms. Manufacture of cocoa, chocolate and sugar confectionery registered a marginal growth of 0.8 percent in 2015. Sweets and chewing gum posted growths of 1.2 percent and 1.0 percent, respectively.

Article by Vera Shawiza.