Kenya is the most developed country in Eastern Africa and still is manufacturing accounts for only 10% of its GNP. Why is that so?
This is because a lot of emphasis has been placed on Agriculture, which is the mainstay of our economy, providing our revenue requirements and also job opportunities for the majority of Kenyans. We can no longer depend on Agriculture. The shift now is towards industrialization. Over the last few years, industry is developing steadily, and the Government is placing great emphasis on industrialization, because we feel that this is where our future lies, and we believe that industry should be able to provide the engine for the growth of the economy as a whole. Over the next few years, the emphasis will be on industrialization, so that we can move away from dependency on Agriculture. Dependency on Agriculture, in our view, will not sustain long term growth of this economy, because we are dependent on determination of prices for our basic commodities, over which we have no control. We are dependent on whether it rains or not, and also because land itself is diminishing because of the ever increasing population.
Industrial growth has had a relatively insignificant contribution to our national gross product, because of the type of policies we pursued in the past. We are slowly moving away from the protectionist regime, and entering an open liberalized economy. We believe that this is beginning to bear fruits, and we believe that we should pursue that because that is the way to do it.
Could you give us a background on the growth rate?
The growth rate in the industry, in the last few years, has been approximately 5%. With all the measures put in place to stimulate industrial growth, we expect this to increase to approximately 15% yearly over the next few years.
What measures are you implementing?
The key measures we have already taken, is to de-link Government from direct involvement in industry. We have achieved a considerable measure of success in that we are placing greater emphasis in private sector development and we believe that with adequate motivation, they are better qualified to handle private enterprise. Our role as government, will be to make the private sector thrive in that they will be able to assist the economy in achieving the set rate of growth.
Towards the end of the 80's, Kenya's policy shifted from protectionist to liberal. What effect did it have on the development of the industrial sector?
That is a very important question. We are convinced as a Government, that it is the correct path for us, to liberalize the economy to the greatest extent possible. In the areas where we have done that, we have seen great improvement in terms of efficiency, greater competition, industrial establishments are looking at their own operations in a critical way, with a view to improving.
A wonderful example is Kenya airways, an airline that was known for its inefficiency. You could not rely on their time schedules. We entered an arrangement with KLM, and today, it is one of the best airlines in this region, and it has been receiving international recognition. We believe that improvement has also happened in other key areas of our economy.
Liberalization has had its own toll. Short-term effects have been disastrous in several ways. We opened our doors too soon, when our industrial sector was not prepared for competition. We have seen a lot of goods coming from South East Asia countries, Europe, South Africa, varied goods, cheap goods, relatively cost effective, that our own goods cannot compete with these goods. Kenyan industries cannot cope with that competition. Some have had to close, others are operating well under capacity, and many people have lost their jobs. The unfortunate scenario is that, certain countries in South East Asia have taken advantage of this, and they are dumping goods into our economy. We will be forced, as a country, to take appropriate measures to protect our own industries, particularly against subsidized goods coming in or dumping.
What are Jua Kali or "hot sun" industries, and what has been their contribution?
The Jua Kali industry, generally referred to as the informal sector, has made a significant contribution, towards the development of industry. These are largely small-scale operations, carried out by indigenous Kenyans. People who have had some form of training have ventured into provision of services, small scale manufacturing, and we reckon that at the present moment, that sector has been growing at the rate of 70% in the last four or five years.
The contribution to the general economy, by the Jua Kali is a gray area. It has not received official recognition in the past. It is the only avenue through which jobs are created at the moment. It is a sector that we are beginning to incorporate into our national planning because we reckon it is making a significant contribution to our GDP.
It is a wide range and it is fairly well spread around the country. If you go to any urban center and even rural areas where there is some infrastructure, Jua Kali is out there. They are the ones who will fix your car when it breaks down out there, they will be the people engaged in small scale manufacturing of various items, steel, plastic, etc. small kiosks selling wares, clothing, etc. It is an important sector of our economy. In many cases, people who have been involved in Jua Kali, are entering business activity for the first time. We reckon they will be the entrepreneurs of tomorrow and so we recognize their contribution. Because of this recognition, the Government is beginning to appreciate some of their problems such as provision of credit. They have no access to credit, to modern technology, to managerial training, and the Government has programs now to make that possible through the Kenya Industrial Estates. This is an organization we plan to strength to provide credit specifically for the Jua Kali sector.
What impact has the setting up of the Export Processing Zones had on Kenya's industries?
