THE DECLINE OF MANUFACTURING INDUSTRY CONTRIBUTION TO THE CURRENT GDP.




I recently read an article on the newspaper with the title “What Kenya must do to spur manufacturing”. The article stated that the country manufacturing shared GDP has decline from 13% in 2007 to 7.7% in 2018 and this got me think why is that the case??

Manufacturing was one of the big 4 industries contributing heavily to the country economy. So, it doesn’t add why that huge decline in the last 10years. Well, let us discuss some of those factor and maybe try and make sense all this.

Short sight thinking and interest.

Let take it back to the 1990s when the Kenya Dairy Boards pushed for the use of proper milk cooling tanks. The local industry to manufacture such tanks grew immensely by importing refrigeration compressor duty free then assembling a complete cooling tank for purchase here. However, in the late 1990s this proved difficult when the government imposed a 25% duty on compressor while a complete unit could be imported duty free. This lead to the uncompetitive nature of the cooling tank industry. Which begs the question why did the government take such a turn?

Many countries in Africa adopted the “import substitution” because they tried establishing domestic industries to manufacture but they weren’t able to compete with the already existing market. However, Kenya already had a domestic industry that was gradually growing so why adopt the import substitution? This decision made no economic sense as it only served a small group of interested people.

However this is not an isolated incident think about what happened to the sugar production industry in Kenya. 10 years ago the sugar producer could comfortable supply sugar to 70% of the Kenyan population but currently it is down to around 40%. This is now the current story and trend in Kenya no wander the decline in our GDP.

I believe that Kenya can and should do better. If, Kenya wants to grow its manufacturing sector we should stop killing it from the ground. Although this is not an easy step politically but those political leaders who formulate and implement industrial policy must face down the vested interests that have pushed for the “inverse import substitution strategy”.