Local markets key for sustainable economic growth

By Job Wanjohi

Sustainable economic development is based on a thriving manufacturing sector, that creates employment and wealth.

The Government’s Big Four Agenda has singled out the manufacturing sector as one of the key drivers of economic growth. The Agenda seeks to increase the sector’s contribution to 15% to the GDP and create 1.3 million jobs by 2022. To achieve this Agenda, the sector needs a conducive business environment, and most critical, access to markets at local, regional and international levels. 

In any country, the Government is the largest consumer of goods and services hence, the greatest opportunity for the sector, particularly SMEs, lies in the public procurement processes. Unfortunately, the Government of Kenya is increasingly preferring imported goods at the expense of the locally manufactured goods, in the process, undermining efforts towards the achievement of the Big 4 Agenda. According to the Central Bank of Kenya, between January and April 2018, imports by public entities grew by 133% in comparison with the same period a year ago. 

Hence, it is important that we ensure that public procurement is a key industrial strategy aimed at supporting local industrial development. This is where the Buy Kenya Build Kenya Strategy comes in. The Strategy aspires to promote consumption of locally produced goods and services by the public and private sectors as well as the citizens. Its success is therefore dependent on an effective participation of all the stakeholders in particular from the National and County Governments, the Private Sector players, the Civil Society and the citizens. 

How then can we promote national consumption of Kenya products?

First, the government should finalize the Preference and Reservation Regulations under the Public Procurement and Asset Disposal Act (2015). The regulations will provide a clear procedure and guidelines for smooth implementation of the Buy Kenya Build Kenya strategy and ensure that government spending creates a spurring effect on the economy by supporting local industries.

Second, there is need also to introduce local certificate of origin for authenticity under Buy Kenya Build Kenya, with the single most objective of the government purchasingminimum 40% locallyand deter substitution of local goods with imported during delivery.  

Critically, the scope of the above should consider how much value addition should goes into such a product, what policies should inform the development of local content and what local value threshold to adopt. Hence, the policy framework would address this and effectuate the Public Procurement and Asset Disposal Act which provides for 40% local preference.

The undisputed effect of a progressive local content policy is that it will stimulate the use of local factors of production such as labour, capital, the supply of goods and services, as well as create value in the domestic economy. This will, in turn, attract both local and foreign investments stimulating employment creation, which is desperately needed in our country.

As we continue to promote public procurement of local products, it is also important that both the public and private sectors create awareness on locally manufactured products and encourage consumers to buy local, through such programs as shopping festivals at national and county levels and periodic trade fairs to create market awareness. 

To this end, the Association of Manufacturers launched the Annual Kenya Manufacturing Summit and Expo aimed at promoting locally produced goods and profiling unique Kenyan inventions. Such trade fairs and exhibitions can be replicated in various counties and used as platforms for young businesses to profile their work.

Local industries have the potential and substantial capacity to serve our local markets if only such opportunity is provided. This will be a sure way to grow local industries, create massive employment along the value chains and ultimately, led to the realization of the Big 4 Agenda.

The writer is the Head of Policy, Research and Advocacy at Kenya Association of Manufacturers and can be reached on info@kam.co.ke.