Why local manufacturing should matter to political candidates

By Mucai Kunyiha

The election fever is already palpable as more government officials resign to join politics.

Exorbitant taxes, soaring cost of living, poor transport infrastructure, late payments and lack of jobs are some of the issues that Kenyans continue to raise. This makes now the most ideal time for us to engage political candidates to influence their policy making decisions, based on real-life issues facing citizens.

As Kenya Association of Manufacturers (KAM), we have a unique view of the issues borne out of years of experience in the market and engagement with stakeholders. Our insights add positively to the conversation based on real and measurable contribution to the economy, made in the last 60 years, as evidence of our capability, commitment, and tenacity. This is why KAM engages in policymaking, and during the election period, with political parties and actors.

As a starting point, we see three fundamental issues that we ought to be discussing and engaging the political class on – the role of government, productivity, and regulation.

We need a clearer vision of the role government plays primarily to help us determine its size and structure. This is at the root of the much-discussed issue of government borrowing and debts. Inherently, the government has been borrowing to meet budget deficits. We need to seriously discuss what we are spending money on and how much we can spend.

There is much waste in government spending. Besides corruption, we have glaring challenges around parastatals that are constantly losing money, duplicity between national and county governments, a culture of entitlement to high luxury in government and, perhaps worst of all, is ribbon-disease – the compulsion to open new buildings and infrastructure however ineffective or uncompetitive.

All these are underpinned by the erroneous view that ‘the government has money’, a fallacy that ignores the fact that the only money government has is what it takes from its citizens as taxes.

Adjacent to this question is, what role does the public sector play in the economy and where can it bring efficiency and benefits as opposed to bureaucracy, cost and waste. Whereas there is a big role for government in education, health and policy making, it is not clear why we have government-owned enterprises, such as butcheries, transport services, financial lending, and manufacturing with most registering poor performance.

This brings us to the second key area that is applicable to all economies of the world – productivity. Our political lingo often speaks of ‘sharing the national cake’, however, productivity is about baking the cake. Growing the economy is about sustainably baking a bigger and better cake, using less resources. A more equitable form of sharing the cake will make long-term growth more sustainable by creating a real and deep middle class, but this cannot be done until there is production to be shared.

Productivity asks the simple question – how much output are you getting for every unit of input? For instance, in agriculture, we focus exclusively on the price per bag of maize or litre of milk. The productivity question would be how many bags per acre? Litres per cow? Our lack of focus on productivity has resulted in decreasing prolificacy across many sectors, eroding our growth potential and ability to create wealth. This is especially critical in a globalized economy, from which we obtain many benefits, but in which we cannot participate if we are unproductive and uncompetitive. Any political movement that does not address itself seriously to the question of improving productivity is not committed to the foundational growth of our economy.

The third issue of regulation in our economy and public space can be related to the two earlier questions. The number, size and complexity of regulatory structure all speak to the cost of regulation and the impact on productivity. When we have multiple regulators, the temptation by each is to raise resources to finance their existence. This creates costs to the citizens who are doing the producing and dampens productivity, and worse, a disincentive to invest. This then leads to heavy-handed application of regulation and adversarial relations between the public and the regulators that is not conducive to the improvement of productivity. Ideally, we ought to have collaborative, progressive, and developmental relations between all the actors as a means of raising standards and productivity at the same time for the benefit of the entire economy.

These are the foundational economic issues that underpin our collective future. The ideas and choices around them will determine the success or failure of any incoming government.