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REPUBLIC OF KENYA
MINISTRY OF INDUSTRIALIZATION
NATIONAL INDUSTRIALIZATION POLICY FRAMEWORK FOR KENYA
DATE: 2011-2015
ii
ACRONYMS AND ABBREVIATIONS
ACA - Anti Counterfeit Agency
AGOA - African Growth Opportunity Act
BPO - Business Process Outsourcing
CCK - Communications Commission of Kenya
CCM - Coordinate Measuring Machines
CKD - Complete Knocked Down
CODA - Cotton Development Authority (CODA)
COMESA - Common Market for East and Southern Africa
COTU - Central Organization of Trade Unions
CMM - Coordinate Measuring Machines
CQS - Common Quality Standards
DFIs - Development Financial Institutions
EAC - East African Community
ERS - Economic Recovery Strategy
FDI - Foreign Direct Investment
FKE - Federation of Kenya Employers
FKPM - Federation of Kenya Pharmaceutical Manufacturers
FPEAK - Fresh Produce Exporters Association of Kenya
GDP - Gross Domestic Product
ICT - Information, Communication, and Technology
ICF - Industrial Consultative Forum
IDF - Industrial Development Fund
IP - Intellectual Property
IPR - Intellectual Property Rights
ISI - Import Substitution Industrialization
ISO - International Organization of Standards
KAA - Kenya Airports Authority
KAM - Kenya Association of Manufacturers
KCAA - Kenya Civil Aviation Authority
KEBS - Kenya Bureau of Standards
KEPHIS - Kenya Plant Health Inspectorate Services
KEPSA - Kenya Private Sector Alliance
KIPI - Kenya Industrial Property Institute
KIRDI - Kenya Industrial Research and Development Institute1
KLRC - Kenya Law Reform Commission
KMA - Kenya Maritime Authority
KNAS - Kenya National Accreditation Services
KNBS - Kenya National Bureau of Statistics
KNCC&I - Kenya National Chamber of Commerce and Industry
KNCPC - Kenya National Cleaner Production Centre
KNHA - Kenya National Highways Authority
KPA - Kenya Ports Authority
KRA - Kenya Revenue Authority
KPRL - Kenya Petroleum Refineries Limited
KRB - Kenya Roads Board
KRBA - Kenya Rural Boards Authority
KRC - Kenya Railways Corporation
KURA - Kenya Urban Roads Authority
KV2030 - Kenya Vision 2030
LA - Local Authority
M&E - Monitoring and Evaluation
MoA - Ministry of Agriculture
MoCDM - Ministry of Cooperative Development and Marketing
MoE - Ministry of Energy
MEAC - Ministry of East African Community
MENR - Ministry of Environment and Natural Resources
MoF - Ministry of Finance
MoFA - Ministry of Foreign Affairs
MoFD - Ministry of Fisheries Development
MoHEST - Ministry of Higher Education, Science and Technology
MoI - Ministry of Industrialization
MoL - Ministry of Labour
MoLD - Ministry of Livestock Development
MoLG - Ministry of Local Government
MPND - Ministry of Planning and National Development
MoR - Ministry of Roads
MoT - Ministry of Trade
MoTR - Ministry of Transport
MoWI - Ministry of Water and Irrigation
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MSEAK - Micro, and Small Enterprises Association of Kenya
MSMEs - Micro, Small and Medium Enterprises
MSMIs - Micro, Small and Medium Industries
MW - Megawatts
NARC - National Rainbow Coalition
NISF - National Industrial Stakeholders Forum
NCSE - National Council for Small Enterprises
NCST - National Council for Science and Technology
NEMA - National Environmental Management Authority
NESC - National Economic and Social Council
NIDC - National Industrial Development Commission
NIP - National Industrialization Policy
NIMES - National Integrated Monitoring and Evaluation System
NMC - Numerical Machining Complex
NTB - Non-Tariff Barriers
OP-CO - Office of the President, Cabinet Office
OSH - Occupational Safety and Health
OSHA - Occupational Safety and Health Act
OTEC - Oceanic Thermal Expansion Conversion
OVOP - One Village One Product
PCK - Productivity Centre of Kenya
PVC - Polyvinyl Chloride
R&D - Research and Development
RECP - Resource Efficient and Cleaner Production
SAPs - Structural Adjustment Programmes
SEZs - Special Economic Zones
SMEs - Small and Medium Enterprises
SLO - State Law Office
STI - Science, Technology and Innovation
TBT - Technical Barriers to Trade
TPCSI - Training and Production Centre for the Shoe Industry
VA - Value Addition
WIPO - World Intellectual Property Organization
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From the Desk of the Minister
It gives me great pleasure to welcome the publication of this new and highly revitalised
policy framework to govern our aspiration towards a more robust and useful national
Industrialization process in Kenya. It is because the major challenge of the previous years has
always been one of more rhetoric than concrete action. This weakness has undoubtedly
severely affected the work and expected growth of the industrial sector in Kenya, not to
mention that it is also a highly capital intensive sector that requires much more investments.
It is with this background in mind that I must greatly commend my Permanent Secretary and
his team for engaging what has really been “the seventh gear” and in record time, coming up
with this extremely innovative, exciting and a very practical policy framework.
I fully empathise with the aspirations articulated herein whose essence is to unlock the fetters
that have inhibited our previous efforts. Chief of this is the apt recognition that positive
political will, right from the top is the mortar, without which all other policy decisions come
to naught. But we recognise further, that there have also been instances of pure and simple
historical apathy towards real Industrialization, coupled, over the years, with an immensely
dynamic and fast-changing political and economic environment the world over. The
separation of the industrial from the trade sector at the beginning of 2009 did not make
matters any easier as it is readily recognised that these two are sub-sectors that highly depend
on each other if real industrial growth is to be realised. It behoves us therefore to have an
unprecedented sense of urgency if this policy framework is not to join its predecessors in the
dustbins of history.
As minister responsible for this docket, it is therefore my pledge to keenly follow and ensure
that all the eighteen priority sectors identified herein contribute, in however a small way, to
our quest for a more robust industrial growth in Kenya. I will be seeking to receive quarterly
reports and to work tirelessly in unlocking the well-identified problem areas. I urge all my
colleagues in the government to support us in realising the objectives of this venture by
giving it a chance so that the promised results can well revolutionise the growth path in our
country, and especially, the job-creation challenge.
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Minister
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Foreword, By the Assistant Minister
The main thrust of re-conceptualising and revitalising our new National Industrialization
Policy (NIP) is to give primacy to all industry players to come together under a new
coordination mechanism in order to ensure coherence and better sector delivery. This vision
is to be realised through the proposal for the immediate formation of a National Industrial
Development Commission (NIDC) as the apex coordination organ, supported interalia, by an
Industrial Development Fund (IDF), as some of the key measures aimed at triggering growth
and development of the industrial sub-sector in Kenya.
We have fully embraced the reality that the aspiration towards full and beneficial
Industrialization in Kenya cannot reside in just one ministry: the key infrastructure enablers-
energy, roads, rail and airport networks; water, ICT-among others, do actually reside
elsewhere and are not always in the exclusive domain of the Ministry. This is why it is vital
that in moving forward, we have a mechanism that enables us all work together in order to
realise this dream. Neither do we see “Industry” in the primordial sense of factories and
plants, supposedly constructed somewhere in industrial area to which job seekers flock. Our
vision is inspired by the notion of industry as the creation of employment through integrated
efforts that cut across manufacturing, textiles, mining, quarrying construction-among others,
in order to deliver the national aspiration for growth and ensure that there are opportunities
right across all the 47 counties created under the new constitution.
It is my hope and prayer that during our twin watch, we will shepherd the process of
strengthening Industrialization and ensure that it contributes to the much-desired 15 percent
of the national GDP.
Hon. Ndiriitu MuriithiAssistant Minister
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Preface, By the Permanent Secretary
The policy proposals outlined here are a product of much reflection by the sector experts
under the overall coordination of the ministry. I thank, most sincerely, the technical officers
of the Ministry for their dedication and time already invested in coming up with this
document. I also thank my predecessors in the ministry for the foundation they laid in
formulating Kenya’s Industrial Vision through the many reports and documents that have
been consulted in order to come up with the present version. In finalising this document, we
have received invaluable comments and much-appreciated in-put from many people, and
especially other government ministries. I acknowledge and thank all the Permanent
Secretaries who sent us written comments which have extensively been used in coming up
with the final draft. I would also wish to acknowledge my ministries senior technical staff
who worked tirelessly to come up with the drafts and the various versions that have led to this
particular outcome.
Lastly, I acknowledge the meticulous professional and peer review editing undertaken on our
behalf, by Dr George Outa.
I believe we do now have in our hands, an appropriate policy platform to begin an earnest
quest for growing each of the eighteen sectors we believe, and have always been believed, to
have much potential for Kenya.
Dr Kibicho Karanja; PhD; CBSPermanent Secretary
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TABLE OF CONTENTS
ACRONYMS AND ABBREVIATIONS 1
FROM THE DESK OF THE MINISTER 4
FOREWORD, BY THE ASSISTANT MINISTER 5
PREFACE, BY THE PERMANENT SECRETARY 6
EXECUTIVE SUMMARY 10
CHAPTER 1: SETTING THE CONTEXT FOR A REVITALISED NATIONAL INDUSTRIALIZATION POLICY 12
1.0 Moving Towards ‘Industry’ as Engine of Economic Growth 12
1.1A Review of Kenya’s Industrial Development Policies from Independence 13
1.2 Defining Industrialization in Kenya’s Contemporary Context 18
1.3 Problems and Challenges of National Industrialization 20
1.4 The Industrial Sector and Kenya Vision 2030 21
1.5 Rationale and Justification for a ‘New’ National Industrialization Policy 22
1.6 Vision and Mission of the National Industrialization Policy 23
1.7 Guiding Principles and Core Values 23
1.8 Current Goals and Objectives of Kenya’s National Industrialization Policy 25
CHAPTER 2: THE NATIONAL INDUSTRIALIZATION POLICY FRAMEWORK: FOUNDATIONAL PILLARS AND ENABLERS 27
2.0 the Key Industrial Enablers 27
2.1 Physical Infrastructure Required for Industrialization 27
2.2 Energy Requirements for National Industrialization 30
2.3 Water and Sewerage Systems for Industrialization 31
2.4 Information and Communication Technologies for Industrialization 32
2.5 Formation of an Apex Industrial Coordination Institution 32
2.6 MSMI Growth and Graduation for Industrial Expansion 33
2.7 Industrial Land and Work Sites 34
2.8 Standards and Quality Infrastructure 34
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2.9 Intellectual Property Rights 35
2.10 Governance and the Legal Framework for National Industrialization 36
2.11 Occupational Safety and Health 37
2.12 Technical, Production, Managerial and Entrepreneurial skills 37
2.13 Industrial Research, Development and Innovation 38
2.14 Industrial Market Access 38
2.15 Dispersion of Industries in Kenya 39
2.16 Cleaner Production and Environmental Conservation 40
2.17 Trade Policy to Support Industrialization 40
CHAPTER 3: POLICY FRAMEWORK FOR REVITALISING PRIORITY INDUSTRIAL DEVELOPMENT SUB-SECTORS 42
3.0 Identifying the Priority Industrial Development Sub-sectors 42
3.1 Potential in the Iron and Steel Industry 43
3.2 Potential in Machine Tools and Spares 45
3.3 Potential in Agro Machinery and Farm Implements 46
3.4 Potential in the Automotive and Auto Parts Sub-sector 46
3.5 Potential in Agro-Processing and Value Addition 47
3.6 Potential in Wood and Wood Products 48
3.7 Industrial Potential in Paper and Paper Products 49
3.8 Industrial Potential in Textile and Clothing 50
3.9 Potential in Meat and Dairy Products Sub-sector 51
3.10 Leather and Leather Products Industry 51
3.11 Electrical and Electronics Sub-sector Sector 52
3.14 Potential in Kenya’s Pharmaceutical Industry 54
3.15 Potential in Mining and Quarrying 55
3.16 Potential in the Recycling Materials Industry 56
3.17 Potential in the Packaging Industry 56
3.18 Potential in the Petrochemicals Industry 57
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3.19 Potential in the Ceramics Industry 57
3.20 Potential in the Fish and Fishery Products Industry 58
3.22 Conclusion: Prioritising Sector and Policy Measures to Spur Industrial Growth 60
CHAPTER 4: THE INSTITUTIONAL FRAMEWORK FOR IMPLEMENTING THE NATIONAL INDUSTRIAL POLICY 61
4.0 Case for Better Institutional Coordination of the Industrial Sector 61
4.1 The National Industrial Development Commission 62
4.2 Role of Government in National Industrialization 62
4.3 The Role of the Private Sector 63
4.4 Universities, Research and Tertiary Institutions 63
4.5 The Industrial Consultative Forum 64
4.6 National Industrial Policy Implementation Matrix 64
CHAPTER 5: FINANCIAL RESOURCE MAPPING, MONITORING AND EVALUATION 66
5.1 The Resource Challenge Facing the Industrial sector 66
5.2 Domestic Capital Formation 66
5.3 Foreign Direct Investment 66
5.4 Capital Markets 67
5.5 Commercial Bank Credit 67
5.6 Monitoring and Evaluation of the National Industrial Policy Framework 68
Annex 1: Summary of Critical Policy intervention areas; Issues and Responsibilities 70
Annex 2: Performance Appraisal Framework (M&E) for the NIP 71
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EXECUTIVE SUMMARY
1. This policy framework is expected to underpin the National Industrialization process in Kenya over the next foreseeable five years (2011-2015) and beyond. It has been aptly conceptualised as a ‘revitalisation’ document in order to underscore the fact that it builds on the solid foundation of various other efforts the government has made in the past to craft policy interventions that can propel the country forward in the ongoing quest for industrial growth and development. Key among these documents is the national long-term policy blueprint, the Kenya Vision 2030 with its premium on an average growth rate of 10 per cent per annum and the objective to propel Kenya into a “newly industrialised nation with a higher quality of life for its people in a safe and secure environment.” The impetus provided by a new constitution promulgated in august 2010, as well as previous efforts to craft Kenya’s Industrial Masterplan have all made it critical that a National Industrialization Policy framework that responds more effectively to this need, is crafted in order to ensure that industrialization takes its proper place as the real engine of economic growth in Kenya.
