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The prevailing discourse on Africa’s economic development has shifted from whether the region will develop, to how the continent can position itself as the next economic frontier.
The Economic Report on Africa 2015 takes cognisance of the fact that Africa has the potential to experience growth greater than the East Asia countries through industrialisation.
Worryingly, however, is that the continent’s performance has been volatile, with short periods of acceleration followed by long periods of deceleration, underscoring serious shortfalls in some areas, notably in industrialisation and economic diversification of many countries, a case not unique to Kenya.
The recent launch of Kenya’s 10-year Industrial Transformation Programme, which in some quarters has been criticised for being a tad late, informs the stance by the Government in pulling out all stops towards industrialising the country.
Industrial development remains inextricably linked to generating impetus in transforming the Kenyan economy to middle income status by 2030. The vision, to move manufacturing back to Africa due to high production costs in other traditional markets such as Asia and Europe as well as volatile commodity prices, is achievable if the recent plunge of Glencore’s shares, an Anglo-Swiss commodity trading giant is anything to go by.
However, the gains from industrialisation will be a long time coming if Kenya remains largely dependent on the agriculture sector, continues engaging in a narrow export base with low value products, high trade costs and inadequate access to global value chains and markets.
In recent years, Kenya’s export base has stagnated at 15 per cent of GDP while imports have grown by 40 per cent of GDP. This is a trend that has implications on the country’s growing trade deficit.
Trade-induced industrialisation is poised to yield structural transformation in Kenya through inclusive growth, efficient utilisation of resources and economic diversification. This transformation will provide unique opportunities to generate direct and indirect employment, foster strong forward and backward cross-sectoral linkages and sustain economic growth.
The recent statistics by the Kenya National Bureau of Statistics indicate a favourable economic outlook for the country. This is supported by a relatively broad-based growth, with oil discovery, infrastructure development, agriculture, services and domestic demand as the main drivers. Medium-term prospects indicate risks and uncertainties for the country, with fragile recovery of the tourism industry amid declining foreign exchange, an unsustainable current account deficit and tapering of global commodity prices boom.
It has been recognised widely that Kenya, like many African countries, needs to correct large trade deficits, innovatively create employment for the working age population, and consciously design trade policies that will favourably contribute to industrialisation in the years ahead.
At the heart of a country that’s gearing towards middle income status by the year 2030, the Industrial Transformation Programme has prioritised 10 flagship projects in sectors the country has a competitive advantage. However, agro-processing, fisheries textiles and apparel, leather, oil, gas and mining services will be important in leading the country to a trade induced industrialisation.
