Kenya’s industrialisation (manufacturing and high technology services) has featured frequently in this column. I have repeatedly made the case that it is the surest way to create jobs and increase incomes. It is fitting that, on this first day of 2022, we recap some of the key arguments.
In the tradition of Vision 2030, the Kibaki and Uhuru administrations have fixed key enablers such as infrastructure, ICT and education. This means our most urgent business is to industrialise.
Industrialisation will leverage those enablers to put money into peoples’ pockets. For no nation on earth has become wealthy without industrialisation, and more recently, high technology services.
The now discredited early economic orthodoxy argued that nations should follow comparative advantage. However, no amount of natural resources has ever triumphed over manufacturing. Drilling, conveying and processing oil, for example, requires heavy machinery. Many leading industrial nations import raw materials and export manufactured goods.
Throughout independent Kenya, officialdom has always recognised agriculture as “the mainstay” of the economy. But increases in agricultural productivity require manufacturing. First because the latter is a key market for the agricultural output – from cotton to milk and gum arabica. Processing agricultural output reduces post-harvest loss and gives farmers better prices.
Second, manufacturing is the source of machinery and equipment for agriculture. From tractors to irrigation systems, large-scale and intensive agriculture is not possible without building manufacturing first.
We do not lack policy intentions to industrialise. But policy statements without clear political processes to make the policy succeed are empty. Conversely, political rhetoric without well-thought-out policy is blind.
We have stated our intentions in various sessional papers and in the Vision 2030. However, most commercial policies were designed to block industrialisation. Standards, we have pointed out, are used by many nations as a way to protect their own industry to our detriment.
Many laws made after independence have continued in that tradition. The Export processing Zones (EPZ) and the Special Economic Zones (SEZ) acts give tax preference to imported machinery and equipment.
Industrialisation requires protection and promotion of Kenyan industries. These actions require not only clarity of purpose but courage to push through. This is because the high cost structure of both credit and energy is the source of profits for powerful business interests, which make Kenyan industry uncompetitive.
The reforms necessary to make it possible to industrialise require very broad legitimacy. For this reason, Kenya should approach the next general election with a broad-based nationalist coalition. Nationalist because unemployment and low incomes pose an existential threat to the nation. Coalition because the reforms require support from and direct action by business, organised labour, teachers’ unions and the deep state.
