In the span of just under a decade, Kenya has witnessed the closure of more than 30 manufacturing plants, shedding light on the challenges posed by an uncompetitive tax and business environment, as well as the influx of cheaper imports into the local market. This concerning trend, analyzed through sector data between 2014 and 2022, primarily focuses on well-established factories with extensive distribution networks.
This wave of shutdowns and the significant downsizing of operations by a dozen other companies have cast a harsh spotlight on the diminishing competitiveness of Kenya’s manufacturing sector. This sector, crucial for providing employment opportunities and fostering economic growth, has historically held one of the highest multiplier effects on the country’s economy, primarily through job creation.
The repercussions of this crisis are particularly poignant given the sector’s pivotal role in mitigating Kenya’s steadily rising unemployment rates, especially among the country’s skilled youth. The manufacturing industry has long been considered a cornerstone for generating decent employment opportunities for the multitude of skilled graduates emerging from universities and colleges annually. However, the struggles faced by the sector have resulted in a scarcity of viable job prospects.
According to the Kenya Association of Manufacturers (KAM), the leading industry lobby group, a handful of these closed factories might have found new life through acquisitions and financial bailouts. Nevertheless, the overall impact on the economy has been undeniably detrimental. KAM’s Chief Executive, Antony Mwangi, highlighted the key factors contributing to these closures and downsizings, emphasizing challenges such as exorbitant taxation, escalating power costs, difficulties in conducting business, and intense competition from imported finished goods.
Of particular concern is the soaring cost of power, which renders Kenya less competitive in comparison to other African nations. This disparity has far-reaching consequences, affecting the nation’s ability to attract investments and sustain industrial growth. Mwangi also underscored the issue of policy unpredictability, emphasizing that Kenya’s industrial landscape experiences annual shifts due to changes in the Finance Act. This unpredictability stands in stark contrast to the stability enjoyed by other countries, making Kenya a less attractive prospect for potential investors.
The manufacturing sector, once a beacon of economic progress, now finds itself at a crossroads. Addressing these challenges and fostering an environment conducive to industrial growth is imperative for Kenya’s economic resurgence and the creation of sustainable job opportunities for its burgeoning skilled workforce.
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