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Kenya is at a turning point, with an opportunity to change the trajectory of its economic transformation through smart industrialization. The road to a sustained economy can uplift the nation by creating endless opportunities and fostering innovation amongst other things, especially among our youth while addressing critical economic issues such as import substitution. Kenya can learn a lot from the success story of Rwanda, and with it in hand, The sky is the limit.
Industrialization adds important value to raw materials in form of market or consumer products and therefore their price increases drastically. For example, Kenya’s plentiful agricultural crops – coffee, tea, and horticultural products – can be processed locally into higher-value goods. Not only does this increase export revenues but stimulates job growth in deleveraged economies. Addition of value through industrialization also means we are cutting our over dependence on foreign produced goods. To remedy this, Kenya needs to develop its industries to manufacture goods locally which could help deal with the trade imbalance and build economic resilience. This shift saves foreign exchange and promotes local industries, in the process building up more robust and diversified economy.
Kenya’s youth, particularly Generation Z, are brimming with potential and creativity. Industrialization provides a fertile ground for harnessing this potential. By establishing innovation hubs and industrial parks, the government can create environments where young entrepreneurs and innovators can experiment, develop, and commercialize their ideas. Access to modern technologies and exposure to industrial processes can inspire the youth to engage in scientific research and technological development. This can lead to the creation of innovative products and services, driving Kenya towards a knowledge-based economy. Moreover, partnerships between industries and educational institutions can ensure that the skills taught are aligned with the needs of the market, making the youth more employable and entrepreneurial.
One of the challenges facing Kenya economy is high level imports that stretches thin its foreign reserves. In 2023, Kenya imported goods worth approximately $18 billion, leading to a trade deficit of about $10 billion. Import substitution is a perfectly feasible measure that could be accomplished merely by industrialization itself. Kenya can save significantly on its import bill by creating local production system which can start parallel industries that produce consumer goods, which are currently imported from outside. An example would be building electronics, textile and auto-part factories – to reduce imports and create jobs locally. This process would not only empower, but notably, supports to create a more robust economic system less dependent on the fluctuations of global markets.
Kenya’s economic growth has shown resilience despite various challenges. The country’s GDP grew by grew by 5.9% in the third quarter of 2023, compared to 4.3% in the corresponding quarter of 2022, reflecting a recovery from the COVID-19 pandemic’s impacts. This growth was driven by sectors such as agriculture, manufacturing, and services. However, to sustain and enhance this growth, Kenya needs to focus on industrialization to diversify its economy and reduce dependency on importation. Kenya aims to achieve 20% of the country’s GDP from manufacturing by the year 2030. As of 2023, manufacturing contributes about 7.6% to Kenya’s GDP, indicating significant room for growth in industrialization.
To drive industrialization, attracting foreign investment is crucial. Counties can play a pivotal role in this by creating conducive environments for investors. This includes offering incentives such as tax breaks, ensuring political stability, and improving infrastructure. Counties can also highlight their unique resources and strengths to attract investments in specific sectors such as agribusiness. For example, regions with fertile land and favourable climates can attract investments in agricultural processing industries. By setting up investment promotion agencies at the county level, tailored to the unique attributes and needs of each region, Kenya can draw significant foreign funds into various sectors.
Rwanda’s achievements in economic development are instructive lessons for Kenya. Rwanda’s GDP grew by an average of 7.5% annually from 2010 to 2020, reflecting its effective economic strategies and choosing some priority sectors for the growth. Rwanda opted for the technology, innovation, and infrastructure pathway as the best modality of creating a very friendly environment for investors, both local and foreign. In addition, the creation of human capital by means of education and skills building marked Rwanda as ready to be a shining centre of technology and innovation. By adhering to the principles of accountability and transparency, Rwanda was successful in attracting foreign capital and aid, thanks to which it gained the momentum for its growth.
By focusing on value addition, fostering innovation among the youth, and pursuing import substitution, Kenya can build a resilient and self-sufficient economy. With strategic planning and execution, Kenya can unlock its full potential and secure a prosperous future for all its citizens.
