Ethiopia is set to become the largest manufacturing nation in East Africa, beating the regional leader Kenya, as government incentives, such as cheap electricity, tax holidays and cheap land, attract investors in the industry.
The manufacturing industry in the horn of Africa nation has blossomed in recent years due to better industrialization policies from the government and has attracted investors while the Kenyan government has not laid out policies to boost its industrialization, leading to a near-stagnation.
Ethiopia has attracted investors from United Kingdom, Turkey and India who have invested billions of dollars in foreign direct investment (FDI) in the textile, leather, Pharmaceuticals and other sectors of the economy, The Reporterindicated.
“If not careful our market will be flooded with goods from Ethiopia. Kenya must improve the industrial sector,” The Star quoted Saitoti Torome, Kenya’s Planning Permanent Secretary, saying during the launch of the Kenya Economic Report in Nairobi last week.
The Kenyan manufacturing industry employed 287,400 people in formal jobs in the 2014-15 period, an increase from 279,400 jobs in 2013-14.
However its contributions to the Gross Domestic Product (GDP) are declining, according to the Kenya Economic Report 2016 that was released by Kenya Institute for Public Policy Research and Analysis (KIPPRI), this month.
Kenya, the biggest economy in the East African region, risks being flooded by cheaply manufactured goods from neighboring Ethiopia, which has had a booming manufacturing industry in recent years.
The main causes for the decline in Kenya’s manufacturing sector is high production costs and competition from cheap imports from China and India, The Reporter added.
However, despite the stagnation in the manufacturing sector, World Bank Group estimated that Kenya’s economy will grow at a rate of 5.9 percent this year, rising to 6 percent next year. Ethiopia’s economy is predicted to grow by about 8.1 percent.
Growth in the two east African nations is mainly due to the boom in the infrastructure sector, with both of them undertaking big projects to upgrade roads, air and rail transport besides increasing their energy capacity.
Unlike Ethiopia, Kenya will hold a general election in August next year. The election tension is likely to put off investors until the polls are peacefully concluded