State of manufacturing sector in Kenya

Kenya's manufacturing sector has been facing challenges in recent years due to economic crises and increased taxes. However, with the withdrawal of the Finance Bill 2024, the sector is expected to drive economic growth and contribute significantly to the country's revenue. CNBC Africa's Flora Limukii spoke to Anthony Mwangi, the CEO of the Kenya Association of Manufacturers, to gain insights into the state of manufacturing in Kenya. Mwangi highlighted the robust nature of the sector, which currently contributes 7.6% to the country's GDP. While this percentage has declined over the last decade, Mwangi emphasized that it is not due to a lack of growth in the manufacturing sector but rather the faster growth of other industries such as banking, telecommunications, wholesale, retail, and tourism. He noted that the target is for the manufacturing sector to account for 18-20% of GDP by 2030, and outlined four key pillars to achieve this goal. The first pillar focuses on making Kenya a globally competitive manufacturing base by addressing taxation, energy costs, and regulatory challenges. The second pillar is an export-led growth strategy to increase the country's exports, which currently stand at $7.6 billion. The third pillar emphasizes the development of small and medium-sized enterprises (SMEs) within the manufacturing sector, while the fourth pillar advocates for leveraging agriculture for industrial purposes. Mwangi underscored the manufacturing sector's role in revenue generation, highlighting that manufacturing contributes 18% to taxation, equating to $360 billion annually. He acknowledged the impact of the finance bill on the sector but emphasized that revenue collection would continue and urged the government to align expenditure with tax revenues to avoid deficits. Regarding market opportunities, Mwangi highlighted Kenya's access to global markets through agreements such as the Kenya-EU Economic Partnership Agreement and the African Continental Free Trade Area (AFCFTA). He stressed the importance of enhancing the competitiveness of the manufacturing sector to capitalize on these opportunities and drive economic growth. Mwangi also addressed challenges faced by local manufacturers, such as high taxation, energy costs, regulatory burdens, and expensive capital, which have led some companies to consider relocating production bases. He emphasized the need to address these cost factors to promote competitiveness and support initiatives like Buy Kenya, Build Kenya. Mwangi called for a structured approach to addressing taxation, energy, regulatory, and capital costs to enhance Kenya's competitiveness in the global manufacturing landscape.