Azimio deal: It’s possible to grow manufacturing, agriculture concurrently

I readily accept that any candidate, for any elective post in our governance architecture, should have a firm grasp on the purpose of government. I would go further. They must have a deep appreciation of Kenya’s number one national interest—to industrialise. For no nation has become wealthy on agriculture alone!

And yes, our Azimio manifesto springs from the eternal prayer in our national anthem, whose first stanza prays to God of all creation, to bless this our land and nation. That justice be our shield and defender. That we may dwell in unity, peace and liberty. And “plenty be found within our borders”.

What is clear on reading their piece in Tuesday’s Daily Nation is that Kwame [Owino] and [Leo] Kemboi of the Institute of Economic Affairs (IEA) have no clue what a modern government must do to stimulate economic activity, create jobs, increase real incomes and better lives. By their own admission, they rely on “conventional economic thinking” to make the “uncontroversial claim” that government’s role is limited only to the provision of “public goods” such as security and enforcement of the rule of law. Nothing could be further from the truth—both in theory and practice.

Mediocre conclusions

Conventional thinking can often lead to mediocre conclusions, policy prescriptions and actions. Two examples should suffice. Example one. Building and equipping a hospital does not necessarily lead to better health for the population, yet that is what the conventional thinking would have you believe.

You have to go further to positively influence the health seeking behaviour of the citizens, and secondly, solve financing question. How will the citizens pay for the services they require? Consider the example of Laikipia Health Service (Kimanjo). Even after completion and staffing of a surgical theatre in 2018, citizens continued to seek routine surgical services in Nanyuki, 65km away on a bumpy road, for more than a year and a half. Asked why, it turned out they simply did not believe the hospital capable of such a service.

The conventional thinking failed to remedy the situation. What worked was an actual sit-down between residents and medics, which led to an actual demonstration that the theatre works. Basically, LHS-Nanyuki referred cases to Kimanjo and citizens could then see that surgery was taking place.

Export processing zones

Example two. Take the export processing zones (EPZs), and the special economic zones (SEZs) that exist in our republic today. Their gazettement, and even provision of service infrastructure has not led directly to manufacturing enterprises sprouting up. For that to happen, firms require risk capital and business development services. The latter two are not naturally occurring resources. Government must catalyse their provision. In modern unconventional thinking, governments must go beyond input and output, that is budgets, water or roads, to outcomes and impacts such as jobs and incomes!

I invite Kwame and Kemboi to do a quick Internet search for the Navigation Act of 1651. Yes, 1651! That is how far back England began to take direct action to ensure manufacturing took hold in their land. The Act made it illegal for merchant ships to dock in any English controlled port if they carried manufactured wares originating anywhere else except England.

Target sector

The IEA duo is critical of the fact that manufacturing takes centre stage in the Azimio plan. They question our target of the sector contributing 30 per cent of GDP and claim this could only happen at the expense of agriculture. They accuse us of not “considering the simple idea that a provision of the public goods and water and safety infrastructure would be sufficient. [And that] the decision on investment should be left to the private sector”.

Let us deconstruct. First, what is the main engine of economic revolution by Azimio? That we shall increase productivity in agriculture, livestock, fisheries, and blue economy, and ICT by manufacturing the tools and machinery necessary to mechanise and mass-produce. Without the latter, the “production frontier” Kwame and his colleague talk about remains static. Simply put, if the limit for an individual farmer using a jembe is to dig one acre every two days, she can only do more if she has a machine!

Ore deposits

But we must go further. Where is the steel and aluminium that we need to make the tools and machinery? Well, the ore deposits are in Nyeri, Laikipia, Tharaka Nithi, Taita Taveta and Kwale for starters. The coal to smelt the ore is in Kitui. The Azimio manifesto is talking about not just consumer manufacturing and processing. Not just making toothpaste and soap. But rather, secondary and most importantly, primary manufacturing. It is cynical and conventional thinking that concludes that manufacturing can only grow if agriculture is shrinking. That concludes that growth in manufacturing of necessity requires a “movement of capital and labour from small farms to manufacturing enterprises”.

I would invite the duo again to do a simple Internet search on, or better yet visit, STL Semiconductor. I trust they will be pleased to know STL is a semiconductor (micro-chip) manufacturer based in Nyeri at Dedan Kimathi University. Micro-chips are the most critical components of electronics from mobile phones to computers.

I would further invite the duo to show us from which small farms the capital and labour that is STL Semiconductor came from. We have millions of young educated Kenyans in the informal sector. It is that labour that an expanding manufacturing sector will absorb.

Reorganise financial sector

A minor reorganisation of the financial sector will improve availability of, and access to, long-term risk capital necessary to build factories. Manufacturing and agriculture can and will grow together under Azimio. The critique gives us credit for recognising that “the change in the structure of Kenya’s economy is inevitable”. Well, indeed. That is one of the primary reasons why we rebase the GDP numbers every five or so years—the changing structure requires that the sampling frame changes!

But are we “obsess(ed) with arbitrary target-setting and a mastery of centralised planning has not been shaken off”? Does the “One County, One Product” policy demonstrate the belief that bureaucrats know which industries are to be established in each county and, therefore, have the ability to conjure them into existence”?

No, it does not. I speak as an elected governor, who is growing his economy at about 9 per cent per year, has created 22,000 jobs and doubled the business register in the last four years in spite of Covid. I speak as a governor who is running a Sh3.3 billion stimulus programme providing structured finance to thousands of small manufacturing businesses.

I speak as the pioneer of leasing as a financing instrument for counties, and whose county is rated investment grade at BBB by international credit rating agencies! So, no, my colleagues and I are not bureaucrats conjuring, rather we are seasoned professionals, led by a seasoned captain, determined to bring about an economic revolution.

The writer is the Governor of Laikipia and chairs the Azimio Presidential Campaign Board