2. The policy document is structured into five chapters, including a context-setting/introductory chapter one. The chapter provides a brief historical overview of the various efforts made in the past, which unfortunately, did not materialise into a fully-fledged NIP for Kenya. Reference is made to the import substitution and export-led policy orientations that characterised the early years to be followed later by the Structural Adjustment Programmes (SAPs) as well as the various Sessional Papers the government has published in a bid to promote industrialisation since independence. A notable reference in this respect is the 1997, Sessional Paper on “Industrialisation Transformation to the year 2020”. More recent policy sources have come from both the Economic Recovery Strategy and the Kenya Vision 2030. On the basis of this review, a case has therefore been made for a revitalised National Industrialization Policy (NIP) framework appearing at a momentous point in time. It explains why it has become necessary to invest in a more robust framework and bring on board the various sector stakeholders. The chapter touches on some of the major challenges that require to be overcome and concludes by articulating the Vision, Mission and the core values that will guide this particular NIP.
3. In chapter two, the document elaborates the all-critical “enabler, or foundational” pillars-as premised in the Kenya Vision 2030 policy framework. Specific policy proposals are pronounced to ensure decisive actions that can deliver good infrastructure: roads, railways, airports; a reliable oil pipeline as well as Information, Communication Technologies(ICTs)-among others, because they are the basis of successful Industrialization. Quite importantly, the role of an emerging regional market and the need to harmonise certain enabler policy interventions is emphasised as is the need for ensuring an enabling secure environment within the country’s borders as a major investor incentive.
4. In chapter three, attention is devoted to the priority sub-sectors that are expected to propel national Industrialization. In all, some twenty sub-sectors-led by the steel and iron industries are indicated, along with the policy proposals and options that can
10
grow them into meaningful and sustainable sectors in the economic development equation. Other key sectors identified for their waiting include construction and mining as well as the potential in pharmaceutical products development, leather, packaging and other more recent areas such as nanotechnology and green energy.
5. In chapter 4, the document elaborates the institutional framework that is required to deliver a robust national Industrialization momentum. The most critical proposal is the call to establish a National Industrial Development Commission (NIDC) as an apex institution to be charged with the overall coordination of the industrial sub-sector activities. Needless to say, such an institution has been seen as long-overdue because it is envisaged to bring about coherence and better coordination in a sub-sector where it is readily acknowledged that many activities and programmes cut across many other institutions, ministries and government agencies. The chapter also spells out the roles to be played by various key stakeholders in the industrial sector, including primarily, training and higher learning institutions, the Private Sector and other government agencies, in what should also crystallise into a more robust National Industrials Stakeholders Forum (NISF) where industrial sector issues are raised, considered and dealt with.
6. In chapter five, the document specifies the policy options for resources and resource mobilisation, including especially the realisation that meaningful industrial sector expansion requires massive and intensive capitalisation. To this end, a domestic capital formation approach is proposed with a specific call to establish an Industrial Development Fund (IDF) to assist investors seeking to establish MSMIs. Lastly, a Performance Appraisal Framework has been included to ensure Monitoring and Evaluation (M&E) of developments and progress in the industrial sub-sector.
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CHAPTER 1: SETTING THE CONTEXT FOR A REVITALISED NATIONAL INDUSTRIALIZATION POLICY
1.0 Moving Towards ‘Industry’ as Engine of Economic Growth
This revised and up-dated National Industrialization Policy (NIP) has been prepared at a rather
momentous time in Kenya’s history. To begin with, the Ministry has taken full cognisance of the
fact that, although Kenya’s industrial sector is relatively large, it has not been dynamic enough to
function as, "an engine of economic growth” especially when compared to peer countries and
other newly emerging economies. Indeed, the sector has been inward-looking with only limited
technological progress, largely reflecting the import-substitution and export-led policy
orientations of the past years. There has been lack of a planned program to support the local
Small and Medium Engineering Enterprises, which have the potential of growth in the field
of Electrical and Mechanical engineering in the region.
The country’s stated drive towards a “Newly industrialised economy” under Kenya Vision
2030, coupled with the new constitutional dispensation that puts emphasis on renewed
commitment to economic performance under devolved national governance structure all
make it imperative that the industrial sector must equally re-visit its policy framework and its
strategic approaches in order to make an effective contribution to national growth. In this
regard, the Ministry is set to work closely with other government institutions responsible for
the development of the devolution policy framework in order to ensure that attention is given
to the right strategies and institutional structures that can facilitate the devolution of
Industrialization. Furthermore, the pace of global technological change makes it necessary
for Kenya to develop an industrialization policy framework that is capable of responding to
the rapidly changing global technological environment.
It is further realised that industrialization, agriculture and commerce are the key pillars of
wealth creation in any country. As can readily be seen from Figure 1 here below, whereas the
agricultural sector has registered remarkable growth, the industrial sector’s (comprising
manufacturing, construction, mining and the quarrying sub-sectors) share of monetary GDP
has remained at just about 14-16% over the last two decades. In addition, the cross-sectoral
linkages and coordination that is required to enable the industrial sector be fully operational
and capable of unlocking the Kenyan potential makes it imperative that the government
reviews and makes policy recommendations that take into account both the sectoral and inter-
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ministerial linkages that will enable the Ministry work together with other ministries in order
to deliver the national aspirations for Industrialization.
Figure 1: GDP Contribution of key economic sectors (2005 – 2009)
1.1 A Review of Kenya’s Industrial Development Policies from Independence
This policy framework builds upon the various efforts that have been made in the past in an
attempt to define Kenya’s industrial development path. Any cursory review easily confirms
that national efforts targeting industrial development has produced mixed results and that the
government has always been prompted to undertake periodic reviews in order to
accommodate emerging and new dynamics.
In a nutshell, Industrial policies in Kenya can be said to have evolved through three distinct
policy orientations, including, the import substitution policy that was embraced soon after
independence in 1963, followed thereafter by an export-led policy orientation and ultimately,
industrial development policies inspired by the Structural Adjustment Programmes (SAPs)
that dominated much of the 1990s. On the other hand, in the 2000 decade, the policies have
13
tended to be influenced and based on the governments definition of its policy priorities as
spelt out in the two major policy documents of the time: the Economic Recovery Strategy
(ERS) for Wealth and Employment Creation (2003-2007) and the Kenya Vision 2030 policy
blueprint which also the first major attempt by the Government of Kenya to define its long-
term policy for the country.
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1.1.1 The Import Substitution Policy
In the period immediately after independence, Kenya's industrialization efforts were mainly
guided by the Import Substitution Industrialization (ISI) strategy. The main objectives of this
strategy was to ensure rapid growth of industry, ease balance of payment pressure; increased
domestic control of the economy and also generate employment. The ISI advocated domestic
production of import substitutes by domestic industries through protection of the infant
industries from international competition mainly achieved through quantitative restrictions,
import licensing, foreign exchange controls, high tariffs on competing imports and
overvalued exchange rates. In general, the ISI policy is credited for the high growth of
industries producing consumer products such as textiles and garments; food and beverages as
well as tobacco that became leading sectors between 1963 and 1989. The manufacturing
sector then grew at an average rate of 8% per year.
Nevertheless, it has been noted that the high levels of protection contributed to inefficiencies
in the domestic industries which hindered the development of a competitive industrial base.
Indeed, the ISI policy was clearly inward looking and biased against exports. The limited size
of the domestic market eventually led to a further problem of excess capacity in industry and
also meant that competition between firms was mainly confined to the domestic market.
Towards the end of the 1970s, there was therefore a general decline of the country's overall
economic performance largely driven by the fact that the ISI incentive structure favoured
production for the domestic market whose potential was limited.
By the mid 1980s, the scope for ISI policy had thus been exhausted due to diminishing
domestic opportunities. An attempt was therefore made to change the industrial strategy from
‘import substitution’ to an ‘export-led’ one. Due to the heavy protection, the inefficiencies in
production and the accumulation of excess capacity, the sector's products failed to penetrate
external markets causing severe external imbalances. To remedy the situation, the country
embarked on major macro-economic policy changes under the Structural Adjustment
Programmes (SAPs).
1.1.2 Structural Adjustment Policies
Structural Adjustment Policies (SAPs) were introduced in the early 1980s in order to address
the structural rigidities, price instability and the macroeconomic imbalances that had become
,.
15
embedded in the economy leading to poor delivery of services by the public sector. The main
thrust of the SAPs was the shift from a highly protected domestic market to a more
competitive environment that would facilitate increased use of local resources as well as
outward oriented policies that would promote employment-creation and export expansion.
The main components of SAPs included lifting of quotas and administrative controls,
decontrol of prices and import tariffs, tariff reforms, reforming of state corporations,
devaluation of exchange' rate 'through liberalization that included financial sector reforms,
notably the' lifting of controls’ on interest rates and credit controls, and cost-sharing in the
delivery of social services. The SAPs entailed sharp reduction of protection to industry as
limits of import substitution strategy were reached.
Whereas the SAPs reduced tariffs and attempted to decontrol prices, the remaining import
and price controls interfered with resource allocation by stifling the forces of supply and
demand. The industrial sector experienced a major shake-up during this policy regime as
trade liberalization measures exposed the previously protected industries to stiff competition.
The strategic industries that mainly included those in the textile sector collapsed and
impinged negatively on exports while also holding back potential investments. The SAPs did
not therefore achieve the envisaged outcome. In fact, the GDP growth rate recorded a
negative rate of 0.4% between 1991 and 1992, while per capita GNP fell from US$350 in
1992 to US$270 in 1993, while the real annual growth rate of the manufacturing sector fell
from 3.8% to 1.8%.
1.1.3 Export Oriented Policies
Kenya adopted an Export-Oriented Industrialization Strategy when the failure of the ISI
strategy and SAPs became clear. The strategy offered incentives aimed at encouraging
industries to produce for exports. The main objectives of the export-led industrial sector
reform programmes were to improve efficiency, stimulate private investment and increase the
sector's foreign exchange earnings. The trade liberalization measures also aimed at
encouraging production for exports and included the removal of quantitative restrictions,
tariff reduction and export promotion, as well as, the establishment of a more flexible
exchange rate regimes. By 1993, all administrative controls in international trade including
import licensing and foreign exchange controls had been abolished. Export promotion
measures introduced included Manufacture Under Bond(MUB); setting up of the Export
Processing Zones (EPZ), under which investors enjoyed ten year tax holidays, unrestricted
foreign ownership and limited employment of foreigners. Other export-oriented measures
16
included duty and VAT exemptions under the Export Promotion Programme Office (EPPO)-
now referred to as the Tax Remission for Exports Office (TREO).
It is to be noted however, that the export-oriented strategy has not by itself created the much
anticipated impetus in terms of foreign exchange generation; sustainable economic
diversification; enterprise networking and the establishment of linkages with the local
enterprises, particularly the Micro, Small and Medium Enterprises (MSMEs).
1.1.4 Sessional paper No.1 of 1986
The Government’s development objectives for the year 2000 were recast to include strong
agricultural growth based on a strong non-farm informal sector based on strong linkages to
agriculture and industry. It was also restructured to ensure a more efficient manufacturing
sector which together with agriculture and tourism generates the foreign exchange needed to
support growth without excessive reliance on external assistance. More specifically, the
Sessional paper called for industry to be restructured over the next 15 years or so to become
more productive and attain a rapid growth in order to serve specific industrial goals then
identified to include: the expansion and diversification of Kenya’s export base; job creation in
the informal sector exceeding 4% a year; development on the basis of relatively high and
rising productivity; attraction and generation of indigenous Kenyan entrepreneurs and
managers, as well as, support and promotion of the development of agriculture and of the
rural areas.
1.1.5 Small and Medium Scale Enterprises Sector Policy, 1992
As articulated in the Sessional Paper No. 2 of 1992, the Small and Jua kali Enterprises (JKE)
sector was recognised as having an important role to play in job creation. In order to enhance
the rapid growth of the sector, the Ministry of the then Commerce and Industry along with the
Ministries of Finance; Local Authorities, OVOP and MPND and other relevant Ministries
were to collaborate with the private sector, NGOs and community based organizations so as
to: develop and renew the legal and regulatory environment for informal sector activities;
formulate and develop programmes to improve access to credit and finances; support women
and youth involvement in small/medium scale and informal sector through special
programmes; encourage strong backward linkages with the manufacturing sector; and, review
and harmonize licensing procedures for the informal sector enterprises.
17
As it is this effort too has had its limitations and hence the need for continuous policy review
1.1.6 Sessional Paper No.2 of 1997
This Sessional paper was developed to provide a framework within which Government
policies will stimulate economic growth and employment creation through the expansion of
the industrial sector. This objective has however not been met, largely due to the slow pace of
implementation as well as the fact that there were no clear targets and benchmarks. As a
consequence the contribution of the manufacturing sector to the GDP appears to have
stagnated. The statistics show that the sector grew at an average of 12% in the 1970s; 13% in
the 1980s and 1990s then reduced to 10% in the 2000s before standing at 10.5% in 2005.
Therefore, in order to achieve the target of being a newly industrialized country as envisaged
by this Sessional Paper, the economy was expected to grow at between 8-10% per annum
with industry as the dominant sector that was expected to increase its growth rate from 5% to
15% by 2020.
This new NIP is therefore a call to build on the positive interventions of the Sessional paper
of 1997, address areas of its failure, and take into consideration the rapidly changing global
environment and contribute to the achievements of Kenya Vision 2030 targets for the
manufacturing sector anticipated at a minimum of 10 percent annually.
1.1.7 the Economic Recovery Strategy for Wealth and Employment Creation
The Economic Recovery Strategy (ERS) policy framework that the NARC government
unveiled in 2003 identified the review of the aforementioned Sessional Paper No.2 on
Industrial transformation, as a prerequisite for preparing an Industrial Master plan. It also
recognized the need for a comprehensive trade and industrial policy that will –hand in hand-
propel the growth of the economy. The new NIP should therefore essentially further the
aspirations of 'the ERS’ while also providing a useful link to the Kenya Vision 2030
aspirations and targets.
1.2 Defining Industrialization in Kenya’s Contemporary Context
The process of national industrialization as understood in this policy context, borrows from
the classic encyclopaedic definition: a country's capacity to produce secondary goods and
services, which as it were, will ensure the conversion to an order in which industry is
dominant. It is therefore, not merely, the construction of plants and factories, but rather the
4
,..
