Industry-Led Growth Strategies Require State Backing To Succeed

by Business Watch Team

The manufacturing sector’s contribution to Kenya’s GDP tumbled from 9.3 percent to 7.2 percent in the five-year period between 2016-2021, according to the Kenya National Bureau of Statistics. This is way below the 20 percent target the sector is aiming to achieve by 2030.

We therefore urgently need to re-think our industrial model and adopt strategies that will make the sector the engine of the country’s transformation into a middle-income economy.

Making Kenya a serious industrial hub requires strategic thinking. Even as we push the government to address concerns raised by manufacturers, notably, reduced cost of power, tax incentives for investment, and a predictable regulatory environment, we must quickly explore ways of enhancing Kenya’s industrial output and efficiency.

Fortunately, a lot is happening globally and I have in mind three mega-trends that are changing the world of industrial operations, which if applied locally, would significantly increase the manufacturing share of GDP but also help the sector recover into a trajectory of sustainable growth.

The first is the optimization of industrial processes using innovative technologies like Artificial Intelligence to create ‘intelligent factories’ of the future. Here, we are talking of not just the automation of industries but also the use of innovative technologies like data analytics to achieve higher levels of throughput and yield while reducing costs. Companies in other countries are experimenting with AI to improve product quality through automated inspection processes and mitigate supply chain disruptions by programming machines to ‘learn’ advanced production planning and scheduling techniques.

As a sector, we cannot escape the disruptive impact of technology. The question is, how do we harness innovative tools like AI to stimulate manufacturing growth and productivity? Where does the government come in to support such industry-led initiatives? Investing in new advanced technology is, of course, not cheap but developing nations like Kenya that harbor industrial dreams must be willing to make the technological leap of faith.

A key reason why the so-called Asian Tigers – Hong Kong, Singapore, Korea, and Taiwan – were able to develop into industrial giants was because of their willingness to embrace advanced technologies despite being relatively poor economies at the time they made this important decision. We must start integrating Industry 4.0 digital transformation into local manufacturing operations to achieve new levels of efficiency to counter the high cost of production.

The second mega-trend is re-skilling and upskilling the local industrial workforce with new technology and knowledge capabilities for the fast-changing global industrial workplace. To work with new technology, workers need digital among other skills as a basic labor parameter. We also need to invest heavily in Science, Technology, Engineering and Mathematics (STEM) in our schools and in addition, equip our learners with ‘soft skills’ like emotional intelligence, critical thinking, communication, creative thinking, and leadership, that prepare them for a competitive industrial environment. Industry can partner with universities and technical training institutions (TVETs) to nurture innovative workers for the new Industrial Age.

The third mega-trend is building a sustainable manufacturing value chain that is capable of withstanding short and long-term shocks. The aftershocks of the global pandemic and the war in Ukraine have forced manufacturers to focus more on strengthening supply chain resilience. Hence the need for the local industry to plan better for unpredictable events including climate-change-related disruptions as a short and long-term growth strategy. The use of predictive tools such as AI should be an integral part of this re-alignment process.

Also, manufacturers are under pressure to meet higher consumer demands and deliver products at a price that meets their expectations. This means going beyond just producing quality products to focusing more on how such products add value to the customer’s aspirations and daily life experiences. Investing in ecologically-friendly production processes not only minimizes negative impacts on the Planet but also makes products more attractive to the growing population of environmentally-conscious consumers. This is one way of producing goods that are more competitive for both the local and global markets.

However, for the above industry-driven strategies to succeed and achieve the 20 percent manufacturing share of GDP within seven years, the government must create the right environment. It is simply not possible to realize enhanced industrial productivity and growth without State support. The Asian Tigers are the industrial giants they are today because their governments deliberately supported industrial innovation via “true industrial policies” backed by heavy investment in infrastructure and education.

In short, achieving double-digit growth and performance in the manufacturing sector requires government and industry to come together and pursue a common objective.

Mr. Malde is Commercial Director, at Pwani Oil Products Limited.

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