WANGand#039OMBE: Sectors key to trade-induced industrialisation

The prevailing discourse on Africa’s economic development has shifted from whether the region will develop to how the continent can position itself as the next economic frontier.

The Economic Report on Africa 2015 takes cognisance of the fact that Africa has the potential to experience growth greater than the East Asia countries through industrialisation.

However, the continent’s performance has been volatile, with short periods of acceleration followed by long periods of deceleration, underscoring serious shortfalls in industrialisation and economic diversification.

The recent launch of Kenya’s 10-year Industrial Transformation Programme, which in some quarters has been criticised in being a tad late, informs the stance by the government in pulling all stops towards industrialising the country.

Industrial development remains inextricably linked to generating impetus in transforming the Kenyan economy to middle income status by 2030.

The vision, to move manufacturing back to Africa due to high production costs in other traditional markets such as Asia and Europe as well volatile commodity prices, is achievable.

However, the gains from industrialisation will be a long time coming if Kenya remains largely dependent on agriculture and continues engaging in a narrow export base with low value products, high trade costs and inadequate access to global value chains and markets.

In recent years, Kenya’s export base has stagnated at 15 per cent of GDP while imports have grown by 40 per cent of GDP. This has implications on the country’s growing trade deficit.

Trade-induced industrialisation is poised to yield structural transformation in Kenya through inclusive growth, efficient use of resources and economic diversification.

This transformation will provide unique opportunities to generate direct and indirect employment, foster cross-sectoral linkages and sustain economic growth.

Recent statistics by the Kenya National Bureau of Statistics indicate a favourable economic outlook for the country supported by a relatively broad-based growth.

Medium term prospects indicate risks and uncertainties, with fragile recovery of tourism amidst declining foreign exchange, an unsustainable current account deficit and tapering of global commodity prices boom.

Kenya needs to correct large trade deficits, innovatively create employment and consciously design trade policies that will contribute to industrialisation.

The Industrial Transformation Programme has prioritised 10 flagship projects in sectors the country has a competitive aantage in.

However, agro-processing, fisheries, textiles and apparel, leather, oil, gas and mining services will be important in leading the country to a trade-induced industrialisation.

The writer is researcher at KIPPRA.