18
integrated and holistic government-wide policy interventions that together secure the enabler
environment and putting in place governance and regulatory framework that gives incentives
for growth in all sectors of the economy.
In general terms, the industrial sector in Kenya can be said to comprise the manufacturing,
quarrying and mining as well as construction activities out of which manufacturing alone
accounts for approximately two-thirds of the sector’s activities. According to the Economic
Survey 2010, the contribution of the industrial sector to GDP in 2009 was 9.5% for
Manufacturing; 4.4% for Construction and 0.5% for both Mining and Quarrying.
As is readily apparent (see figure 1.2 below), manufacturing activities account for the greatest
share of industrial production-output and forms the core of the industrial sector. In fact, for
the last five years the manufacturing sector contributed an average of some additional Kshs 5
billion to the GDP on an annual basis. The sector registered a decelerated growth of 2.0 per
cent in 2009 against a growth of 3.6 per cent in 2008 while direct employment grew by 0.5
per cent, to 265.3 thousand persons. The mining and quarrying sector registered a decline of
0.8 per cent in 2009 against a growth of 0.9 per cent in 2008. What these figures suggest is
that there is great need to conceptualise and implement concrete policy proposal that ensures
that such a critical economic sector is well-nurtured to ensure that it makes its rightful
contribution to national economic growth and development.
Figure 1.2: Value of output (in millions) of the Manufacturing Sector
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1.3 Problems and Challenges of National Industrialization
Currently, the performance and growth of other national economic sectors in Kenya such as
agriculture, mining, quarrying, construction and others are not happening as expected due to
the slow growth and low support from the manufacturing sector. From a historical
perspective there has hardly been any effort in locating national industrialization as a
necessary and important political decision to be made at the highest level. Examples abound
elsewhere, indicating how decisive political decisions led many countries to pursue extremely
rewarding Industrialization policies. Japan for instance took the political decision in the
1960s and despite having no minerals, including oil, has been able to manufacture many high
precision products.
Furthermore, the absence of what may correctly be seen as an “Industrialisation Culture” in
Kenya has inhibited growth and innovation in the sector. The construction of the railway line
in Kenya at the close of the 19th century, created an opportunity for small enterprises which
offered the required engineering services. These enterprises have since matured into highly
skilled units using modern technologies. It means that a well-planned policy for developing
these units can help in our industrialization program and thus contribute towards the
realization of the Kenya Vision 2030 aspirations.
A major problem in Kenya has also been the fact that the operational industrial policies are
contained in many disparate policy documents including Acts of Parliament, Sessional
Papers, development plans and other sectoral policies and strategies some of which have been
reviewed in the foregoing sections. The lack of a harmonised and clearly defined National
Industrialization Policy (NIP) has therefore negatively affected the process of
industrialization and is compounded by the existence of numerous laws; a weak legal
framework, as well as, overlapping ministerial mandates, all of which have culminated into
an uncoordinated and slow pace of industrialization. It has in fact, led to a scenario where
unemployment outstrips wealth creation, resulting into low demand and rapid growth of
second-hand (‘mitumba’) business.
It is to be observed too, that the industrial sector in Kenya is constrained by ambiguous
policies for the charging and payment of royalties, high capital investment and exploration
costs as well as high energy costs, environmental concerns and uncertainty over economic
quantities of minerals. The sector is mainly agro-based and characterized by relatively low
value addition, low employment, low capacity utilization and consequently, low export
volumes partly due to weak linkages with other sectors. The intermediate and capital goods
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industries are also relatively underdeveloped, implying that Kenya’s manufacturing sector is
highly import dependent.
The performance of the manufacturing sector has further been affected by low capital
injection, use of obsolete technologies and high costs of doing business. The factors that have
contributed to the high cost of doing business include; the poor state of physical infrastructure
that prevailed for a long time; limited access to finance, limited Research and Development
(R&D), poor national institutional framework, as well as, inadequate managerial, technical
and entrepreneurial skills. The high cost of doing business has also contributed to the limited
local and Foreign Direct Investment (FDI) in the country and the high outflow of investment
to the neighbouring countries.
In the meantime, it is noted that the construction sector registered the second fastest sectoral
growth in 2009 at of 14.1%, compared to 8.2% realised in 2008. It has persistently
maintained a robust growth since 2003 and has been instrumental in supporting economic
growth in the country. Nevertheless, the sector has been affected by inadequate supply of key
local construction materials and over reliance on imported machinery and equipment.
It is against the foregoing background that the Ministry has realised that with improved
productivity and competitiveness as well as targeted facilitation, the industrial sector would be
poised to contribute significantly to accelerated economic growth in Kenya. Furthermore, Kenya
is best-placed to take advantage of its strategic leadership position to exploit the opportunities
now availed in the EAC region. This policy framework is therefore being formulated in order
to contribute to the furtherance of the aspirations of Kenya’s quest for industrialization and
overall economic development of the country.
1.4 The Industrial Sector and Kenya Vision 2030
The Kenya Vision 2030 –Kenya’s long-term national policy blueprint correctly places the
industrial sector as a potential growth area for the following reasons:
1. It enjoys strong forward and backward linkages with other important economic
sectors such as agriculture and services;
2. It offers high prospects for employment-creation, especially in labour-intensive
industries;
3. It acts as a catalyst for technology transfer and attraction of FDI;
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4. It offers high prospects for deepening Kenya’s drive to integrate further into the
regional and global economy; and
5. It provides significant foreign exchange earnings to the Kenya Economy.
In addition, it is clear that any successful local enterprises in the field of technology and
engineering creates confidence for attracting both local and Foreign Direct Investment (FDI)
as well as technology transfer as it shows the ability of local institutions to work as sub-
contractors and/ or auxiliary industries.
For these reasons and others to be elaborated elsewhere in this document, the development of
a new and revitalised policy framework for national Industrialization is in line with the
aspirations already identified in the national policy blueprint, i.e. the Kenya Vision 2030.
1.5 Rationale and Justification for a ‘New’ National Industrialization Policy
As can be readily inferred from the foregoing sections, this policy has been formulated, in
part, to provide a stronger and more robust institutional framework within which to
synchronize and coordinate the various policies, strategies and activities that underpin
Kenya’s continuing quest for industrialization. The policy recognises that Kenya is primarily
an agricultural-based economy with a fairly skilled human resource base and is also
strategically located to serve as a regional industrial hub in East Africa. The country is also
endowed with natural resources that can be tapped through Value Addition (VA) for the
benefit of the whole country. It is in this context that policy endeavours to address issues
affecting the industrial sector, by including prospects for more broad-based strategies that
would provide the sector with meaningful opportunities to realize its full potential. The
policy provides for a broader engagement framework within which all stakeholders, including
the public and private sector; civil society and development partners will contribute and play
their respective roles in industrial development.
The experience from successful economies seems to indicate that having a coherent National
Industrialization Policy is a prerequisite for the advancement of industrial development in any
country. For example, Hong Kong’s industrialization policy consisted of an FDI strategy and
a “non-expert technology” to SMEs; that is: medium level, rather than top-level expertise
being extended to the SMEs in order to nurture them into the growth trajectory. On the other
hand, Singapore, Taiwan and Korea had a strong push for specialized high skills/technology
industries and sub contracting of SMEs. In turn, Korea focused on giant private
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conglomerates-led heavy industry and creation of brands. Thailand’s industrialization was
based on the export of primary products and on import substitution policies at home.
From these experiences of industrialized countries, the industrial sector can be seen as a key
driver for increasing growth rates, generation of sufficient employment opportunities, and
fostering Kenya’s integration into the global economy. Further, research indicates that most of
the rich nations have a thriving industrial sector whereas the poorest countries have
agriculture, with very little value addition, as their dominant economic sector. Kenya is, in
fact, lucky to have an active agricultural sector which can benefit immensely from industrial
activities that can scale up Value Addition and thus make the country self sufficient in its food
supplies.
Kenya has an abundant intellectual capacity to achieve the vision in technology led industrial
growth. This should, in fact, be the primary focus in our industrialization policy.
Encouraging the consumption of locally produced industrial goods and services will have a
bearing on the road map to the Vision 2030. The pace of industrialization will depend on this
policy as well.
1.6 Vision and Mission of the National Industrialization Policy
The Vision of this National Industrialization Policy framework has been considered and
agreed as follows:
To enable Kenya become a regional leader in industrial growth and development
contributing upwards of 15% of the annual national GDP.
On the other hand, the Mission is:
To spur industrial economic growth by creating an enabling environment with targeted
incentives in priority sectors that promote country-wide dispersal of industries in order to
realise equitable economic empowerment for all Kenyans
1.7 Guiding Principles and Core Values
In order to revolutionize the growth of the industrial sector in Kenya, the following guiding
principles and core values have been considered and will apply:
i. Productivity and competitiveness
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The policy emphasizes increased productivity and competitiveness as one of the key guiding
principles for expanding and maintaining the domestic and export markets in a liberalized
environment.
ii. Market development
The policy takes cognizance of the need to diversify and expand markets for industrial value
added products. It addresses supply side constraints with regard to product quality, volume
and standards.
iii. High value addition and diversification
The policy recognizes high value addition to the resource endowment as key for optimizing
creation of wealth, employment and regional development. It therefore emphasizes on further
processing of primary products.
iv. Regional dispersion
The Policy underscores the need for equitable dispersion of industries throughout the country
in order to accelerate the pace of development especially in the marginalized areas.
v. Technology and innovation
The Policy recognizes innovation as central to meeting the rapidly changing consumer tastes
and preferences while also boosting productivity and competitiveness of the industrial sector.
vi. Fair trade practices
The policy is expected to create and ensure a level playing field that facilitates fair
competition by guarding against infringement of Intellectual Property Rights, and supply of
counterfeits and substandard and second hand goods.
vii. Growth and Graduation of MSMIs
The policy underscores the need for enhancing the growth and graduation of MSMIs into
large industries that form the bedrock of industrialization.
viii. Employment Creation
This policy focuses on quality and sustainable employment creation.
ix. Environmental Sustainability
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The policy recognizes the need to promote sustainable industrial development that upholds
environmental protection, management and efficient resource utilization.
x. Compliance with the New Constitution
The policy is well-aligned to the provisions of the constitution and takes into account the
constitutional provisions for a devolved structure of government and the particular call to
encourage regional dispersal of industries as a basis for equity and empowerment across the
nation.
xi. Education and manpower development
The policy recognizes that industrialization can only take place when there is a strong and
well trained workforce from all levels of training.
1.8 Current Goals and Objectives of Kenya’s National Industrialization Policy
The overall goal of this policy framework is to increase the contribution of the industrial
sector to GDP by at least 10 per cent per annum. There are ten (10) specific goals to be
achieved in the short term (5 years) as follows:
1. Strengthening local production capacity to increase domestically-manufactured goods
by focusing on improving the sector’s productivity and value addition by 20 per cent;
2. Raising the share of Kenyan products in the regional market from 7 to 15 per cent.
3. Developing niche products through which Kenya can achieve a global competitive
advantage;
4. Increasing the share of Foreign Direct Investment in the industrial sector by 10 per
cent;
5. Increasing by 25 per cent, the share of locally produced industrial components and
spare parts;
6. Developing at least 2 Special Economic Zones and 5 SME Industrial Parks;
7. Establishing an Industrial Development Fund with a minimum of Kshs. 10 billion for
long term financing;
8. Increasing by 20 per cent the share of manufacturing in total MSME Output.
9. Increase the local content of locally manufactured goods for export to at least 60 per
cent.
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10. Increasing the share of industries located outside major urban centres (Nairobi,
Mombasa, Kisumu, Nakuru, Eldoret) to 50 per cent.
The overall policy proposal is to sustain the growth of the industrial sector and make it the
most preferred location for industrial investment in Kenya. In order to realise this objective, a
number of policy objectives are to be pursued, including the following:
1. Creating an enabling environment through improved infrastructure for industrial
development;
2. Attracting local and foreign industrial investment, mining and quarrying;
3. Promoting the development of Micro, Small and Medium Industries(MSMIs);
4. Enhancing Value-Addition to Kenya’s natural and agricultural resources;
5. Intensifying R&D, innovation and technology adoption for industrial growth and
sustainability;
6. Facilitating the provision of internationally recognized standards, measurement and
conformity assessment solutions;
7. Ensuring protection of Intellectual Property Rights;
8. Ensuring sound policy on counterfeit products and damping is in place;
9. Enhancing access to financial services and markets;
10. Upgrading technical, production and managerial skills for the sector, and;
11. Ensuring the protection of the environment.
In the next chapter, the document elaborates the Ministry’s proposed policy framework for
realising national industrialization in Kenya for each of the identified and prioritised sub-
sectors. The proposals are expected to undergird the government‘s implementation of the
national Industrialization objective for the next foreseeable five years and even beyond.
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CHAPTER 2: THE NATIONAL INDUSTRIALIZATION POLICY FRAMEWORK: FOUNDATIONAL PILLARS AND ENABLERS
2.0 the Key Industrial Enablers
The policy framework elaborated herein outlines policy measures to be pursued in order to
promote a more robust and sustainable industrial development in Kenya. It seeks to address
issues affecting industrialization while also rationalizing and streamlining the existing
policies and statutes that impede the growth and development of the industrial sector. Among
the foundational pillars (or enablers as they have been called), are the physical infrastructure
requirements that cover transportation and related logistics, i.e., roads, railways, sea and
airports; energy, water and sewerage; a reliable oil pipeline, as well as, the crucial role of
ICTs-among others reviewed in this chapter. In addition, this policy document places
emphasis on the crucial role of national security as an enabler in its own right and hence the
need to ensure its sustainable availability if investments in industrialization is to be
guaranteed.
It is thus argued that Kenya’s industrial competitiveness will only be achieved by building
and developing an infrastructure network that is adequate in meeting the industrial needs of
the growing economy of Kenya and that the enabling environment is properly nurtured in
order to create the required investor confidence. The thrust of the policy proposals herein are
therefore designed to ensure that the cost of doing business is drastically reduced;
productivity and efficiency of operations enhanced and Kenya turned into the preferred
destination for industrial development and investment.
