Africa is famous for resource and mineral wealth because we dig, we sweat, and we sell. However, this only enables the world and a few locals to get wealthy. But what about the people and the country?
Kenya is getting it right, if manufacturing is in your blood and you understand how economies need it, then Kenya is the
place to be. It’s no longer just about banking/M-PESA, shareholder returns but it’s also enabling industry, job opportunities, creating value-add, to share basic “wealth” for legions of people. And done through thousands of SME companies.
It’s about increasing people’s spending on food, clothes, education, and consumer goods, made locally but critically also exported from Kenya. It’s about the “circular flow of income” a self-expanding supply chain of value.
Why Manufacturing
Competitive manufacturing is critical to enable African change and Kenya is leading this. It brings jobs, but critically it adds value to our economy we all share. Globally GDP contribution from manufacturing is the way to grow national wealth but not just individual, grow employment but not at the expense of other sectors like agriculture, and grow new revenue from exports to global
markets. We have always known this but it’s hard to achieve.
Previous manufacturing nations’ investment moved away from strong but increasingly low shareholder-return Manufacturing to Services, Financial Sector, and Tourism while they buy from more competitive nations (like China).
- UK post war 1950s – Manufacturing contributed 46% to the economy (GDP), a boom period of demand and spending, by 2021 it dropped to 15% but trying to grow again. How effectively?
- South Africa 1990, manufacturing contributed 25% to GDP, and now it is 9%, a nation that has lost it’s “gateway to Africa” status.
In Africa we’ve always relied of agriculture and more recently minerals and resources like gold, oil, copper, and coal. Our “national” mining/resource industries provide a multitude of basic jobs, but as we add little value to these minerals, the economic contribution is poor. We export product and added value. But only a fraction of wealth from these supply chains is shared with our people.
Kenya Changing History
Since the 1950s the Kenya Association of Manufacturers (KAM) has motivated and pushed industries and government to enable growth in the manufacturing sector as they understand what it brings. KAM’s “20by30” initiative to move manufacturing GDP contribution to 20% (from 7.2%) by 2030 is significant not just for Kenya but also Africa.
KAM Chairman Rajan Shah at the October Nairobi KAM Summit talked about the “Golden Opportunity for Kenya” to grow SMEs to the next level (sustainable growth).
He highlighted that a manufacturing contribution increase to GCP by 1.6% per year will:
- Move from 338,000 to 1,000,000 additional jobs
- Increase employee compensation (total earnings) from Ksh 232 billion to Ksh 644 Billion
- Release real value-added growth to Kenya’s economy from Ksh 876 billion to Ksh 5.2 trillion
This was supported by the President Dr William Ruto who attended and then confirmed to the audience of industry-leaders, to move together as a nation, people, policies, and production with government supporting and on the team.
Enabling Kenya’s Leadership in Africa
President Ruto also mentioned that in his manufacturing vision 2030 meant having 8 years to build a whole supportive ecosystem, to move to clean energy to bring down the cost of power, and to move the current 16 million workforce (85% – of Kenya’s 19 million) involved in formal and informal MSMEs to competitiveness. That is global competitiveness as growth has to be led by export, domestic revenues are not enough even with expected growth in local consumption spending.
His Excellency highlighted Tea as a leading local export industry. Tea grown in Kenya is competitive because “we don’t just pick it; we process and pack it for the world – value addition”.
Africa has people, around 1,200m and Kenya 4% of this. Kenya generates $114 billion in annual GDP, around 4% of Africa’s. Average GDP per Capita is $2,175 for Africa with Kenya 3% above this at $2,255. What does this mean? It means Kenya is pretty much an average contributor to Africa, with mostly agriculture-based export trade but with far less dependence on minerals or oil than the leading African export nations. That means there is huge need for manufacturing to grow jobs and exports.
Kenya is technology savvy and ready to exploit “Industry 4.0” (the Fourth Industrial Revolution) where industry rapidly applies technology, increasing interconnectivity and smart automation. This includes implementing an ERP (Enterprise Resource Planning) solution, like SYSPRO ERP, which is specifically designed to enable manufacturers supply-chain and financial business processes. Then
using the massive amounts of data captured from these systems and augmented by external data collected through the Internet of Things (IoT) to feed Artificial Intelligent (AI) which grows “experience” from increased data through Machine Learning (ML). Bringing Predictive Insights before they happen rather than the old BI which told you what had happened that you need to change.
But Kenya can leapfrog Africa with “Industry 5.0” – why? According to the European Union Industry 5.0 “provides a vision of industry that aims beyond efficiency and productivity as the sole goals and reinforces the role and the contribution of industry to society.” and “It places the wellbeing of the worker at the centre of the production process and uses new technologies”.
Surely this is what Africa needs and Kenya can lead. Enable growing manufacture, employment, exports, shared wealth and beginning to the end of Africa’s poverty and ineffectiveness.
By Doug Hunter – Customer and Ecosystem Enablement Lead, SYSPRO Africa