The Government has got fourteen gazetted export processing zones. Out of all those, only one is government owned. The others are all privately developed and a good number of them are operating. Whatever they are producing is for export and they are allowed to off-load as much as 20% of their production into the local market after paying the required taxes. There are also cases where they could be allowed, with prior arrangement, to off-load more. Their main purpose is to bring in foreign exchange. | The concept of Technology parks is in-depth. They are not operating as such at the moment. There are plans, through the Export Processing Zones, to develop technology parks. The idea as to set up process functions so that they can export their products and earn foreign exchange for the country and also to transfer technology into Kenya. They have been a resounding success. They have been given a number of incentives, tax holidays etc.
How is the COMESA going to affect Kenya's industrial development?
Kenyan manufacturers found themselves in a situation where they were facing stiff competition from, not only South Africa and countries in the COMESA region, but also from countries further away. But because of the experience they have had in the last few years, they are now bracing themselves for this competition. Most of them are revising their production methods, their own technology, to ensure that they stay firmly competitive in the market.
In regard to the forthcoming COMESA summit, I am aware that the Kenyan companies are aware of the importance of the COMESA summit, the opportunity that the summit will provide to expose them into the wider COMESA market. By and large, the Kenyan manufacturers have an advantage over the manufacturers in the neighboring countries. They have had more exposure and experience, and we should be able to take advantage of this opportunity. It is something we want to be deeply involved in because of the long-term favorable effect to our economy.
What is the ministries future plans?
My immediate concern is to ensure that existing industrial establishments continue to thrive, because it is on the basis of these that the future of industrialization of the country will depend.
My second priority, which is also in keeping with the mandate in my Ministry, is to give encouragement to the establishment of new ventures in our major town and cities, as well as in the rural areas. This will be in line with the country's policy of reducing poverty levels.
My third priority will be to encourage as much as possible foreign investment to come into Kenya, in partnership with local people if possible, or on their own. My role will be to make it possible for such potential investors to come, by way of assisting them to get all the information they may require, by ensuring that the climate is conducive for them to venture into those activities.
In as far as the Jua Kali is concerned, we will try and strengthen local institutions that provide credit, that provide advice and information like the Investment Promotion Council, to make sure that they are in a position to provide these services more efficiently and in a more meaningful way.
The fourth priority is to embark on the actual program. How exactly to go about industrializing this country. What we are trying to do, is that a survey is still going on, to identify the core sectors of the economy, which will stimulate the growth. Once this is done, our mission will be to enter dialogue with the people in these core sectors to support them, so that they can serve as a springboard.
We encourage our existing industrial establishments, to go out and put emphasis on quality products at the most cost-effective prices. This is the only way they can stay in business in the face of global competition. Even consumers should insist on quality products so as to encourage the concept of greater efficiency, in manufacturing, in distribution and at all levels. That will enable Kenyan goods to compete with other commodities. We have the Kenya Bureau of Standards, which is an internationally recognized institution, charged with the responsibility of maintaining quality standards, and we are telling that body to go out and improve their thoughts, so as to supervise compliance and ensure that enterprises produce goods which comply with international standards. We can only industrialize this country if we have organizations, which produce quality standards acceptable everywhere in the world.
Do you have a final Message for our readers?
The most important point is that Kenya is an open society. Kenya is a country governed through the rule of law. Our geographical position gives us great advantages, because it is the gateway to this region. We are telling manufacturers and potential investors, that they can use Kenya to reach a large part of Eastern and Southern Africa region, particularly the COMESA region. We believe that we have adequate infrastructure, a developed banking system, and a relatively developed stock exchange, through which we can mobilize investment funds. We have one of the best ports, the Kilindini Port in Mombasa, we have a road network which traverses the Northern corridor that reaches Central Africa, Sudan, Uganda, and the Government is putting great emphasis on improving this infrastructure for it is critical to investment. We feel that we are a safe investment destination. We feel that we are on the right path. All institutions and infrastructures are in place.
What about the corruption problem?
Corruption has inhibited progress in many countries of Africa. It is not just a phenomenon that is restricted to Kenya or a few countries in Africa. The vice is everywhere. The temptation is very great in a country like Kenya or any other developing country where poverty levels are high. In Kenya, we are very fortunate because this is a matter that is being discussed openly at all levels of society. People are now aware of the dangers of corruption. It is a national problem now, and Parliament has discussed this at great length. The Government is serious in trying to eliminate this menace. The Anti-Corruption Authority is now in place and they have been charged with that mandate and we believe that it will achieve considerable measure, in minimizing corruption to the lowest level possible. |
