Create the Right Ecosystem for Kenya Industries to be Tech-savvy

Industrial technology concept. For Kenya to become a smart manufacturing hub, we must create the right ecosystem to enable local industries invest in people, processes and technology. PHOTO | SHUTTERSTOCK

November 19, 2020//-Innovative manufacturing or industrial innovation is basically the use of new technologies to improve production capabilities, promote efficient utilization of resources while protecting the environment.

Industrial innovation occurs at two levels. First is product innovation by expanding the variety of goods available to consumers. Second is process innovation leading to enhanced productivity and efficiency.

Manufacturing innovation has both economic and social benefits including greater productivity, more jobs and better products to improve living standards.

Industrial innovation further plays a vital role in protecting the environment, for example, enabling energy efficiency and waste reduction. Innovation thus underpins inclusive, sustainable industrial development.

The international Sustainable Development Goal (SDG) 9 recognises that investment in innovation is a crucial driver of economic growth and development.

But for innovative manufacturing to take off, we must invest in infrastructure. This refers not just to the physical assets (roads, ports, railways, water and sewer lines, electricity grid) but also their ability to provide industries with access to essential services and resources to produce goods efficiently.

According to the United Nations Industrial Development Organization (UNIDO), infrastructure constraints in many African countries such as Kenya cut business productivity by up to 40 percent.

Massive traffic jams, frequent power blackouts, port delays, unreliable water supply, clogged drainage and sewer systems, are examples of infrastructure challenges hampering the growth of Kenya’s manufacturing sector.

Although the government has invested heavily in public infrastructure, the country still faces a huge infrastructure deficit. The World Bank says plugging this gap requires sustained investment of 20 percent of GDP compared to the current nine percent.

In particular, expensive power has been flagged as the biggest infrastructure challenge facing Kenya’s industrial sector. Industrial innovation requires a reliable supply of power. Frequent power interruptions are estimated to cost 3 percent of business turnover per year.

Movement of goods and people is also severely hampered by transportation and logistics bottlenecks due to inadequate infrastructure. The World Bank Transport Logistics Performance Index 2016 ranked Kenya at 79 out of 155 countries.

In short, national and county governments need to urgently fix existing infrastructure challenges to catapult Kenya to the next level of industrial development led by innovation, also known as Industry 4.0.

Basically, Industry 4.0 or Fourth Industrial Revolution refers to the digital transformation of manufacturing and production through internet, data and automation. It is about people, processes and technology.

Many countries globally are embracing smart manufacturing as the next big thing driving their industrial agenda. In an increasingly digitised world, the shift to technology-led manufacturing is inevitable.

Digitisation of manufacturing is already changing the way goods are produced and transforming supply and value chains. There are concerns that increased adoption of Big Data, Internet of Things, Artificial Intelligence and other technological innovations will lead to loss of jobs.

While automation may reduce dependence on human labour in manufacturing, it is also an opportunity to build the right skill-set for the smart economy. Also, large and small manufacturers alike have a role in transitioning Kenya into an industrial innovation hub.

Kenya could borrow a leaf from countries like Malaysia that have deliberately adopted policies to foster smart manufacturing. Malaysia is a trading nation but due to sustained investment in the right infrastructure and enabling policy environment, has emerged into a global smart manufacturing giant.

The Malaysia Industry 4WRD, the national policy on industrial 4.0, prioritizes investment in the latest manufacturing technology especially in SMEs, comprising 98 percent of manufacturers there and providing 42 per cent of employment.

Specifically, the Malaysian government has been supporting SMEs to adopt the latest technologies to become globally competitive.

The Kenya National Economic Survey shows 98 percent of businesses in Kenya are SMEs creating 30 percent of jobs annually. Therefore, the SME factor in local smart manufacturing cannot be ignored. Not to forget that SMEs have been at the forefront of business innovation in Kenya.

Besides continuously investing in infrastructure, government at national and county level should offer incentives to local manufacturers who invest in innovative technologies that enhance productivity and competitiveness of our goods in export markets, create jobs and crucially, protect the environment.

Also, local manufacturers who innovate in energy efficiency and waste reduction deserve tax and other incentives besides access to good roads, lower cost of electricity, faster business approvals and permits, just to mention a few.

For Kenya to become a smart manufacturing hub, we must create the right ecosystem to enable local industries invest in people, processes and technology.

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