2.1 Physical Infrastructure Required for Industrialization
An effective and appropriate infrastructure is an important key enabler for growth and
sustainability of industrialization. It is also critical in lowering the cost of doing business and
enhancing competitiveness of the country. Infrastructure generally entails transport and
logistics systems, road and rail networks, sea and inland waterways, air transport, energy
supply, including a reliable oil pipeline; water and sewerage services; ICT services (fixed,
mobile, wireless and satellite telecommunications networks)-among other things as already
recognised by KV2030 as critical enablers of the national transformation programme. A brief
discussion of each of these infrastructure sub-sectors in the context of Kenya’s national
industrialisation goals and objectives follows.
2.1.1 Transportation and logistics
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By transportation and logistics, reference is being made to the all-important requirements for
a good rail and road network as well as sea and airports and the necessary logistics that
ensure fast and efficient transportation of goods to required destinations. An efficient
logistical system reduces lead clearance time and costs. Currently, levies are charged at
different collection points while roadblocks, weighbridges, and custom clearance points have
equally affected the timely flow of industrial inputs and products. In addition, these
procedures are not well coordinated between the various agencies that are responsible for
them and thus, often, giving way to the problem of corruption.
2.1.2 The Roads Network
Road transportation is an essential component for the transportation of raw materials,
industrial inputs, finished products and movement of human capital. The existing road
network in Kenya is however largely concentrated in a few urban areas, with limited feeder
roads to markets and regions with resource endowments, especially those of agro-based raw
materials. The inadequate state of the road network causes delays, breakages and high
maintenance cost for transport machinery, leading to high costs of doing business. This has
resulted, over the years, in the concentration of industries in areas with a good road network
thus creating disparities in regional industrial development. It is readily recognised that one
of the by-products which can be easily made available locally for the road networks is the
street lighting system. Investments in road networks will thus give birth to several local
companies which can produce street lighting products.
2.1.3 The Rail Network
The role of the railway network in the process of industrialization is to facilitate a cost
effective mode of transportation of bulk industrial inputs and finished products. In Kenya the
railway network, rolling stocks and locomotives have not been modernized in tandem with
economic development of the country ever since it was first constructed between 1897 and
1901 as a project of the colonial government. This has resulted in long turnaround time and
diversion of cargo onto the road network thus causing further deterioration
and escalating the costs of road maintenance and transportation. From the past experiences
with that first railway line, several small workshops were set up all over the country to
service the railway system. The development of a modern railway can create industrial
growth with skills in electrical and mechanical engineering disciplines becoming very
critical. A taskforce to identify the skills needed for the success of this mission and the skills
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needed to service is therefore an important consideration as is the need to ensure that the
education and training for the new graduates is aligned in order to serve this field.
2.1.4 Sea and Inland waterways
Sea and inland waterways (Ports) are important links in the transportation of bulk imports and
exports. Kenya has a sea port in Mombasa and lake ports along Lake Victoria. However, they
face several challenges that include; poor operating systems, insufficient modern equipment,
and the inability to maintain the sophisticated equipment that has been installed; the invasion
by the water hyacinth which has led to periodic blockage of the lake as well as shallow
channels and narrow berths that inhibit navigation and docking of large ships. These
inefficiencies have led to delays in clearance and ship turnaround time thereby making
importation costs of industrial inputs and export of finished products expensive. Further it has
to be appreciated that modern systems today use equipment which has got communication
facilities that need highly skilled manpower to sustain and manage. This manpower can be
trained in facilities available within the institutions. Local industries will need to be
encouraged to train these talents if the industrialization policy provides for commensurate
incentives.
2.1.5 Airports
As globalization and regional integration takes hold, the competitiveness of the Kenyan
industry is increasingly relying on airports and the aviation infrastructure. Modern and
efficient airports facilitate quick delivery of high valued industrial goods and especially the
perishable products destined for the European markets. With rising passenger and cargo
traffic and the ongoing infrastructure improvements, the importance of airports as economic
catalysts cannot be ignored since they cater for the increase in the volume of imports and
exports and generally contribute to an efficient movement of human capital.
2.1.6 Policy Imperatives for Improving Industrial Transportation and Logistics
In order to inject the required efficiencies and reduce the challenges facing transportation and
logistics across all the aforementioned physical infrastructure sub-sectors, the Ministry
intends to work with all other stakeholders in order to implement the following policy
options:
1. Urgent implementation of the Sessional Paper on Integrated National Transport
Policy (INTP) of November 2010;
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2. Fast-tracking the expansion, modernization and maintenance of road networks to
areas of existing and high potential for industrial development prioritized in this
policy document;
3. Modernizing and expanding the rail network to areas of existing and high potential for
industrial development prioritized in this policy document;
4. Modernizing and expanding Kenya’s International airports while also expanding the
local airports network;
5. Prioritizing the expansion and modernization of the existing ports and fast tracking
the development of new ones, and;
6. Harmonizing, streamlining, and automating clearing and forwarding procedures at the
ports.
2.2 Energy Requirements for National Industrialization
The Kenya Vision 2030 recognises the role of energy as a critical enabler of national
transformation and especially in so far as the aspiration towards industrialization is
concerned. For the country to industrialize, adequate and affordable energy supply is a pre-
requisite. The energy sector mainly comprises of electricity, petroleum and renewable energy
(geothermal, wind, solar, biomass). Other potential sources include coal, nuclear, tidal,
Oceanic Thermal Expansion Conversion (OTEC) and natural gas. The energy needs under
KV2030 is obviously very challenging, and offers important opportunities for the local
industries to harness wind, solar and geothermal energy. Furthermore, there will be need for
locally manufactured switchgear, automation, motor control panels, power factor correction
equipment-among others.
Currently the hydro-power generation capacity is only 742MW compared to a demand of
1200MW that is expected to rise to 3011MW by 2018. Hydro-power generation, which is a
cheaper source of energy, is unreliable due to the exigencies now created through
environment and climatic change. Furthermore, the thermal generation which is used to
bridge the short fall is expensive due to high cost of imported fuel. The situation is worsened
by high cost of generation, transmission and distribution. There is need therefore, to expand
the exploitation of hydro-power generation, coal, nuclear and other renewable energy
resources in order to meet the demands of Industrialization.
2.2.1 Policy Statements to Support the provision of Energy for Industrialization
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As a response to the challenge and requirements of Energy, the Sessional Paper No. 4 of 2004 on Energy will continue to be implemented alongside the following policy interventions that are specific to industrialization:
1. Fast tracking the expansion and diversification of the power generation sources in a
cost effective manner;
2. Separating power feed for industrial consumers from power feed for residential use to
increase reliability especially during times of rationing;
3. Fast tracking provision of electrical energy to areas of existing and high potential for
industrial development prioritized in this Policy document;
4. Providing preferential electricity tariffs for heavy industrial consumers by capping it
at 30% less than the prevailing rates at the short term in key industries prioritized in
this Policy document.
2.3 Water and Sewerage Systems for Industrialization
Clean water is one of the most important ingredients in the industrial production processes.
Current available water is inadequate for industrial and other domestic uses. Competition for
water use has often denied the industry adequate clean water in the required quantities. Due
to this competition the current tariff structure is disadvantageous to industrial users therefore
making the cost of water to these users very high. As a result of poor sewerage system the
cost of waste water management is also very high for industries.
2.3.1 Policy Statements to Improve Water and Sewerage Services for Industrialization
The Ministry, with other relevant stakeholders will pursue the implementation of existing
water-related policies that also have a bearing on the growth of the Industrial sector. These
include the continued implementation of the Irrigation Master Plan of June 2009 alongside
the following policy options that will provide a basis for improvements in the provision of
water and sewerage management for industries:
1. Fast tracking the provision of clean and reliable water to areas of existing and high
potential for industrial development prioritized in this policy document;
2. Providing preferential water tariffs for industrial consumers in key industries
prioritized in this Policy document;
3. Promoting Public-Private-Partnerships in the provision of water and waste
management systems, including water harvesting, storage and recycling;
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4. Providing incentives for construction and fabrication of effluent treatment plants and
solid waste management facilities in industrial areas.
2.4 Information and Communication Technologies for Industrialization
It is now well-known that Information and Communication technologies (ICTs) are at the
core of contemporary industrial development and human progress in general. Indeed, ICTs
have become a key enabler or ingredient in lowering the cost of doing business. The Ministry
recognises the role of ICTs as critical in creating an immense impact on the way services are
delivered. Kenya witnessed tremendous growth in this sector in 2009 following the landing of
the underground sea fibre optic cable. However, the ICT Sector is still relatively
underdeveloped in comparison with emerging and developed economies. With the growth of
ICT, power needs will increase as more data centers, cloud computing and registration of
BPO’s are established to take advantage of the abundant skilled manpower resource in
Kenya. Much FDI is anticipated in this sector and local industries producing switchgear and
local talent are expected to manage these installations while encouraging other investors to
choose Kenya as a key destination in Africa.
2.4.1 Policy statements to enhance ICT infrastructure for industrialization
The Ministry will work other stakeholders to ensure the continued implementation of the
National Information and Communications Policy of 2006 and especially in areas related to
and touching on national industrial development. Other than the continued implementation of
the agreed ICT policies, the Ministry will also pursue a two-pronged policy intervention
measure as follows:
1. Fast tracking the provision of ICT infrastructure to areas of existing and high potential
for industrial development as prioritized in this policy document;
2. Promoting the use of ICT in transport and logistics systems, manufacturing processes
and all industrial related activities to enhance cost effectiveness and efficiency.
2.5 Formation of an Apex Industrial Coordination Institution
The success of this NIP framework largely depends on a strong political will and commitment
by the top policy-making organs of the government in taking firm decisions regarding the
sector’s growth and development. This is especially critical because the priorities and focus
of other institutions whose mandate cuts across industrial development, and are therefore
critical to overall industrial growth in the country, may not have their priorities, necessarily,
aligned to those of the industrial sector. In this regard, the Ministry finds it crucial that a
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vertical, apex institution be created to provide leadership, allocate resources, set targets,
oversee, as well as, synchronize the activities of all the different institutions that play a role in
the path of Industrialization. The detailed institutional arrangements under the NIDC as well
as the linkages with other sectors and institutions are further elaborated in chapter four of this
document.
2.5.1 Policy Statements on the formation of an Apex Industrial Coordination Institution
The Ministry will pursue the following three-policy options designed to support the establishment of a new institutional framework to assist in the coordination and management of the national industrial development process:
1. Crafting and ensuring the enactment of a National Industrialization Act;
2. Establishment of a National Industrial Development Commission (NIDC);
3. Identifying companies and/or institutions for technology management nuclei in order
to create a culture of excellence in the respective fields of expertise.
2.6 MSMI Growth and Graduation for Industrial Expansion
The MSMI sector is recognised as the foundation of industrial development in most
developing and developed countries. Currently, the sector is suffering from many challenges
including the lack of access to affordable finance, limited access to markets, lack of
infrastructure, a hostile business environment, weak management structures, and lack of
access to skilled labour. Many of the past policies were devised from the perspective of large
firms and those targeting the sector were fragmented and not effective in the development of
the MSMIs.
2.6.1 Policy statements to support MSMI growth and graduation
In order to continue unlocking the potential of MSMI’s so that they play their role in
contributing to Kenya’s industrial development, the following policy measures are to be
pursued:
1. Fast tracking the enactment of the Micro and Small Enterprises Bill.
2. Establishment of an Industrial Development Fund (IDF);
3. Development of a National Industrial Incubation Policy
4. Development of a ‘One-Stop-Shop’ for business registration, licensing and taxation
for MSMIs;
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5. Mainstreaming the 4K MSE 2030 initiative and CIDC program to support graduation
of MSMIs;
6. Ensuring the alignment and harmonization of all Development Partner-projects and
programs to the Kenya Vision 2030;
7. Advocacy to ensure harmonised coordination of MSMIs activities under one ministry;
8. Formulating a National Industrial Sub-contracting Policy;
9. Benchmarking companies with ethical principles and policies that are conducting
business with goods manufactured locally in the government tendering process as a
basis for reducing the proliferation of counterfeit goods.
2.7 Industrial Land and Work Sites
The availability of adequate and accessible industrial land is a crucial factor in the location of
industries. The cost of industrial land is quite high owing to speculation and lack of direct
government intervention in the provision of industrial land. As already noted, there is also
inadequacy of requisite infrastructure in the potential industrial locations, leading to low
interest in industrial investment in such areas. The overall consequence of this is that there is
inequitable industrial dispersion across all the forty-seven Kenya counties.
2.7.1 Policy Statements to secure provision Industrial land and work sites
The Ministry will pursue the following two policy-options to ensure availability of adequate
industrial and work sites across the counties:
1. Work and lobby with other stakeholders to ensure the provision of land for industrial
development in areas of existing and high potential as prioritized in this policy
document;
2. Work and lobby with other stakeholders to plan, demarcate, zone and acquire land for
industrial development in every county.
2.8 Standards and Quality Infrastructure
It has to be recognised that the world relies on various standards and technical regulations for
their trade-related activities. For Kenya’s products to be competitive in the regional and
global market, the country must adhere to these standards. Quality infrastructure refers to all
aspects of standardization, metrology, testing and quality management, including certification
and accreditation. It applies to both public and private institutions and covers the regulatory
framework within which they operate. In addition, consumers are increasingly demanding
international standardization of production practices and traceability of products for quality,
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health, safety and full disclosure to ensure consumer protection. But industrialists in Kenya
are also faced with challenges of competition from sub-standard and counterfeit goods, illicit
goods and many forms of illegal trade. The situation is worsened by lack of, and/or weak
implementation of the harmonized standards in the EAC and COMESA region. This makes
the playing field rather uneven for the Kenya-based manufacturers.
2.8.1 Policy statements to enhance standards and quality infrastructure
In order, therefore, to enhance standards and quality infrastructure, the following policy measures are to be pursued by the Ministry:
1. Fast track the harmonization and implementation of EAC and COMESA common
quality standards and EAC Anti-Counterfeit Bill;
2. Establish the Kenya National Standards Inspectorate to replace the Anti-Counterfeit
Agency (ACA);
3. Establish the Kenya Intellectual Property and Standards Tribunal by merging ACA,
IPT and Standards Tribunal;
4. Develop a National Quality, Standards and Anti-counterfeit Policy;
The policy will address among others:
(i) the responsibilities of importer, exporting countries, shipping lines, clearing and
forwarding agents and government agents with respect to sub-standard,
counterfeit and illegal goods imported into Kenya;
(ii) graduated and progressive standards for local Small Medium Industries; and
(iii) Harmonize and streamline levies charged by the regulatory agencies.
