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        Ideas & Debate

        Industries should sharpen technology, value-addition

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        The capacity to manufacture and export refers to our ability and record in actual value-added production. FILE PHOTO | NMG

        If you start growing vegetables to sell, you soon realise there are other farmers both in the neighbourhood and far away who are targeting the same market.

        The quantity, quality and size of the vegetables will determine prices and you will start figuring out what you need to grow to succeed. The ability to do this in a sustained manner is referred to as competitiveness.

        Just as a vegetable farmer, Kenyan manufacturing competes against local, regional and global manufacturers. In manufacturing terms, a country’s industrial competitiveness has been defined as ‘the degree to which a nation can, under the free trade and fair market conditions, produce goods and services that meet the test of international markets whilst simultaneously maintaining and expanding the real income of its citizens’.

        The United Nations Industrial Development Organisation (Unido) launched the Competitive Industrial Performance (CIP) Index 2020 in Kenya in partnership with the Kenya Association of Manufacturers (KAM). Its findings on Kenya’s competitiveness are grim with a ranking of 115 out of 152 countries.

        Why do these global indices matter, one might ask? Firstly, they allow us to identify our comparator and competitor countries. The ranking of China (2), India (42), South Africa (52) and Egypt (64) is part of the explanation for the stiff competition they provide to Kenyan-made goods.

        Whereas Kenya was slightly ahead of its East African partners — Tanzania (123) and Uganda (128), when benchmarked against other countries within the ‘other developing countries’ category, we find that sub-Saharan countries rank ahead of Kenya, for instance, Eswatini (formerly Swaziland) (83), Botswana (89), Namibia (97) and Congo (101).

        Ranking comes with a good dose of humble pie.

        Secondly, and I would say most importantly, the index points at the key areas countries need to focus on to progress their manufacturing agenda.

        Different countries can pick their own strategies that are fitting and appropriate from their current starting point, to fit the resources and opportunities at their disposal. Herein lies Kenya’s opportunity.

        The CIP Index covers three main dimensions - the capacity to produce and export manufactured goods, technological deepening and upgrading, and world impact.

        UNWASHED VEGETABLES

        The capacity to manufacture and export refers to our ability and record in actual value-added production.

        If we continue with the vegetable illustration, we could ask how many types of vegetables you grow, the quantity and quality produced per hectare.

        Further value addition would include packaging into sacks for delivery to a wholesale market, or perhaps you could pack into trays for supermarket shelves.

        Increased value addition also allows you to access new and more sophisticated markets and obtain better prices.

        Unwashed vegetables may be sufficient for the local kiosk but not a supermarket shelf; chilled vegetables can allow you to access the Mombasa market where prices may be higher, and tomato paste can be delivered to the Middle East.

        Value can be added to the basic commodity, and the more it is, the higher the price, and arguably the less volatile the pricing. The price of a salad in your favourite restaurant does not change with the market prices of the vegetables.

        Kenya scores poorly on manufacturing value added per capita, ranking 131 in the world, indicating that we do relatively little value addition.

        The CIP Index also looks at our ability to move into high value addition and inculcate technology into various sectors of industry, improving the quality and positioning of our output on a global stage.

        CRUCIAL COG

        Technology and its application is a crucial cog in value addition.

        Low levels of value addition are possible with manual labour, but creating more technologically advanced goods requires skills, equipment and know-how. The growth and expansion of manufacturing technology is one of the means by which it creates a multiplier effect in the knowledge and skills base of a country.

        Kenya’s performance on the technology front was very low with 78 percent of manufacturing being resource-based or low technology.

        Medium technology manufacturing was 16 percent and high technology manufacturing only five percent. Here, the vegetable analogy begins to breakdown – whatever you do to the vegetables, would still be in the resource-based category.

        Moving to medium technology would be manufacturing the equipment and machinery for the various processes, for example tractor parts, sorting and packing machines.

        High technology manufacturing would include Radio Frequency Identification (RFID) systems to track and trace, laboratory equipment to analyse the vegetables for nutrients, name it.

        The Unido report signals that we have a lot to do in our journey to grow as a manufacturing nation.

        It also gives us some suggestions on the key areas we could focus on to move the needle.

        If we are thoughtful, persistent and consistent in our manufacturing strategy, we can progress.

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