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Why the Manufacturing Sector May Make or Break the Big 4 Agenda

BY Soko Directory Team · April 27, 2018 05:04 am

President Uhuru Kenyatta, upon his reelection, laid down what he termed as the Big 4 Agenda, with four major economic plans that he wishes to accomplish before the end of his second and final term.

Most Kenyans around the country are still excited about the Big 4 Agenda but no one has stopped to think of how they are going to be rolled out.

The Big 4 Agenda brings back the memories of Vision 2030 which after kicking off under President Mwai Kibaki, Kenyans still don’t know whether it already died, is in the ICU or still struggling towards its destination, 2030.

I think, under the Big 4 Economic Agenda, contribution by the Manufacturing Sector is what is going to make it a reality or just an agenda that never came to pass.

Under the plan, the sector’s overall contribution to the gross domestic product (GDP) has been earmarked to grow from 9.20 percent recorded in 2016 to 15.0 percent in 2022.

According to the stats contained at Kenya National Bureau of Statistics, and also in a macroeconomic report for 2018 released by Genghis Capital, the manufacturing sector added 657.95 billion shillings to 2016 nominal GDP.

In order to attain the 2022 goal as stated under the Big 4 dream, the manufacturing sector needs to record a 5-year Compounded Annual Growth Rate (CAGR) of 20.24 percent the 15.0 percent sector contribution of the projected 14.36 trillion shillings nominal GDP in FY2021/22.

This is an aggressive growth considering the sector averaged 2.91 percent on a year-to-year growth in 2012 – 2016 period.

If the President wants to make his dream come true, then his team that has been tasked with implementing the dream in the manufacturing sector should focus on: textiles and apparels, leather products, agro-processing, manufacturing of construction materials, oil, mining and gas, iron and steel, information, communication and technology as well as fish processing.

To help these local sectors grow, the country must first purpose to stop importing what we can produce locally. In the past few years, the country has been importing things that can be produced locally. For instance, why would we go all the way to China to import fish? Why would we go all the way to Brazil to import yellow maize when we can produce our own white maize? We need to set our priorities right as a country.

It should be noted that as at 2016, the manufacturing sector employed 300,900 with the private sector providing 91.16 percent of the sector’s labor force. Under the Big 4 plan, employment in the manufacturing sector is expected to increase by 800,000. This is also an ambitious projection that needs not only planning but the best form of execution.

If the government wants to make this a reality, then the private sector should be made to control the lion’s share. With the ability to provide 91.16 percent employment in the whole sector, with the government producing less than 9 percent, the private sector should not be underestimated.

The government should not rush into opening new industries. There is no time. Known to be doing things in the eleventh hour, 2022 is not far away. The government should start strengthening what we already have both private and public and if there will still be a need, then think of setting up new ones.

Over the years, the manufacturing sector has been curtailed by an influx of cheaper imports – mainly from the Far East and Middle East region – and a reduced share of manufactured exports in the regional market. In addition, there is a myriad of challenges facing the industry. Such challenges include; weak institutional, legal and regulatory framework, high levels of unemployment, low-value addition, and product diversification, low growth of Micro, Small and Medium Enterprises (MSMEs) among others. How is the government going to address these challenges?

According to available stats, credit to the manufacturing sector averaged 288.8 billion shillings in 2017, which was equal to 12.70 percent of the total credit to the private sector.

Credit to the sector recorded a 5-year CAGR of 12.90 percent in 2012 – 2017 period to perch at 310.6 billion shillings. Although there has been a robust credit growth to the sector, Gross NPLs stood at 9.48 percent as at end 2016 from 2.24 percent in end 2012.

Although the focus has been laid on the Big Four sectors, the 2018 Budget Policy Statement is sketchy on explicit financing to meet the priority objectives set to be gained under the Manufacturing pillar.

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system. Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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