2.9 Intellectual Property Rights
An effective Intellectual Property Rights (IPRs) system is an incentive to innovation. Kenya
has a legal and institutional framework for administering IPRs and is also affiliated to the
World Intellectual Property Organization (WIPO). However, there is lack of a comprehensive
National Intellectual Property Policy, coupled with a weak institutional framework and
therefore hampering the effectiveness of the IP system. This in itself acts as a disincentive to
innovation. At the same time, there is low awareness on the importance of IP registration
resulting in loss of revenue and royalties to the innovators and protection of Kenyan products.
2.9.1 Policy Statements to enhance protection of Intellectual Property Rights
The ministry will pursue a three-pronged policy approach to enhance IPR protection in the
country. It will therefore:
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1. Develop and implement a National Intellectual Property Policy
2. Mount campaigns to increase knowledge and awareness of IPR issues and its
importance to industrial investors;
3. Strengthen the Kenya Industrial Property Institute (KIPI) as well as the Industrial
Property Tribunal, to enhance institutional capacity for protection of IPR and
arbitration.
2.10 Governance and the Legal Framework for National Industrialization
The Justice System and dispute resolution mechanisms are important components in
supporting commercial activities in any country. In Kenya, these mechanisms have not been
as effective as required, leading to the perpetuation of corruption, criminal activities as well
as inordinate delays in the determination of industrial and commercial disputes. These
shortcomings often lead to increased costs of doing business and therefore a major
disincentive to Foreign Direct Investments. Although the government has in recent years tried
to deal with some of the challenges facing the business environment, it is to be noted that the
process of incorporation of businesses, registration and taxation have remained expensive,
long and often cumbersome, especially owing to the fact that it is still largely centralized. In
addition, there is no legislation to handle e-trade related litigations. The labour laws with
respect to wages are also not necessarily conducive to industrial sector development since the
wages and annual increments are not aligned to labour productivity.
2.10.1 Policy Statements to promote good industrial governance
The Ministry, in consultation with other stakeholders will pursue the implementation of
ongoing judicial reforms as a basis for securing fast and efficient disposal of industrial
disputes. It will also pursue the enactment of the revised Company’s Act 2010. In addition, the
following three-policy options aimed at promoting general good governance and a better
legal framework for the sector will be pursued:
1. Advocate and work for fast-tracking of reforms in the legal and judicial systems, in
line with the provisions of the Constitution;
2. Work with other stakeholders in fast-tracking the on-going business regulatory
reforms that are in to support of industrial development;
3. Work with other stakeholders in order to revise the labour laws and incorporate
provisions on labour productivity in industries.
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2.11 Occupational Safety and Health
A safe work place reduces the occurrence of work-related accidents, diseases and insurance
claims thus resulting in higher productivity levels and low production costs. In Kenya, the
low awareness of the Occupational Safety and Health (OSH) Act of 2007 undermines the
safety and health of workers. This has partly contributed to the weak safety culture in the
workplace and non compliance with international safety and health standards. Similarly,
Workplace policy on HIV/AIDS has not been fully mainstreamed.
2.11.1 Policy statements to enhance Occupational Safety and Health
The ministry, in consultation with the relevant stakeholders, will work to increase awareness on the Occupational Safety and Health (OSH) Act of 2007 and will also adopt a two-pronged policy intervention, specified as follows:
1. Fast tracking the development and implementation of the OSH Policy;
2. Mainstreaming HIV/AIDS policy at the workplace, especially for MSMIs.
2.12 Technical, Production, Managerial and Entrepreneurial skills
The development of technical, production and managerial skills is essential for the expansion
of the industrial sector. Kenya aims to create a globally competitive and adaptive human
resource base to meet the requirements of the Vision 2030. This requires strengthening of
linkages between training institutions and industry as well as the development of technical,
production and managerial skills in a well-structured and coordinated manner. Vocational and
technical training institutions also require modern training facilities to meet the market
demands while at the same time an entrepreneurial culture needs to be developed.
2.12. 1 Policy Statements to grow technical, production, managerial and entrepreneurial skills
In view of the challenge of insufficient and inadequately skilled Human Resource base, the Ministry will pursue the following policy options:
1. Develop a framework to provide for and enhance continuous linkages between
tertiary and vocational training institutions and with industry;
2. Expand and modernize the Kenya Industrial Training Institute (KITI), including other
technical, vocational and entrepreneurial training institutions that are designed to offer
artisan, craftsmanship and technician training for industry;
3. Establish entrepreneurial ‘Centres of Excellence’ for Business Development Services
(BDS) for Micro, Small and Medium industries.
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2.13 Industrial Research, Development and Innovation
Industrial Research and Development (R&D) as well as innovation all play an important role
in a modern economy where new knowledge is central in boosting wealth creation, enhancing
social welfare, and ensuring product and labour competitiveness. These activities are
essential in building innovative capacity of enterprises for increased efficiency and
productivity. The limited linkages between industries, research institutions and training
institutions; low funding and weak institutional mechanisms for promoting collaborative
research have constrained the commercialization of research findings in Kenya. Similarly,
there is no structured system of nurturing and promoting technology entrepreneurs
(technopreneurs) within the country.
2.13.1 Policy Statements to enhance Industrial Research, Development, and Innovation
The Ministry will pursue the following policy measures aimed at enhancing industrial
research and development as well as innovation:
1. The development of a policy framework to support commercialization of research
findings;
2. Strengthen the linkages between Universities, polytechnics and other training
institutions in pursuit of a curriculum that supports the national Industrialization
process;
3. Formulate mechanisms to facilitate collaboration with the private sector in research,
technology-transfer and development;
4. Strengthen capacity for technology certification by KEBS and subsequent adoption
for mass production to meet market needs;
5. Establish a funding mechanism for Research and Development that will facilitate
innovation as well as the acquisition of strategic and relevant technology for industrial
development;
6. Establish an industrial information database.
2.14 Industrial Market Access
Markets and the access to them are essential for the development of any industrial sector.
Kenya depends on a few traditional markets and export earnings from these markets.
However, export earnings have been declining due to increased and sustained competition by
similar products. Similarly, ‘Supply Side Constraints’ that include such factors as the inability
to meet standards and the inability to deliver bulk orders on a timely basis have further 38
compounded the problem. There are also the ‘Demand Side Constraints’ which include tariff
escalations and peaks as well as stringent standards and technical regulations which often
amount to Technical Barriers of Trade (TBT) and Non-Tariff Barriers (NTBs) such as export
quotas, have all contributed to the decline in earnings.
2.14.1 Policy Statements to promote market access for industrialization
In order to promote market access for industrial products and therefore increase Kenya’s
earnings from Industrialization, the Ministry will under this policy framework:
1. Promote the consumption of locally manufactured products in prioritized industrial
sectors;
2. Work with other stakeholders, and especially the Ministry responsible for Finance, to
review the Public Procurement and Disposal Act 2005 in order to give 100%
preference to locally manufactured products;
3. Strengthen the negotiation capacity of Kenyan negotiators and also review regional
and bilateral trade arrangements in order to enhance market access for manufactured
products.
2.15 Dispersion of Industries in Kenya
For various historical reasons, the manufacturing sector in Kenya has largely been
concentrated in few peri-urban and urban areas resulting in disparity and un-equitable
regional development. This policy recognises that the different regions of the country are
suitable for different types of industrial and manufacturing activities. In order to harness the
resources available throughout the country, region-specific industrial and manufacturing
clusters need to be developed and nurtured. In doing this, this policy will simultaneously be
answering to the crucial constitutional provision that calls for equitable development across
the country in light of the newly-introduced devolved structure of government that has
divided the country into 47 counties.
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2.15.1 Policy Statements on Dispersion of Industries
As a result of the rather skewed dispersion of industries across the country and the need to
also tap into the specific potential of every region, the Ministry proposes to pursue the
following policy measures:
1. Fast track the establishment of the Special Economic Zones (SEZs), Industrial Zones
and SME Parks in line with the Kenya Vision 2030;
2. Provide incentives for the establishment and dispersion of industries across the
counties;
3. Promote development of MSMIs in rural areas.
2.16 Cleaner Production and Environmental Conservation
Cleaner production practices in industries and environment conservation are intricately
intertwined and need to be integrated for sustainable development. The implementation of
‘Resource Efficient and Cleaner Production’ (RECP) programs is an integral part of the
policies that aim at increasing competitiveness and efficiency of firms as they assist in energy
saving, water conservation, pollution control while also ensuring safety of machines,
equipment and workers as well as enhancing the image of the firm in national and
international arenas.
2.16.1 Policy Statements to promote cleaner production and environmental conservation
In order to ensure conformity with contemporary demands for cleaner production and also
adhere to international requirements for environmental protection and conservation, the
Ministry will:
1. Promote investment in local manufacturing of resource efficient and cleaner
production equipment, along with other emerging technologies;
2. Develop a National Resource Efficiency and Cleaner Production Policy, and;
3. Work to ensure the mainstreaming of the operations of the Kenya National Cleaner
Production Centre (KNCPC) into the ministry responsible for industrialization.
2.17 Trade Policy to Support Industrialization
The existence and operationalisation of a Trade Policy by any country is meant, largely, to
serve as an instrument of industrial development. It should therefore be developed in tandem
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with the Industrialization policy. The development of specific sector strategies itself offers a
pragmatic framework for drawing trade policy considerations into the development of
sectoral industrial strategies in a more systematic and better-coordinated manner.
2.17.1 Policy Statements on Trade Policy
In order to ensure the close alignment between the national trade policy and its
Industrialization counterpart, the Ministry’s major policy option will be to seek the alignment
between the Trade Policy and that of Industrialization. It is hoped that through collaboration
and teamwork across the government ministries/departments handling these two sub-sectors,
the Ministry will be able to address outstanding issues relating to tariffs, bi-lateral and multi-
lateral trade policies and thus enhance competitiveness and market access for Kenya’s
industrial products.
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CHAPTER 3: POLICY FRAMEWORK FOR REVITALISING PRIORITY INDUSTRIAL DEVELOPMENT SUB-SECTORS
3.0 Identifying the Priority Industrial Development Sub-sectors
This policy framework document has identified twenty (20) industrial development sub-
sectors which can be relied upon to spur and invigorate the national Industrialization process.
The main objective of this chapter is therefore to spell out and reflect on the policy options
that will be pursued in order to unlock and revitalise the potential that lies in each of these
sub-sectors and thereby, contribute to national industrial growth and overall economic
development.
The table 3.1 (herebelow) provide information on general industrial classification in Kenya
and their performance in terms of extent of value addition, input productivity, real annual
growth of value addition; employment, labour productivity and the number of companies in
the country. It is these basic indicators that have been used to select the priority sub-sectors
which are as follows:
(i) Iron and Steel
(ii) Machine tools and spares
(iii) Agro Machinery and farm implements
(iv) Automotive and Auto parts industry
(v) Agro-Processing
(vi) Wood and Wood Industries
(vii) Paper and Paper Products
(viii) Meat and Dairy Products
(ix) Leather and Leather Products
(x) Electrical and Electronic Products
(xi) Mining and Quarrying
(xii) Ceramics Industry
(xiii) Glass Industry
(xiv) Pharmaceuticals Industry
(xv) Recycling Materials
(xvi) Packaging Industry
(xvii)Fish and Fishery products
(xviii) Petrochemicals Industry
(xix) Green Energy
(xx) Biotechnology and Nanotechnology Industries
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Each of these sub-sectors are reviewed briefly here below, with the corresponding policy
statements also outlined as the basis for further action by the ministry and other stakeholders,
in seeking to unlock the full potential of each of the sub-sectors.
Table 3.1 : Value-Addition, Productivity and Employment
Inputproductivity
(2005)
Real AnnualGrowth of
Value Added(2001-2005)
LabourproductivityThousandKsh (2005)
1 Food Processing 31,461 25% 26% 5% 71,183 33% 400 168 27%1-1 Meat and Diary 6063 5% 28% 1% 7,925 4% 707 18 3%1-2 Canned Vegetables, Fish, Oils and Fats 4773 4% 27% -2% 8,564 4% 522 21 3%1-3 Grain Mill 11692 9% 27% 13% 5,818 3% 1,790 16 3%1-4 Bakery 3019 2% 27% 0% 2,070 1% 1,102 24 4%1-5 Sugar and Confectionery 3329 3% 27% 6% 16,504 8% 202 14 2%1-6 Other food 2585 2% 16% 7% 30,302 14% 78 75 12%2 Petroleum and other Chemicals 23,472 19% 36% 11% 11,553 5% 1,764 45 7%3 Non-Metallic Mineral Products 12,880 10% 194% 8% 4,953 2% 2,504 25 4%4 Beverages and Tobacco 11,654 9% 68% 8% 7,579 3% 1,234 22 4%5 Paper and Paper Products 6,584 5% 35% 11% 8,061 4% 787 25 4%6 Metal Products 6,313 5% 69% 1% 17,476 8% 325 56 9%7 Pottery and Glass Products 4,596 4% 194% 30% 2,468 1% 1,740 6 1%8 Printing and Publishing 4,268 3% 45% 1% 6,204 3% 499 18 3%9 Electrical Machinery 3,021 2% 56% 7% 2,481 1% 994 6 1%10 Rubber Products 3,011 2% 43% 7% 2,887 1% 1,002 15 2%11 Textiles 2,795 2% 35% -12% 40,365 19% 68 38 6%12 Leather Products and Footwear 2,625 2% 35% -2% 1,669 1% 1,386 8 1%13 Transport Equipment 2,593 2% 22% 1% 5,549 3% 382 14 2%14 Plastic Products 1,897 2% 43% -2% 6,946 3% 253 19 3%15 Clothing 1,888 2% 35% -7% 9,985 5% 119 49 8%16 Wood and Cork Products 1,224 1% 127% -26% 7,806 4% 126 46 7%17 Industrial Chemicals 1,007 1% 57% -10% 1,583 1% 541 23 4%18 Non-Electrical Machinery 953 1% 57% 10% 1,184 1% 635 6 1%19 Furniture and Fixtures 879 1% 70% 1% 2,840 1% 200 22 4%20 Miscellaneous Manufactures 1,088 1% 70% -8% 4,093 2% 194 14 2%
TOTAL 124,209 100% 40% 5% 216,865 100% 505 625 100%
Number ofCompanies
(2005)
Figure 5-3 (large-scale enterprises)
Value addition(2005)
Figure 5-2 (all establishments)Number of
Employment(2005)
Source: Extrapolation of data from Central Bureau of Statistics
3.1 Potential in the Iron and Steel Industry
The industrialization of any nation is largely dependent on the availability and affordability of
iron and steel. It has been established that vast amounts of iron ore reserves exist in several
locations in Kenya, including: Meru, Ikutha, Taita, Embu, Lolgorien, Samburu, and Funyula
districts. There are also smaller deposits in various parts of Nyanza, Western and Coastal
regions including pyritic ores in Bukura area, limonitic ores on Lugulu Hill south of Sio and
and goethite ore on Mrima Hill in Kwale.
