Deliberate action needed to return manufacturing and jobs to Kenya

ODM Leader Raila Odinga during his celebration by Hekima Kaka at Vila Rosa Kempinsky in Nairobi on Friday night October 16, 2021. [Boniface Okendo, Standard]

Kenya has witnessed an alarming exit, closure or scaling down of operations by multinational corporations and other big businesses in the last few years.

They include Coca-Cola, Toyota Kenya, CMC Motors, Eveready East Africa, Cadbury Kenya, Nestle Kenya, Johnson & Johnson, Sameer Africa, Colgate Palmolive, Unilever, Reckitt Benckiser, Corn Products and Procter and Gamble. Some like Toyota and Coca-Cola have consolidated operations and laid off workers.

Mumias Sugar, Ganijee Glassmart, Athi River Mining, East African Portland Cement, City Radiators, Avon Rubber, Nakuru Plastics, Packaging Manufacturers, and Tata Chemicals are among medium-sized firms that have either gone under, scaled down or left. In a nutshell, the list is long and sobering.

Most have moved to South Africa and Egypt, resulting in massive unemployment.

The surest way to get jobs back to Kenya and put the country on a steady path of foreign exchange liquidity is by getting back to big time manufacturing.

Kenya must become the destination for big firms looking for new homes, not the place where firms depart for other countries.

We must also become the home of start-ups that proceed to conquer the region, not a warehouse for foreign goods. Only a few years ago, Nairobi and other towns like Thika and Kisumu had industrial areas that were hubs of humming factories, working 24 hours in steady shifts.

Today, the once vibrant factories have become warehouses stocking goods from China, India and Turkey. Where we once had a stream of workers walking out in the evening as others walked in, now we have two or five, mostly watchmen and messengers handling warehouses.

Through acts of omission and commission, we have aided the departure and death of thousands of jobs and left our people desperate.

The immediate challenge we face as a country is to revive factories that are idle and help those operating below capacity to operate fully while we also start a stream of new production plants and industries.

We are the largest and most developed economy in the East African region. We also have several advantages that are supposed to propel our industrialisation, including opportunities for value addition in agriculture, favourable trade agreements, advanced infrastructure, educated workforce, highly developed ICT, telecommunications sectors and banking sectors.

Yet our industrialisation has been on the decline for a while now, falling from 7.8 per cent in 2018 to 7.5 per cent in 2019. The Kenya Vision 2030 targeted a 10 per cent annual growth. Something has gone very wrong.

Companies that have left or scaled down operations in Kenya consistently cite specific problems that don’t seem to be going away: High cost, low quality electricity, unfair competition from cheap imports including substandard, dumped goods and a hostile legal regime. Others are corruption and red tape, multiple taxation, uncertainties with VAT refunds by Kenya Revenue Authority as well as inadequate industrial and physical infrastructure facilities, including lack of serviced industrial land and parks and high cost of land.

The contradictions point to something very wrong. Kenya has one of the most developed power sectors in sub-Saharan Africa. We also have abundant energy resources including hydro, geothermal, wind and solar.

Yet our energy is still too expensive and too erratic to keep businesses here.

It is clear that the sectors and institutions that are supposed to aid the growth of industrialisation here have instead aided its slow death.

Getting jobs back into Kenya will require that we undertake fearless, ruthless and radical surgery in the relevant sectors and entities in a very deliberate and consistent manner that also holds people to account.

Reforms in the energy sector must address both how to ensure reliable supply and how to keep prices affordable for the poor, vulnerable, and MSMEs.

The sector’s reform needs to run hand in hand with that of bodies like Kenya Bureau of Standards, Anti-Counterfeit Agency and KRA. These bodies must consistently be treated as national security concerns and they must be made to appreciate this.

The energy sector is going to require real professional, clean and patriotic leadership if it is to take us to the next level through efficiency in generation, transmission and distribution of electricity.

The recent presidential action in the power sector points to a determination in that direction.

Hopefully, this will mark the beginning of the country dealing with the power sector’s opaque and parasitic procurement processes, compromised distribution infrastructure and high technical and commercial losses that many times are arranged to benefit a few individuals, sabotaging the nation.

We must make electricity available in large and reliable quantities and reduce its cost if we are to keep manufacturing going. International standards require electricity costs should be below $0.09 per Kilowatt hour. Ideally, however, Kenya should provide power at $0.07. Countries attracting big manufacturers are selling power at between $0.03 and $0.05. In Egypt, power sells at $0.04.

Once we fix the energy sector and the bodies responsible for preventing cheap imports and counterfeits from reaching and destroying our country, once we streamline taxation and ensure efficient VAT refunds, then we can embark on a realistic journey to local manufacturing and actualise a policy of BUY KENYA, BUILD KENYA.

With necessary conditions made right, we can start a process that makes Made in Kenya not just an aspiration but a powerful institution supervised by, and answerable to, possibly, the highest authority in the land. It is too critical an idea to be left to agency with its bits and pieces cutting across several ministries.

We may need to go further and come up with a Buy Kenyan Act that makes it an offence for State officers to buy from elsewhere what Kenya has or can make. That law would also provide a pathway ensuring that what we cannot make, we will strike a deal with the makers abroad to manufacture it in Kenya and employ Kenyans.

We have to get the basics right to ensure that the investments we are toying with today will not collapse the way others did in the past because the fundamentals were wrong.