OBG talks to Adan Mohamed, Cabinet Secretary, Ministry of Industrialisation and Enterprise Development

Interview: Adan Mohamed

How much does manufacturing contribute to the economy, and what factors have caused the sector to lag behind in terms of growth?

ADAN MOHAMED: Manufacturing’s share of GDP has been around 10% for a long time. While this has largely been due to growth in the services sector, it has also been a result of imports and the high cost of operations associated with power, infrastructure and logistics. There has also been a lack of focused policies that address issues affecting segments in which we have natural competitive advantages. Kenya still has the largest manufacturing sector in East Africa, but we need to do more.

What sectors has the Ministry of Industrialisation and Enterprise Development focused on as key priority areas in terms of industrial development?

MOHAMED: In the short term, we are putting a strong emphasis on segments that we believe have a high chance of success, specifically, those for which we have all the necessary ingredients, such as raw materials, skill sets and markets. These segments will also help us in dealing with some of the country’s most prominent social problems, such as poverty and unemployment. It is for these reasons that we have chosen textiles, leather and agro-processing as the segments on which to focus initially.

We have also made a concerted effort to address the main bottlenecks that have affected industrial growth. It is essential for the manufacturing sector that we are increasing the power supply from 1700 MW to 6700 MW over the next five years, while targeting a 40% reduction in overall electricity prices.

Likewise, a reduction in the cost of logistics through investment in the standard gauge railway between the Port of Mombasa and Rwanda, as well as further investment in road infrastructure, will have a multiplier effect on the economy and the overall cost of doing business. The target is to increase manufacturing’s share of GDP to 20% in the next 10 years.

What is the government’s strategy for improving Kenya’s business climate?

MOHAMED: Kenya is already the regional business and manufacturing centre for the East Africa region, with great potential to attract additional investments in the manufacturing and services sector. We already have one of the most liberal and investor-friendly business environments on the continent and will continue to improve in other areas that may impact investors. We are tackling this agenda on two broad fronts: the first is by reducing the overall cost of doing business through major investments in infrastructure, and the second is through improving the country’s ranking on international ease of doing business indices. Significant progress is being made in these two areas, and we are confident that this will lead to a conducive environment for attracting investment into the country.

What do you see as future growth areas that will drive the country’s manufacturing sector, and what segments will Kenya focus on?

MOHAMED: As the overall cost of production increases in traditional low-cost markets in Asia, Africa will be the future home for many industries. As a country, we will reduce the overall cost of manufacturing and combine this with an available skilled, low-cost labour force.

Our initial focus will be on sectors that are labour intensive, such as textiles, leather, agro-processing, business process outsourcing and ICT, as they can be immediate areas of significant growth. We also have over 6000 product lines that have access to the US market under the African Growth and Opportunity Act and so the potential for investment in these sectors is immense.

Emerging sectors such as mining, and oil and gas will also provide new frontiers for manufacturing, and we are laying the foundation in order to ensure that we are ready for the revolution when it happens.