Since the level of steel consumption is considered world over as an indicator of the status of
industrial development, it is envisaged that the creation of an iron and steel industry in Kenya
will contribute to the enhancement of economic progress, social cohesion and political
stability in line with the aspirations of vision 2030. The three basic materials for setting up a
steel plant have been identified in the country. The main one is iron ore which is reported to
exist in various deposits in Meru, Taita, and other parts of the country including Coast,
Eastern, Nyanza Eastern and Rift Valley regions. The work that has been carried out by
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various interested parties show that the iron ore deposits are very rich in the ore content and
figures in excess of 80% have been reported as the quality of the ore.
The second main ingredient in iron and steel production is coal which has also been reported
to be in Mwingi and Kitui districts. Tests on the coal grades from these areas and the reserve
estimates are very encouraging and are deemed to be adequate to support both power
generation and iron and steel production. The available data from the work already done
reports deposits in excess of 275 million tons and the work of investigations is still
continuing. The third main ingredient in the iron and steel production is limestone, which
occurs in various parts of the country including Mutomo, Kajiado, Taita, Pokot, Baringo
among other areas.
The availability of iron and steel products in the country will give Kenya an upper hand
within the regional market in iron and steel sector. Steel is a bulky product and is costly to
import from far countries. The availability of steel and steel products in the country will
create a very strong economy for Kenya. The countries in East and Central Africa will source
their steel products from Kenya. It is worth noting in this regard that there is no iron ore
processing industry in Africa, save for South Africa. It means that with the strategic location
of Kenya, the country stands to benefit greatly from the proposed venture. Indeed, the growth
of the steel industry will create a pull effect for the energy sector to supply the necessary
switchgear automation panels manufactured locally and services locally as well. This action
will encourage training of skilled manpower to sustain the industrial growth. The key
industries will be self sufficient in terms of local support in engineering.
3.1.2 Policy Statements to Expand the Iron and Steel Industry
In pursuit of the need to grow and expand the potential that is inherent in the iron and steel
industry in Kenya, it is proposed that the following policy measures be pursued:
1. Establish a sub-committee of the proposed Industrial Development
Commission to deal exclusively with the development of steel and iron
2. Rationalize the tariffs and any other anomalies within the industry to ensure
local competitiveness and value addition in the development of down-stream industries,
including machine tool industry, forging industry, agro machinery and motor vehicle
assembly.
3. Establish the types, location, quantities and qualities of iron, coal and
limestone in the country,
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4. Establish a mini-steel plant at the NMC
5. Develop an institutional framework to promote development of iron and steel
mills industries in the country, within the framework of Kenya Vision 2030
6. Establish a coal power generation plant.
7. Impose a ban on export of scrap metal and iron ore
8. Promote stockpiling of the iron ore and limestone while initially exploring
ways of mining the coal and producing the coke
3.2 Potential in Machine Tools and Spares
Machine tools are power-driven machinery and equipment that perform specific actions on materials
like metal, wood and plastic. These machines are used for turning, milling, drilling, grinding, water-jet
or laser cutting; material forming i.e. stamping, bending and joining as well as work holding i.e.
chucks, fixtures and clamps. The machine tool and accessories industry is critical to economic
development as it makes possible the existence of virtually every other manufacturing industry.
Special tooling such as dies and moulds, is custom designed and made to manufacture specific
products, generally in quantity and to desired levels of uniformity, accuracy, inter-changeability and
quality. Kenya can in fact become a center of excellence in tools and dye making for the
region. The machine-tool industry is therefore a vital sub-sector of the manufacturing sector,
especially because it is the machine tools which cut and form metal and thus are essential for
reproducing the technologies required in an industrial economy. In addition, the sub-sector helps
foster innovation in the manufacturing processes and is a major indicator of economic development.
3.2.1 Policy Statements to Grow Machine Tools and Spares Sub-sector
In consideration of the foregoing potential within the machine tools and spares sub-sector, the
following policy measures will be pursued under this framework:
1. Build manufacturing capacity in Products and Tools design; Machining , Forging,
Forming , Casting and Tool room facilities;
2. Establish a Machine tool Cluster agglomeration of firms with forward and backward
links;
3. Upgrade technical and managerial skills to enable precision engineering
4. Promote incentives to investors in machine tool industry such as tax holiday,
preferential tariff on imported high precision components;
5. Encourage collaboration/manufacturing under license with renowned machine tool
manufacturers.
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6. Deploy CAD-CAM, manufacturing and CNC technology and encourage university
students to undertake practical training and working knowledge of soft ware such as
Pro-engineering and Solid Works for opportunities in machine tooling and sheet metal
works.
3.3 Potential in Agro Machinery and Farm Implements
Agricultural machinery may simply be defined as any kind of machinery used on a farm to
help in the vocation of farming. The best-known example of this kind is the tractor. Some of
the tasks that these machines can perform include soil cultivation, planting, fertilizing and
pest control, irrigation, harvesting/post-harvest, hay making, loading and milking.
In Kenya, machinery costs are generally high particularly in the maize and wheat production
sectors and thus threatening local production and favouring imports. Related machinery costs
include costs of ploughing, harrowing, chiselling, planting, spraying, harvesting, shelling and
transport to stores. There is thus a case to grow and develop this sub-sector in order to reap
the compound savings and simultaneously benefit the agricultural sector.
3.3.1 Policy statements to Grow the Agro Machinery and Farm Inputs Sub-sector
In order to harvest the potential in this sub-sector while also directly complementing the
Kenya Vision 2030 aspirations for the agribusiness potential in the country, two main policy
options will be pursued under this policy framework:
1. Promotion of the usage of farm energy efficient machines and equipment which
reduce on energy expenses while increasing returns;
2. Working with the Ministry responsible for Finance and other stakeholders to lobby for
the provision of tax exemptions on imported farm machines and implements;
3. Pursuing of joint venture partner who manufactures low cost tractors in order to
support agriculture and agro based industries with a view to germinating other
ancillary and sub-contracting SMEs with a potential to expand towards an automotive
sector.
3.4 Potential in the Automotive and Auto Parts Sub-sector
The automotive and auto parts industry is a major economic driver and the government
should nurture and encourage growth and development of the industry. Motor vehicles, used
to transport people and goods are a necessity and part of a well -integrated modern society
with far reaching social-economic impact. (Include figures on potential)
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Most motor vehicles sold in Kenya are imported either as new or second hand with the latter
constituting the bulk of the imports. Locally manufactured vehicles are assembled from
Completely Knocked Down (CKD) kits with little input of the local content.
3.4.1 Policy Statements on Growing the Automotive and Auto Parts sub-sector
In view of the potential in this sector and the central role it plays in the economy, the ministry
will undertake the following pleasure measures:
1. Develop a specialized automotive industrial park through Public-Private
Partnerships.
2. Provide incentives to locally assembled vehicles and auto parts manufacturers for
gradual replacement of second hand vehicles with equally-affordable and reliable
locally assembled ones;
3. Establish a National Automotive Industry committee to coordinate the industry
and develop the auto motive value chain
4. Rationalize tariffs on imported auto parts that can be competitively made locally
to spur growth;
5. Promote the production of vehicles through joint ventures with an established
vehicle manufacturer, by relocation of their working plant and domesticate within
ten years.
3.5 Potential in Agro-Processing and Value Addition
Agriculture is the mainstay of the Kenyan economy and currently represents 24% of the GDP.
More than one third of Kenya’s agricultural produce is exported and this accounts for 65% of
Kenya’s total exports. However, it has long been known that most of the exports are in raw
or semi-processed form meaning that producers of Kenyan agricultural products do not reap
as much benefits as those who process and give value-addition before re-exporting to other
destinations.
3.5.1 Policy Statements to Enhance Agro-Processing and Value Addition
In order to tap into the potential that lurks in processing Kenya’s agricultural products and
providing value addition before export, the Ministry will:
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1. Provide incentives for investment in high value processing of agricultural products
such as tea, coffee, pyrethrum, cotton, nuts, oil crops, hides and skins; gum Arabica,
aloe vera and fruit crops such as bananas, pineapples, passion, oranges and mangoes;
2. Promote the local manufacture of agro-processing machinery and equipments such as
tractors, combine harvesters, cotton ginneries, tea picker, juicing and pulping
equipment by providing technical information and support from research;
3. Encourage clustering of industries around specific agricultural resources for example
coconut and cashew nut, honey processing as well as fish farming and processing;
4. Promote the processing of biodiesel crops such as sunflower, palm trees, cassava and
jetropha circas.
5. Revive ‘ailing’ rice mills to be in line with the heavy government investment in the
sub-sector and promote processing and diversification of rice products;
6. Promote further processing of sugar and sugar by-products to enhance the
competitiveness and productivity of the sub-sector;
7. Work with other stakeholders and especially, the Brand Kenya Board (BKB) to
emulate best practice from Australia and New Zealand in country branding for agro-
based industries.
3.6 Potential in Wood and Wood Products
Wood and wood products constitute an important input to the building and construction
sector and also to furniture industry. There has been a long-standing ban on logging in Kenya
which has affected the performance of the industries involved while some have closed down.
Many SMEs operate within the furniture industry which generates high employment
opportunities. This policy framework aims at revitalising this sector through the pursuit of
deliberate policy measures.
3.6.1 Policy Statements to Grow the Wood and Wood Products Sub-sector
In order to rebuild and revitalise this sub-sector, the ministry will pursue and promote the
following policy measures:
1. Encourage the procurement of all furniture consumed in government institutions is
procured from local manufacturers.
2. Strict enforcement of standards in the sector to ensure quality and competitiveness.
3. Promote utilization of wood waste for production of chip boards.
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4. Allow duty free import of low cost woods and alternative materials for furniture
manufacturing.
3.7 Industrial Potential in Paper and Paper Products
At the moment, Kenya has an integrated pulp mill plant producing paper and paperboard
from renewable forest products. However, the country imports coated white lined chipboard
and other boards for packaging, newsprint, printing paper and other types of paper.
Investment opportunities exist in the production of paper from other raw materials such as
bagasse, sisal waste, bamboo, papyrus reed, straw and waste paper.
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3.7.1 Policy Statements to Grow the Paper and Paper Products Industry
In order to unlock the potential in the paper and paper products industry, three policy options
will be pursued as follows:
1. Encourage investment in the production of paper, including the use of other raw
materials other than wood;
2. Revive the Pan African Paper Mills Company;
3. Encourage government institutions to procure paper products from local
manufacturers, except for those that are not locally manufactured
3.8 Industrial Potential in Textile and Clothing
In Kenya, the textile and clothing industry comprises of two main sub-sectors namely:
(i) Textiles; covering cotton growing and ginning, fabric manufacture, including
activities such as polymerization, spinning, weaving, knitting and wet processing,
and;
(ii) Apparel; which include garments and clothing accessories (labels, buttons, zippers
and packaging)
Apparel manufacturing is the most vibrant part of the chain at the moment, largely because
AGOA permits imports of fabric from low cost producers in any part of the world. Some of
the challenges affecting the sector include, high electricity cost and availability; marketing,
especially for non-exporting firms; competition from uncontrolled imports of second-hand
clothes; counterfeit textile products and imports that evade duty as well as handicaps in
obtaining qualified personnel such as managers and designers.
3.8.1 Policy Statements to Grow the Textiles and Clothing Sub-sector
Under this policy framework, the following policies measures are to be pursued:
1. Revive ‘dead’ textile mills and ginneries in the country;
2. Encourage the setting up of weaving and milling plants through incentives on capital
equipment;
3. Encourage the regional development of textile within the EAC region to maximize on
comparative advantage;
4. Provide competitive prices for cotton farmers, through the Cotton Development
Authority (CoDA), in line with international textile prices;
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5. Ban, or introduce a levy on the export of cotton lint and;
6. Ban the import of used clothes (mitumba).
3.9 Potential in Meat and Dairy Products Sub-sector
The livestock sector comprises mainly of dairy and meat production; eggs, hides, skins and
wool from cows, sheep, goats, poultry and game meat. Kenya has one of the largest dairy
industries in sub-Saharan Africa. The Kenyan dairy companies’ process, package, and/or
market dairy products, including fluid, cultured, and solid milk products such as yoghurt,
cheese, butter, ghee, condensed and evaporated milk, ice cream and frozen desserts. These
products are either produced by partially skimming the whole milk, or by completely
skimming it and then adding an appropriate amount of cream back to achieve the desired
final fat content.
3.9.1 Policy statements to Grow the Meat and Dairy Products Industry
In order to tap into the full potential of this sub-sector, two major policy options are to be
pursued:
1. Enhance the processing, packaging and branding of Kenyan meat and dairy products;
2. Promote exports to regional and global markets for products in the sub-sector.
3.10 Leather and Leather Products Industry
The Kenyan leather industry is a prime agro-based sector with a high potential for economic
development and creation of employment opportunities. The industry has strong backward
and forward linkages that provide opportunities for value addition using locally sourced raw
materials. The leather industry in Kenya is made up of four main sub-sectors: the raw
material base (hides and skins); Tanneries, Footwear, and manufacturing of Leather goods.
The challenges facing the sector include, low recovery of hides and skins due to poor
slaughtering and flaying practices; poor animal husbandry; the export of raw hides and skins;
the importation of second hand leather products-among others.
