Interview: Adan Mohamed
What steps are currently being taken to encourage a shift towards value addition?
ADAN MOHAMED: Despite its potential, the industrial sector has not been dynamic enough to function as an engine of growth for the Kenyan economy, as has been the case in many other newly emerging economies. Kenya has thus embarked on an industrial transformation programme, which is the first ever strategic, comprehensive and integrated industrial plan that will support growth in certain critical industries and drive the country’s development.
The programme, which will be pursued over the next decade, consists of a five-point strategy: launching sector-specific flagship projects to capitalise on the country’s existing advantages; building agro-processing centres; cultivating local content for the extraction and infrastructure sectors; enhancing job-creating service sectors such as IT, tourism and retail; and developing small and medium-sized enterprises (SMEs) by improving access to finance and encouraging international best practices.
The agriculture sector already represents about 24% of the country’s GDP and will be one of the central growth drivers for industrialisation moving forward. A key goal is to boost exports, which will help to address the current trade imbalance. Some target products have already been identified; tea, coffee and horticulture. Kenya already enjoys a healthy position in all three of these markets, but a number of bottlenecks – including a lack of branding, limited access to credit, low value-added, and a dearth of technological innovation – have limited their growth in recent years. By addressing these obstacles and providing more support, the sector can continue to power Kenyan industrial growth.
Textiles also offer the country a valuable growth opportunity, already accounting for 30% of the country’s industrial exports and worth $415m annually. Taking advantage of the renewal of the Africa Growth Opportunity Act, we plan to grow textile exports to the US to over $1bn in three years, and there is also ample opportunity to serve the local market.
How can Kenya best develop local capacity?
MOHAMED: The common theme throughout the industrialisation programme is to build local capacity and knowledge so that Kenya can capitalise on it’s current economic growth. For example, only 8% of the $60bn regional infrastructure market is served by domestic companies, a figure that should be far higher. Kenyan companies should be providing the construction materials for these products, rather than importing as much as they do. We also plan to significantly grow the services sector, specifically the IT, tourism and retail segments. Kenya is already a tech-savvy society, but there are ample opportunities to enhance IT integration in the public and private spheres, as well as to build IT clusters nationwide.
In what ways can the government provide further support for SMEs in Kenya?
MOHAMED: The industrial transformation programme highly values the role played by SMEs in the country’s economic growth, especially considering that they account for 83% of current employment in the country. The government has made plans to improve the business environment for SMEs, as well as providing a ready market by allocating 30% of all government procurement to them. There are various funds facilitating access to financing and private capital is available. In addition, we are moving towards international best practices through model factories.
We also see significant growth potential in the agro-processing industry, which currently accounts for only 3.2% of GDP, 2.4% of formal employment and 8.5% of exports. The government has already identified a number of different locations that are particularly suited for the development of agro-processing.
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