Fund local content project and create needed jobs

Opposition leader Raila Odinga

Opposition leader Raila Odinga addressing his supporters at Nairobi's Pipeline Estate on March 30, 2023. 
 

Photo credit: Dennis Onsongo | Nation Media Group

Six months into his presidency, Dr William Ruto’s statesmanship is being severely tested.

An extremely volatile time calling for tough decisions is being made even more turbulent by the political crisis residing in the difficult demands made by opposition leader Raila Odinga, demands he is dramatising by the demonstrations he has called for every Monday and Thursday until something gives.

In the political maelstrom sweeping across the country, important decisions may be delayed or overlooked as energy and resources are directed at stopping the demonstrations. But some decisions must not be postponed.

For instance, creating jobs may not be among the immediate demands that the demonstrating Azimio team seeks an immediate response to. But we know that unemployment is one of the issues at the core of the challenges that President Ruto’s government must address.

The World Bank and our own bureau of statistics tell us that Kenya needs to create at least 900,000 jobs annually between now and 2025 to absorb the high number of youths joining the job market.

The capacity to create jobs has failed to keep pace with new job entrants, and the problem gets worse by the year, as more and more graduates enter the job market. 

Successive governments have promised to resolve this but none has succeeded. Despite claiming to prioritise manufacturing, the fact is that very little concrete initiatives have been rolled out to trigger sustained growth in manufacturing. Priority and support for agriculture are understandable and commendable but it is not the sector that alone can drive growth and create jobs.

Manufacturing must be given its pride of place and this must go beyond token measures like amending laws to ease the registration of companies and creating special economic zones to few will be attracted to because of the high cost of energy in the country. One initiative that President Ruto’s government needs to implement is legislating into life the Local Content Mechanism.

It is not a new idea. I have written about it before. The Kenya Local Content Mechanism Policy Project (KLCMPP) is an idea that was conceptualised by the Nairobi-based Global Institute of Management and the then PS Trade, Dr Chris Kiptoo, who is now the Principal Secretary at the National Treasury.

Equitable competition

The project seeks to ensure equitable competition, job creation and economic growth in Kenya. It will empower local manufacturers and suppliers by introducing a manufacturing percentage cap on the amount of non-Kenyan imports on five schedules of products — household goods; bicycles and motorcycles; motor vehicles and spare parts; light industrial and agricultural mechanised equipment; and heavy equipment. 

Supporting the introduction of a set amount of local content in products intended for sale in a specific country is not a new concept. It is tested and proven. The growth of the Asian tigers in the early years of their industrialisation journey is partly attributed to their implementing a local content mechanism as a key driver for their manufacturing efforts.

In the period 1960-1980, the Asian tiger countries saw a 7.5 per cent increase in annual GDP attributed to the effective implementation of the local content mechanism. In comparison, the worldwide economy only achieved a 4.5 per cent increase in annual GDP during this same period. This led to South Korea producing leading technologies and products. Today, the brands Samsung, Hyundai and Daewoo are known worldwide.

The governments of South Korea, Taiwan and Singapore all adopted export-focused policies that encouraged the production of local content which helped them maintain a 7.5 per cent economic growth rate per year for three decades. Singapore recorded a GDP per capita of US$82,794 in 2022, and this is forecasted to rise even higher in the next five years.

This experience from Asia and also from South Africa, which has also seen laudable growth in its automotive industry because of the local content requirement in that sector, must persuade the government of President Ruto to mainstream the implementation of the Local Content Mechanism a priority.

The enthusiasm and support that Treasury PS Kiptoo has extended to the project since his days at Trade are reassuring as is that of the current PS in the department of Industrialisation, Dr Juma Mukhwana.

The latter has spent valuable time with the directors of the Global Institute of Management Institute to understand the project components. The Numerical Machining Complex is another partner keen to lend its support through proposals pertaining to the local content suppliers and takers.

The project has been accepted and the one obstacle standing between it and implementation is funding. This is the one issue that the leadership at Treasury needs to address. As he sifts through the many priorities that he must attend to, this is one to-do item that he must urgently instruct the Treasury team to implement.

The writer, a former Chief Editor of the Nation Group, is now consulting. [email protected]; @TMshindi