Apathy killing off interest in govt datacentres

Mistrust, lack
of resources 

Apathy hovers over
govt datacentres.

Thursday, Feb 27th

Can Kenya position manufacturing as a key Big Four pillar?

A recent study by SYSPRO and Strathmore University highlights the challenges facing Kenya's manufacturing sector, as it seeks to fulfil the government's Big Four Agenda.

Kenya's proposed Big Four Agenda was unveiled almost two years ago by President Uhuru Kenyatta, and encompasses the following four critical pillars: Manufacturing, Affordable Housing, Universal Health Coverage and Food Security.

As part of this agenda, Kenya's government is striving to increase the contribution manufacturing makes to the nation's gross domestic product – the goal is for manufacturing to contribute some 15% of the total – SYSPRO, in collaboration with Strathmore University, undertook a serious study of this industry sector.

According to Mark Wilson, MD of SYSPRO Africa, one of the key findings of this study is that manufacturers say the cost of transportation using the country's Standard Gauge Railway (SGR) is prohibitive. This is not surprising, as the report also indicates that the cost to move cargo by rail since January of this year has increased by between 33.9% and 39.3%.

"There's a government directive in place that insists that all containerised cargo from Mombasa to Nairobi, and vice versa, has to be moved to and from the capital's inland container depot, which acts as a holding facility, using the SGR. Under new rates which were fixed on 1 January this year, transporting a 20-foot container now costs between $725 and $750, which is significantly higher than the previous charge of $560," says Wilson.

"This is one of several issues identified that the industry suggests needs to be resolved if manufacturing is to become a key pillar of the Big Four Agenda. In fact, local manufacturers themselves have outlined five incentives which they believe will enable them to deliver on the industrialisation that lies at manufacturing's core."

The first of these, suggests Wilson, is that the industry has called on government to incentivise manufacturing, by providing tax exemptions, grants and subsidies, infrastructure development, government purchase guarantee and tax incentives for technology purchases. Such incentivisation is vital, according to those in the industry, as its closest competitors – from neighbouring countries such as Egypt, Uganda and South Africa – enjoy plenty of government subsidies, so without Kenya doing the same, its manufacturing industry will always remain behind its rivals.

"Another area highlighted by the study is the concern around the high cost of power, which is an obvious and significant hindrance to the growth of the sector. The problem lies in the fact that only around 60% of what manufacturers pay towards their power costs account for what they actually consume. The rest of the money is accounted for by taxation (27%), and money that goes to third parties (13%)."

"Another point raised by the industry is that government must also look into strengthening those sectors that support manufacturing, such as agriculture. Other factors named as potential derailers for the manufacturing sector include high taxes, cheap imports, lack of proper technical skills, bad political climate and unavailability of raw materials."

When it comes to the issue of lack of technical skills, suggests Wilson, the government has made promises that it will support apprenticeship programmes, as well as internships and technical courses to bridge the gaps. Not only are these skills needed, but just as crucially, new technologies need to be made readily available, and at a price point that remains affordable for the manufacturers.

"The one technology that is constantly spoken of by this sector is automation, which certainly does offer enormous potential to revitalise the industry. This is because fewer than 10% of small and medium businesses in Kenya – and only around 11% of companies throughout the country – are fully automated. Imagine the kind of impact that automation will have on the manufacturing sector's ability to increase efficiency, quality and quantity of products. There can be little doubt that that a largely automated manufacturing sector will be a strong pillar within the Big Four Agenda," Wilson concludes.


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