Kenya Manufacturing Growth Disappoints in Q1, But There is Optimism Ahead

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The Kenyan manufacturing industry economy stagnated by 60% more than expected in the first quarter of 2019 attributed to ‘rampant corruption and increased bureaucracy in government agencies’, according to data provided by the Kenya Association of Manufacturers (KAM) Manufacturing Barometer, April 2019.

21% believe it is growing and 19% believe the economy is declining among the leaders in the manufacturing sector who gave their views on the implementation of the Big Four Agenda.

The 2019 Manufacturing Priority Agenda (MPA), themed ‘Closing the manufacturing gap through the Big 4 Agenda for shared prosperity’, the sector is expected to contribute 15% to the GDP by 2022 by closing the current gap of 6.6%.

“With the current regulatory environment and uncertainty in the trade environment, shareholders are not willing to invest; investors have been deferring their planned investments over the past two years,” the report stated.

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But, there is optimism for the 6 months ahead.

“Manufacturers remain positive about the economy’s growth prospects -52% are optimistic, 42% uncertain and 6% pessimistic. This is in line with projections by World Bank and Central Bank of Kenya,” says the report but concerns remain.

Those cited include the unpredictable policy environment and heightened political rhetoric, the slow Kenya Revenue Authority (KRA) tax refund process that is likely to have an effect on manufacturers’ cash flow and the agriculture sector that will have an effect on the industry.

As a result, the report calls for an in-depth review of the current framework that will coordinate, implement or fund manufacturing activities.

“The coordination framework has to bring county governments on board for the development of strategies to achieve set goals. This coordination has to include budgetary allocations for planned programs,” reads the report in its policy recommendation.

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The contribution of the manufacturing sector to the economy has averaged about 10% for many decades and declined to 7.7% in 2018 from 8.4% in 2017.