The exuberance of Kenya becoming a newly industrialised middle-income country as envisaged in the Vision 2030 has been gradually dimming.
Retrospectively, the dwindling marginal contribution of manufacturing sector to the economic growth has aborted Kenya’s vision of becoming an industrial hub.
However, a recent collaborative economic transformation assessment between Kippra and Africa Centre for Economic Transformation offer a prognosis.
The assessment embodies an appraisal of Kenya’s economic transformation as chronicled in the Kenya County Economic Development Outlook (Ceto). Kenya Ceto applies a growth analytical framework to evaluate diversification among other indicators. Diversification measures the relative size of the manufacturing and services sectors and the range of exports using four indicators.
The assessment reveals worsening diversification attributable to first, the declining agriculture sub-sector contribution and stagnation of the manufacturing sub-sector.
Second, the assessment unveils geographical disparity based on industrial production with over 80 percent of Kenya’s manufacturing gross‑value‑added is generated by just 10 of the 47 counties.
Third, the assessment inferred the dominance of resource-based industries associated with low technology, lower profit margin and lower labour earnings.
Fourth, the findings show that for Micro Small and Medium Enterprises (MSMEs), production diversification is influenced by enterprises size and the gender of majority owners and firm managers. Fifth, business environment remains a major barrier to diversification.
To address the product and geographical disparities, Kenya Ceto proposes industrial diversification clustering based on comparative advantage of each county. In this, the MSMEs can expand the product offerings and tap into new customer needs.
In conclusion, it is imperative to recalibrate the diversification of Kenya’s economy to mitigate external shocks but more important to rekindle the dream of becoming an industrial hub. Geography and gender present complementary enablers of economic diversification by promoting inclusivity and specialisation of county economies. This much we must do.
Kenya CETO findings reveal that while women are active in entrepreneurship, their concentration in low-productivity, necessity-driven enterprises limits their contribution to economic diversification.
County based competitive advantage can be drawn from the unique geographical, cultural, natural, and institutional endowments of the county and enterprises.
The enactment and implementation of the current Geographical Indicators Bill provides an opportunity to protect and unlock more value of the major commodities exports.
Geographical indicators are designed to link products to their origin, quality, and reputation, allowing counties to leverage differentiated, value-added products such as tea, coffee, honey, traditional crops, minerals, cultural and ecological assets amongst others.
Adoption of a deliberate strategy to nurture high-potential enterprises, especially women-led businesses, to scale regionally and globally is another approach at promoting diversity.