3.10.1 Policy Statements to Grow Leather and Leather Products Industry
In order to address some of the afore-mentioned challenges and ensure a steady growth and
expansion of this sector, the Ministry will put in place the following policy measures:
1. Strengthen the Leather Development Council. 51
2. Revive and mainstream the Training and Production Centre for the Shoe Industry
(TPCSI) in order to promote technical capacity in processing of leather products;
3. Strengthen the leather training and incubation programmes in KIRDI and KITI;
4. Ban importation of used leather products, and;
5. Ban the exportation of raw hides and skins.
3.11 Electrical and Electronics Sub-sector Sector
The Government of Kenya recognizes the importance of ICT in economic development and
has therefore initiated major steps to promote its use. The introduction of the fibre optic cable
has greatly enhanced communication which in turn shall spur the development of industries
within the sector.
3.11.1 Policy Statements to Grow the Electrical and Electronics Sub-sector
In order to advance this cutting edge sub-sector and contribute to the country’s aspirations for
growth in the ICT sector, three major policy interventions will be pursued:
1. Establish an assembly plant for ‘Madaraka’ computers and other ICT accessories as
envisaged in Kenya Vision 2030.
2. Promote investments in the electrical and electronic sector, notably the production of
parts, components and sub-assemblies;
3. Encourage international companies to locate their subsidiaries within Kenya and
utilize locally available resources;
4. Take stock of the current capacity in the field of electrical switchgear manufacturing,
automation and manufacture of LV and MV switchgears and promote the
consumption of locally manufactured switchgear products with the consumers of
technology in government parastatals as well as utilities;
5. Identify a list of items with a view to ensuring local manufacture and consumption by
local companies;
6. Encourage establishment of training centers and electrical industries to fast tract the
transformation of local graduates with practical training in the latest equipment which
are used in the capital goods imported by various industries;
7. Offer tax incentives for establishing the training centers which can be certified by DIT
in terms of teaching equipment and training staff;
8. Explore policy options to ensure that utilities procure at least 30% – 40% of their
needs (e.g. cable, LV and MV switchgears, overhead line materials and protection
panels from local companies.
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3.12 Green Energy and Industrial Growth in Kenya
Energy is one of infrastructural enablers of industrialization. Commercial energy in Kenya is
currently dominated by petroleum and hydroelectric power. However there exists an
immense, unexploited reservoir of geothermal, solar, wind and biomass energy in the country.
To this end, the ministry intends to work with other stakeholders in order to grow the
potential in Green energy and make a contribution to reducing the cost of power in the
country.
3.12.1 Policy Statements to support growth of Green Energy
In partnership with other stakeholders already working on the growth of green energy in the
country, the ministry will pursue the following two policy options:
1. Promote the manufacture of affordable equipment, (in line with national green
energy policies), including solar panels, windmills, digesters, cookers,
refrigerators and micro-hydro generators;
2. Promote energy efficiency by facilitating investments in energy saving
technologies and outlining an efficiency policy for all commercial buildings and
industries;
3. Ensure an effective ban on second hand(mitumba) energy components;
4. Promote the generation and usage of bio-fuels, co-generation in sugar and other
agro-processing activities.
3.13 Potential in Biotechnology and Nanotechnology Industry
Biotechnology is today used in a variety of primary production needs, in health as well as in
industry. Specific industrial applications include the use of biotechnological processes to
produce chemicals, plastics and enzymes, as well as, environmental applications such as
bioremediation and biosensors and methods to reduce the environmental effects or costs of
resource extraction as well as production of biofuels. On the other hand, Nanotechnology
(also known simply as nanotech), is a branch of technology that essentially leads to the
production of ‘nanoparticles’ that are today being in many countries in the production of
textiles, cosmetics, sunscreens, surface coatings, printing, water treatments and kitchenware.
Reports indicate that more than 100 foods have been manufactured, processed, or packaged
using nano particles. It is therefore apparent that these two types of modern-day technology
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can encouraged in Kenya in order to enhance the type and range of our industrial output and
competitiveness.
313.1 Policy Statements to grow Biotechnology and Nanotechnology
The Ministry will pursue two major policy options inn order to grow these modern-day
industrial technology options in Kenya:
1. Develop initiatives that will attract major investment in bio-and nano-technology
research and product development from local and international companies or
institutions, and;
2. Promote industrial skills development for bio-and nano- technologies applications.
3.14 Potential in Kenya’s Pharmaceutical Industry
The Pharmaceutical industry in Kenya has the potential for growth to meet national and
regional demands. It is therefore incumbent upon the government to pursue policies that can
help reap this potential further. It is to be noted that the ministries responsible for Health
Services have already initiated the formulation of a more detailed, Kenya National
Pharmaceutical Policy(KNPP)whose objective, interalia is to “encourage local manufacture
of essential medicines for self-sufficiency in the domestic market and to promote growth in
pharmaceutical exports.”
3.14.1 Policy Statements to Augment Growth in the Pharmaceutical Industry
In order to tap into the clear potential in the pharmaceutical sub-sector, the Ministry will
work closely with the ministries responsible for health in the country as well as with the
Federation of Kenya Pharmaceutical Manufacturers (FKPM,) in order to realise the following
policy objectives:
1. Promote procurement of locally manufactured pharmaceutical products, and
2. Encourage the use of local raw materials for the manufacture of pharmaceutical
products;
3. Streamline the institutional and legal arrangements governing the pharmaceutical
sector;
4. Ensure training of more specialised personnel, to cater for R&D needs; industrial
pharmacy, biotechnology as well as quality control assurance;
5. Encourage technology transfer, especially for the manufacture of generics;
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6. Initiate knowledge and awareness campaigns to ensure proper understanding of
generic medicines.
3.15 Potential in Mining and Quarrying
As already mentioned, Kenya is endowed with various, proven and available natural and
mineral resources. Nevertheless, there has been very little exploitation of these resources
over the years. The development of the mining and quarrying sector is important as it will
support resource based industries such as iron and steel, cement, building and construction;
chemical and ornamental industries, among others. The country has economically viable
quantities of coal, iron ore, fluorspar, titanium gypsum, limestone, soapstone, gemstones,
soda ash, diatomite, lead, gold, silicon oxide and marble among others.
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3.15.1 Policy Statements to Spur Growth in Mining and Quarrying
The national potential in the mining and quarrying sub-sectors will be harnessed through a
prudent two-fold policy intervention measure, to include:
1. The promotion of partnerships between County Governments and private investors in
exploration, mining and processing, and;
2. Working with other stakeholders to fast track development of a policy that governs
the exploitation of minerals in the country.
3.16 Potential in the Recycling Materials Industry
Solid waste arising from industrial processing and manufacturing industries, municipal,
residential and service waste is a resource that can be tapped into in order to spur industrial
growth. The management and disposal of wastes in Kenya is faced with various challenges
such as the prevalence of inappropriate modes of transportation, lack of disposal sites, low
utilization, poor recycling and treatment technologies as well as requirement of high capital
outlays in the event of investment in the sector.
3.16.1 Policy Statements to Grow the Recycling Materials Industry
In order to position and fully exploit the potential in the recycling materials industry, two
policy measures are to be pursued:
1. The development of a Waste Utilization and Recycling Policy;
2. The promotion of a waste minimization in industry through cleaner production
technologies.
3.17 Potential in the Packaging Industry
The quality of packaging is vital for product penetration and expansion into the local,
regional and global markets. In general, packaging has three critical functions namely;
protecting the contents, improving convenience of handling and transport as well as
describing the contents and sales promotion.
3.17.1 Policy Statements to Grow the Packaging Industry
A double-phased policy intervention measure will be pursued in order to grow this sector, as
follows:
1. The strengthening of the visibility and functioning of the Kenya Packaging Institute,
and;
2. The introduction of a training curriculum on packaging at selected tertiary institutions.
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3.18 Potential in the Petrochemicals Industry
This industry covers petroleum products, natural gas and petrochemicals. Petroleum products
include lubricating oils and refinery products, such as gasoline, kerosene, fuel oils, gas oils,
diesel, naphtha, synthetic fibres and bitumen. The petrochemical industry has extensive
intra-linkages with downstream activities, as well as other industries. Plastics parts and
components as well as products are the preferred materials in view of their superior properties
and lower costs, compared with traditional materials, such as paper and metal. The
downstream activities mainly involve polymer production for plastics. Kenya therefore
needs to position itself for opportunities in the petrochemicals sub-sector by, interalia,
the modernization of its oil refinery to take advantage of the imported crude and
existing crude oil discovered within the EAC region.
3.18.1 Policy Statements to Grow the Petrochemical Industry
The following policy intervention measures have been proposed to help grow the
petrochemical industry in Kenya, and will include:
1. The modernization and expansion of the Kenya Petroleum Refineries Limited (KPRL)
in order to enable it process all categories of crude oil and to produce other raw
materials that support the industry;
2. The establishment of R&D programmes devoted to the petrochemical industry, in
research institutions and institutions of higher learning, and;
3. Working with selected tertiary institutions to develop a curriculum in petroleum
engineering.
3.19 Potential in the Ceramics Industry
There are several ceramic plants in the country currently producing various types of products,
including crockery, wall tiles and sanitary ware. The basic raw materials for ceramics silica
such as sand, and Kaolin, Kisii Soapstone and quartz are locally available. However, despite
the fact that adequate raw materials are available locally, the industry lacks adequate
quantitative capacity that can meet the local demand. This gap has tended to be met through
imports from various countries. (unavailability of gas/expensive. Prioritized upwards)
3.19.1 Policy Statements to grow the Ceramics Industry
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There are a number of policy options the government will consider in order to grow and
expand the ceramics industry and particularly enable it meet local demand for ceramics.
These policy measures will include:
1. Prioritization of the expansion and modernization of the existing plants and fast- tracking the
development of new plants;
2. Promoting partnerships between County Governments and private investors in exploration,
mining and processing;
3. The development of a curriculum and training for Ceramics technology in the country and
mainstreaming it in selected existing tertiary institutions.
3.20 Potential in the Fish and Fishery Products Industry
This sector contributes about 0.5% to GDP and supports about 80,000 people directly and
800,000 indirectly in 2009 according to the Fisheries Statistical Bulletin of 2010. The sector
produced fish worth Kshs. 13 billion in 2009 out of which Kshs. 3.7 billion was exported.
The sub-sector is also crucial to food security, including the development of fish ponds which
was identified as one of the focus areas under the Economic Stimulus Programme initiated
during the financial year 2009/2010.
Nevertheless, the sub-sector has been unable to realize its full potential due to inadequate
supportive infrastructure, lack of access to credit facilities, lack of adequate and quality fish
seeds and feeds; poor technology transfer and stringent sanitary and phyto-sanitary standards
(SPS) in export destinations.
3.20.1 Policy Statements to grow the Fish and Fishery Products Industry
In order to address the challenges identified in this sector while also ensuring a steady growth
and expansion of the fisheries industry sub-sector, the Ministry in collaboration with other
stakeholders will put in place the following policy measures:
1. Develop industrial fishing ports and the supportive infrastructure;
2. Encourage clustering of industries engaged in fish production and processing;
3. Provide incentives for investment in the production of value- added fishery
products.
3.21 Potential in the Glass Industry
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The Glass industry has multiple unique properties that make it suited for Industrial Use.
There are five general categories of glass manufacture: flat/sheet glass (windows, picture
glass), container glass (bottles and jars), pressed and blown glass (light bulbs, ovenware,
medical glass), glass fiber (fiberglass insulation, material reinforcement, optical fibres), and
products from purchased glass (assembled products, aquariums, art, mirrors, table tops)
Kenya has large deposits of silica sand have been exploited at Kaloleni, Kilifi County. Silica
sand, including other chemicals such as soda ash are readily available in the country. The
glass industries in Kenya have been growing especially in the area of production of container
glass, commonly used in beverage and alcoholic sectors. With the increasing growth of agro-
processing, especially for the manufacture of fruit juice, the demand for container glass has
been in the increase with exports increasing from Kshs. 353.8 million in 2001 to Kshs. 1.76
billion in 2008, an increase of about 4 times. However, the manufacture of sheet glass in the
country is still undeveloped. Sheet glass is increasing being used in the construction and
motor industries. This has resulted into increase in imported sheet glass from Kshs. 10
million in 2001 to Kshs. 26.8 million in 2008.
The growth and development of the glass industry has been affected by the factors that
include the high cost of energy and unavailability of soda ash. Though being produced in the
country, a large proportion of soda ash is being exported.
3.21.1 Policy Statements to grow the on Glass Industry are:
The following policy intervention measures have been proposed to help grow the
petrochemical industry in Kenya, and will include:
1. Prioritize the expansion and modernization of the existing industries and fast track
the development of new industries through provision of incentives.
2. Provide incentives to the glass industry to facilitate the reduction of energy costs
incurred by the sub-sector.
3. Develop curriculum for Glass technology in the country and mainstream it in the
existing tertiary institutions.
4. Put in place measures that would discourage the export of raw materials used in
the glass industry to facilitate increased local production of especially sheet glass.
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3.22 Conclusion: Prioritising Sector and Policy Measures to Spur Industrial Growth
From the foregoing, it is clearly evident that there are several areas with sufficient potential to
truly transform Kenya’s industrial standing. Some of these sub-sectors and their respective
potentials have been known over many years. What has been lacking has been the political
will and determination to put in place appropriate policy measures as well as the requisite
action that enables them contribute to national development. Under this framework, the
Ministry is therefore determined to ensure that at least none of the eighteen sub-sectors are
ignored and that continuous action is taken to ensure that they are revitalised and enabled to
participate in the country’s new vision for industrial growth and transformation.
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CHAPTER 4: THE INSTITUTIONAL FRAMEWORK FOR IMPLEMENTING THE NATIONAL INDUSTRIAL POLICY
4.0 Case for Better Institutional Coordination of the Industrial Sector
The existing framework for the development of the industrial sector in Kenya cuts across
various institutional arrangements and has resulted in a rather inefficient resource allocation
as well noted cases of duplication of responsibilities and efforts. In response to this
shortcoming, the Ministry has considered the need for a more robust and well-coordinated
institutional framework that is capable of spearheading the process of national
industrialization in a new, contemporary and highly competitive global culture. In this
regard, the proposed institutional arrangements have been made with three objectives in
mind, including:
1. The need to ensure decentralization while also facilitating the delivery of efficient
and cost effective services;
2. The need to facilitate Public Private Partnerships (PPPs) in policy formulation and
implementation and ensure the involvement of all stakeholders, and;
3. The need to facilitate adequate access to infrastructure for industrial development
It is also to be noted that the institutional framework has been designed to take into
consideration the factors that have hindered a more robust industrial growth and development
in Kenya. The success of implementation will therefore largely depend on strong political
will and commitment by the top policy making organs of the government who are in turn
expected to take firm and resolute decisions on the sector’s development issues and priorities.
