Study suggests local manufacturers must quickly invest in tech-savvy workforce

Kenya’s manufacturing sector can increase its competitiveness by adopting information and communication technology (ICT) to boost efficiency. However, manufacturers also need to invest in a workforce with the knowledge and skill to implement the relevant technologies.

These are the key recommendations of a 2019 study titled, “The Implementation of Technological Aids and ERP Solutions in the Manufacturing Industry in Kenya.”

The research was conducted by Strathmore University in partnership with SYSPRO, a leading ERP solution provider for manufacturers. The researchers interviewed 96 firms from 12 sectors in three counties and identified that the state of the automation in the sector was a hindrance to its growth.

Download the full report here:

Sector automation

The study showed that 83 percent and 11 percent of manufacturers currently use semi-automated and fully automated production processes, respectively. Six percent of the manufacturers still rely on fully manual and outdated production processes and units. Furthermore, almost the 10 percent of the manufacturers do not use any hardware or machinery for production.

The study report adds that, 63 percent of the manufacturers surveyed had installed Enterprise Resource Planning (ERP) systems while 33 percent did not use any. This is in stark contrast to the global competitors, which rely heavily on ERP systems to reduce production costs and increase productivity.

On a positive note, 53 percent of the studied businesses have plans to upgrade their hardware and software in the next two to three years.

Dismal performance

The SYSPRO-Strathmore University study showed that three vital factors are responsible for the dismal performance of the manufacturing sector: The poor state of the automation and software adoption; a lack of technical skills to fully support development and growth; and the high cost of capital financing in the sector.

Full potential

Kenya’s manufacturing sector has not lived up to its full potential, consistently performing poorly compared to the overall economy. The sector is still small in comparison to agriculture and service sectors.

In 2016, the manufacturing sector accounted for about 9.2 percent of Gross Domestic Product (GDP), 26 percent of merchandise exports, and 12 percent of total formal employment, with about 280,000 people employed. This is according to the Kenya National Bureau of Statistics (KNBS), 2017.

That is why the Government’s Big 4 Agenda targets to revamp the manufacturing sector so that it can accelerate economic growth, create jobs and reduce poverty. The strategy aims to increase the manufacturing sector’s contribution to the GDP from about 9 percent to 15 percent by the year 2022.

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