The contribution of the manufacturing sector to the economy and jobs has been declining over the past five years, reveals a NationNewsplex investigation.

The sector’s share of the gross domestic product (GDP) shrank by more than two percentage points from almost 11 per cent in 2013 to 8.4 per cent in 2017, according to the 2018 Economic Survey. In 2016, manufacturing contributed 9.1 per cent to GDP, a drop from the previous year’s 9.4 per cent and 10 per cent in 2014.

Manufacturing contribution to the economy contracted more than any other sector during the five years under review followed by education whose input to GDP declined by 1.2 percentage points and real estate (0.5 per cent).

The trends remain unpromising yet Kenya may not meet its ambitious goal of becoming a globally competitive and successful upper-middle-income country with a high quality of life by 2030, as outlined in Vision 2030, without a strong manufacturing sector. Currently, the country is a lower-middle income economy.

Globally, manufacturing has been the engine of innovation and economic growth since the industrial revolution in the 19th Century.

Figures from the World Bank show that the value added per worker in manufacturing firms has declined steadily since the 1970s, which points to structural issues.

The stagnation in the sector is partly due to low overall productivity and large efficiency differences in firms across subsectors, which allows uncompetitive companies to remain in business, according to a recent World Bank Kenya Economic Outlook report.

The industry also fares badly when compared to the largest sector agriculture, forestry and fishing whose contribution to GDP expanded by over five points to a third within the five years under review, the highest increase, followed by construction and financial activities (about one per cent each).

Food production is the dominant manufacturing activity with figures from the Kenya National Bureau of Statistics showing that two in five shillings that the industry contributes to GDP is from the food, beverage and tobacco subsector. This fact and the dominance of the agriculture, forestry and fishing sectors are signs that Kenya largely remains an agricultural economy.

All the other sectors, apart from the two, contribute less than nine per cent each to the GDP.

Salaried employees

Manufacturing growth also significantly trails overall economic growth. The sector posted a marginal growth of 0.2 per cent in 2017 compared to 2.7 per cent the previous year. But the overall economy grew by 4.9 per cent in 2017, which was 25 times the pace at which manufacturing grew. The economy also grew by 5.9 per cent in 2016, a pace double that of the sector.

The deceleration was partly attributed to uncertainties related to the 2017 General Election, high cost of inputs and stiff competition from cheap imports. Largely, most activities in the sector recorded significant decline leading to the slowdown experienced in 2017.

Figures from the World Bank show that the value added per worker in manufacturing firms has declined steadily since the 1970s, which points to structural issues.

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