NAIROBI: At the official opening of the Kenya Association of Manufactures (KAM) House last week, President Uhuru Kenyatta directed Government ministries and parastatals to increase the amount of locally manufactured products that they buy, to build the Kenyan manufacturing industry.
The President’s call to ‘buy Kenyan and build Kenya’ is a step in the right direction. We definitely need to raise the share of manufacturing in GDP from the current 10 per cent to at least 25 per cent to succeed in this front. Buying goods made in Kenya will promote manufacturing and encourage new companies thereby creating employment.
Given the size of our domestic market of goods and services, the President’s vision is no doubt a practical idea, not only from the point of view of the scale of local and regional consumption, but also the opportunity it holds for the export of surplus production. No country can sustain an import-led economy forever.
The ‘Buy Kenyan, build Kenya’ campaign would only make sense, however, if there were Kenyan alternatives to foreign products. But there aren’t Kenyan alternatives for many things consumers need. You can’t buy much Kenyan made goods even if you wanted to.
Similarly, there are lot of products that simply aren’t made in Kenya. That is why we need to prioritise ‘Make in Kenya’ ahead of ‘Buy Kenyan’. And we can’t do that until when we bring down the cost of doing business in this country. The World Bank’s 2015 Doing Business report ranks Kenya 143rd in registering a business, 151st in getting electricity connections, 136th in registering property, 153rd in ease of foreign trade, 134th in resolving insolvency, and 137th in enforcing contracts.
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Unless we address these issues, it would be difficult for us to make things competitively. Many of the issues fall within the Government’s jurisdiction, and businesses don’t have the means to impose these reforms.
President Kenyatta’s administration would thus need to radically de-bureaucratise, deregulate, change its officers’ mindsets, cut paperwork and remove the notorious legal and infrastructure hurdles to starting and doing business in the country.
Business people need freedom to make or service anything easily, anywhere, at a reasonable cost in a competitive environment. If this happens, Kenyan businesses will boom, jobs will be created and exports will rise.
‘Make in Kenya’ and ‘Buy Kenyan’ will then become an outcome, not a slogan or policy
More importantly, we would also need to address the underlying structural weaknesses that is preventing us from industrialising.
First, our education system is a mess. Kenya needs a lot of skilled workers. But when people come out of universities today, they are unemployable. There is definitely a disconnect between the skills and aptitude of the majority of graduates and the needs of industry. The universities, Government and corporate Kenya would have to address this and the need for innovation of new products and new industrial processes and claim important shares of new technological progress.
Second, we need to address the problems of land acquisition. It is a big problem for expansion and new businesses.
When three quarters of an acre plot in the Arboretum area is advertised for Sh1.3 billion, you wonder what type of business one can run there to recoup that level of investment in a reasonable time.
A bigger contribution to high cost of operations comes from the exorbitant cost of real estate, relative to our level of development. A lot of businesses have to buy either a high-cost property or pay high rent, making their products costlier.
The recently introduced capital gains tax on properties does not help either. Again, stakeholders need to come with a game plan to bring down real estate prices, which will be the biggest boost for consumers and businesses alike.
Third, domestic businesses and especially SMEs have little or no access to lower-cost capital from local and global sources. They have to borrow at high rates from local banks.
The Government has been unable to address this issue and lower cost of capital and unless this is addressed, it would be difficult for us to produce competitively priced goods for exports or for domestic demand.
Finally, the President’s new economic doctrine will work only if Kenya is sincerely wedded to a strong self-help philosophy to become a regional leader in manufacturing.
Unfortunately, that spirit seems to be lacking among most principal stakeholders, bureaucracy and legislators; all long suffering from a tunnel vision of making a quick buck by hook or crook.
The President needs to go after the omnipresent cartels that have ruined our economy. The maize, sugar, milk, fertiliser, fuel, you name it, cartels that have completely destroyed the supply side of the economy would need to be uprooted. They are the biggest threat to our economic prosperity.
We need to shift the debate beyond the ‘Buy Kenyan and Build Kenya’ slogan, and discuss long-term prescriptions for boosting manufacturing.
And we would need to go quickly from statements of intent to real action on the ground if we really are to locally produce goods that we can then ask Kenyan to buy.