In view of these factors, it has been considered that it is necessary to create a vertical, apex
institution to be known as the National Industrial Development Commission, (NIDC) that
will provide leadership and vision; allocate resources, set targets as well as oversee and
synchronize the activities of all the different stakeholders as further elaborated in this chapter.
This proposed institutional framework provides for both top-down and bottom-up approach
to issues that would arise during the implementation of the policy, and for an all inclusive
participation by the public and private sector as well as universities and other research
institutions as well as the civil society and other stakeholders. The clear roles,
responsibilities, and lines of authority will be established as described herebelow and
indicated in figure 4.1 at the end of this chapter. It is further envisaged that this institutional
arrangement will facilitate various stakeholders to participate effectively in the manner and
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style as elaborated and therefore contribute effectively to the vision of the Industrial sector in
Kenya.
4.1 The National Industrial Development Commission
As already stated, the National Industrial Development Commission (NIDC) is intended to be
the top organ responsible for improved coherence and better coordination of the industrial
sector in Kenya. It will also be responsible for ensuring the full and timely implementation of
the aspirations of this National Industrialization Policy. There will be a chairman responsible
for the commission with other membership drawn from relevant and Key Permanent
Secretaries as well as other key stakeholders. Overall, the Commission will be expected to
perform the following functions:
1. Generate policy innovations that will accelerate the pace of industrialization;
2. Advice the Government on the strategic industrial development models to pursue in
light of the dynamics in the international business arena;
3. Through the relevant specialized agencies, direct research on thematic issues
affecting industrial development and propose appropriate interventions;
4. Provide routine advice and policy direction on the administration of the Industrial
Development Fund;
5. Receive, synthesize and evaluate policy proposals from the Industry Consultative
Forum and make appropriate recommendations that can be passed on to the Cabinet.
4.1.1 Role of the NIDC Secretariat
The Secretariat for the NIDC will be housed at the Ministry for the time being responsible for
Industrialization. The Ministry, through a Technical Committee working in conjunction with
various experts from both the public and the private sector, will undertake research and
provide technical inputs for submission to the NIDC.
4.2 Role of Government in National Industrialization
The government's overall responsibility will be to provide an enabling policy environment to
facilitate the creation of a competitive industrial base that will spur industrialization and
investment expansion. This will be done through the following policy measures:
• The establishment of an Industrial Development Fund;
• The maintenance of a stable political and economic climate;
• The provision of institutional support in the development of competitive products;
• The provision of administrative and social services;
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• The provision and maintenance of basic infrastructure;
• The promotion of local and foreign investments;
• The enhancement of the participation of civil groups and private sector organizations in
the decision making process; and
• The promotion and support for Research and Development activities
• Strong and effective Judicial system
4.2.1 The Cabinet
The Cabinet provides the vision, political leadership and direction for the industrialization
policy. It will approve and ratify decisions made at the National Industrial Development
Commission (NIDC) and officially conveyed through the minister(s) responsible for the
sector.
4.2.2 National Economic and Social Council
The National Economic and Social Council (NESC) is a standing committee comprising of
eminent persons with diverse experience, knowledge, and skills that is chaired by the
President of the Republic of Kenya. The NESC forums identify, discuss, monitor and assess
policy issues on the basis of the prevailing and prospective economic circumstances and
trends. It is expected that the Council will provide advice to the National Industrial
Development Commission (NIDC) on economic matters related to Industrialization.
4.2.3 Collaborating Ministries and Agencies
The Ministry of Industrialization will continue to work closely with the implementing
Ministries, Agencies and Business Associations involved in industrial development. This will
be done through consultative forums.
4.3 The Role of the Private Sector
The Private Sector, through its umbrella associations, will be encouraged to mobilize its
members to actively participate in deliberation of Sector Working Groups and other
consultative forum.
4.4 Universities, Research and Tertiary Institutions
Representatives from both public and private universities, research and tertiary institutions
will be expected to identify and undertake research for commercialization by industry and
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transfer of technology issues. They will also form part of the expertise that routinely provide
expert knowledge and advice on the course of the national industrialization process.
4.5 The Industrial Consultative Forum
It is proposed to establish an Industrial Consultative Forum (ICF) where the industrial sectors
stakeholders will deliberate and share on issues concerning policy, emerging industrial issues
and other concerns while also giving suggestions on how these matters can be solved. The
forum will also act as a focal point for the Secretariat where it can collect and synthesize
views for detailed policy consideration and documentation. The Consultative Forum will be
designed to address sector specific issues through focused group discussions.
4.6 National Industrial Policy Implementation Matrix
The detailed implementation of the industrialization policy will itself be guided by the
Implementation Matrix as elaborated further as ‘Annex 1’ to this document. It has identified
and defined the actions to be undertaken by the respective Ministries, agencies and all other
relevant stakeholders. In each case the agency or agencies with most immediate responsibility
are specified and a timeframe for implementation given. The actions required are also
identified as are the relevant strategic issues and strategies to be adopted.
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Figure 4.1 National Industrialization: the new Institutional Framework
65
NATIONAL ECONOMIC AND SOCIAL COUNCIL (NESC)
NATIONAL COUNCIL FOR SMALL ENTERPRISES
(NCSE)
PRIVATESECTOR
COLLABORATING
MINISTRIES & AGENCIES
CONSULTATIVE FORUM
SECRETARIAT(MINISTRY OF
INDUSTRIALIZATION)COORDINATING MINISTRY
CABINET
UNIVERSITIES &
RESEARCH INSTITUTIO
NS
DEVELOPMENT
PARTNERS
CHAPTER 5: FINANCIAL RESOURCE MAPPING, MONITORING AND EVALUATION
5.1 The Resource Challenge Facing the Industrial sector
The realisation of sustainable and meaningful Industrial development in the country requires
access to affordable long-term finance and credit facilities. Indeed, accessibility and
affordability of financial services is most critical to the acceleration of industrial growth.
Though the financial sector in Kenya is relatively well-developed, the limited access to
formal financial products and services, particularly for long term financing, has inhibited the
competitiveness and growth of the industrial sector. Similarly, the financial institutions insist
on collateral; have high interest rate spreads and inflexible securitization.
The government through various Development Finance Institutions (DFIs) has focused on
stimulating growth in the industrial sector. The role of the DFIs has been to provide loans,
equity investment, loan guarantees, venture capital and other financial services to various
sectors of the economy. However, over the years, there has been declining funding to these
institutions resulting in reduced capital base for lending. The scenario has been worsened by
rigid management structures and systems that did not respond to the changing times and
trends in the financial sector. It is in view of this situation that this policy framework
emphasises that the funds required to spur industrialization can be made available in two
main categories, namely investment and credit. Clear strategies on how to make funds
available has therefore been proposed in this document, in line with the objectives of this
policy.
5.2 Domestic Capital Formation
The material shortage of capital in relation to labour is a principal constraint to industrial
growth. It is envisioned that increased capital formation would contribute to more industrial
output growth. Gross Capital Formation can be realised across three types of assets,
construction, machinery and equipment. A positive correlation exists between capital
formation and the industrial production.
5.3 Foreign Direct Investment
Foreign Direct Investment (FDI) contributes to the growth of host economies in many ways
including physical capital formation, technology transfer, and human capital formation,
stimulation of productivity, augmentation of output, and promotion of foreign trade and
improvement of competitiveness of indigenous entrepreneurs. Kenya has witnessed declining
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FDI in the industrial sector over the recent past. The poor business environment, poor
physical infrastructure, insecurity; and governance issues have contributed to low FDI
inflows into Kenya and high outflows of investors from Kenya to the neighbouring countries.
5.4 Capital Markets
Capital market development is an important component of financial sector development and
supplements the role of the banking system in economic development. Specifically, capital
markets assists in price discovery, liquidity provision, reduction in transactions costs, and risk
transfer. Capital market constitutes primary (new issues market) and secondary (stock)
market. The primary market helps the public and private sector companies in raising finance
mainly for their new projects, expansion, modernization, and acquisitions. The secondary
market provides liquidity for the financial instruments (equity, preference shares and
debentures/bonds) through adequate marketability and price continuity. Despite the provision
of incentives by government to promote listing of companies on the stock exchange there has
been minimal uptake of the incentive facilities.
5.5 Commercial Bank Credit
Commercial banks are the dominant financial intermediaries in our developing economy. The
array of financial institutions play a crucial role in meeting long-term credit needs of the
industrial sector. The bank credit is an important source of industrial finance. The cost of
finance, however, is still high due to high interest rates, short lending periods, immovable
securitization and collateral requirements. This has made access to financing, particularly
long term financing to MSMIs unaffordable.
5.5.1 Policy statements on access to finance for industrialization
1. Establish an Industrial Development Fund (IDF). (re-look on sustainability and
DFI growth. Subsidize commercial loans {extension/reduction of interest rate}for
industrial development – e.g Spain, Belgium etc). Work on how it is to be used.
2. Develop a funding structure to the IDF through a 2% levy of CIF to all imported
finished goods; flotation of industrial bonds; public private partnerships; cooperatives;
pension funds; insurance schemes and National budgetary allocation.
3. Re-capitalization of DFIs through IDF, national budgetary allocation, and government
guarantees to external lines of credit.
4. Increase from 2% to 10% of the National budget to fund activities in the
productive sectors. (Put actual figure for industrialization – 0.2% - 1%)
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5. Fast track the enactment of the insolvency bill to include provisions for protection of
‘sick’ industries due to external factors that will cover the lenders, creditors and
taxation.
6. Provide globally competitive fiscal incentives for new industrial investments and
extend the same fiscal incentives to investors willing to revive ‘dead’ industries
(Treasury to assist with review for extra specific incentives {income tax free}).
7. Provide a framework for establishment of moveable bank - loans security documents
to enhance competitiveness in the banking sector.
8. Institute prudent monetary and fiscal policies to sustain the macro-economic stability.
5.6 Monitoring and Evaluation of the National Industrial Policy Framework
The Monitoring and Evaluation of this policy framework provides the Government and
Stakeholders with an opportunity to learn from past experiences from such programmes,
learn the strength and weaknesses of past programmes, improve service delivery, planning
and allocating resources and demonstrating results as a part of accountability to stakeholders.
An effective monitoring and evaluation system is therefore important for successful
implementation of this policy. In consultation with all stakeholders the government will
therefore develop M&E systems linked to the National Integrated Monitoring and Evaluation
System (NIMES). The M&E will take place at three levels, national, sectoral and enterprise
each with clear definition of roles and expected outputs.
(i) At the national level the NIDC in collaboration with the Ministry of Industrialization
will develop a comprehensive logical framework for the implementation process of
the policy. The logical framework will spell out the broad policy objectives, strategic
interventions and expected outcomes. It will also contain performance indicators.
(ii) Capacity building will be undertaken at the sectoral level to equip NIDC, sectoral
committees, thematic groups, and MSMIs association with relevant skills to collect
and process timely and reliable data necessary for effective M&E activities.
(iii) At beneficiary level, individual industries will be a source of information required for
the M&E system, they will be critical in identifying process constraints and
suggesting appropriate mitigation measures.
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NIMES
Private Sector Associations,
Thematic Groups and SWGs
GoK Ministries, Departments and Agencies
Individual Industries
A Monitoring and Evaluation matrix, also constituting a ‘Performance Appraisal Framework’
for the implementation of the National Industrialization Policy is further elaborated as
‘Annex 2 of this document.
(Add page of references? {Check on best practices})
(GENERAL: Check on style of writing for consistency with other policy documents)
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Annex 1: Summary of Critical Policy intervention areas; Issues and ResponsibilitiesPolicy InterventionCritical Issues
Policy StatementsPolicy Objective
Implementing Agency
Physical infrastructure for Industrialization1. Transportation and Logistics (Road, Rail, Sea & Inland, Airports, and transport logistics)
Inadequate road infrastructure contributes to high cost of doing business leading to concentration of industries in urban areas.
Poor and ancient railway infrastructure. Obsolete locomotives and rolling stock.
Expansion of airports and air strips to enable transportation of perishable produce from farms to industries and export.
Poor operational systems at the sea and lake ports. Insufficient cargo handling equipment at the ports. Shallow channels and the water hyacinth menace in lake Victoria.
1. Fast track expansion, modernization, and maintenance of road networks to areas of existing and high potential for industrial development prioritized in this Policy document.2. Modernize and expand the rail network to areas of existing and high potential for industrial development prioritized in this Policy document.3. Modernize and expand the International airports and local airports network.4. Prioritize the expansion and modernization of the existing ports and fast tracking the development of new ports.5. Harmonize, streamline and automate clearing and forwarding procedures at the ports.
Provide an integrated, efficient, reliable and sustainable transport infrastructure
MoT, MoR, KRB, KURA, KNHA, KRBA, KRC, KAA, KCAA, KPA, KAM, Private Sector
2. Energy Inadequate and unreliable supply of electricity.
Over-reliance on hydro power and long lead times in development of energy infrastructure.
High power tariffs.
1. Fast track the expansion and diversification of the power generation sources in a cost effective manner.
2. Separate power feed for industrial consumers from power feed for residential use to increase reliability especially during times of rationing.
3. Fast track provision of electrical energy to areas of existing and high potential for industrial development prioritized in this Policy document.
4. Provide a preferential electricity tariffs for heavy industrial consumers in key industries prioritized in this Policy document.
5. Promote the Public-Private-Partnerships in generation and distribution of energy.
Ensure adequate and affordable energy supply to the industrial sector.
MoE, KIRDI, Universities, Private Sector
3. Water and Sewerage Inadequate water supply for industrial, domestic, livestock and wild life use.
Low natural water endowment and degradation of water catchments hence classification of Kenya as a water scarce country.
1. Fast track the provision of clean and reliable water to areas of existing and high potential for industrial development prioritized in this Policy document.
2. Provide preferential water tariffs for industrial consumers in key industries prioritized in this
To increase availability of clean water and improve sanitation.
MoWI, LA, NEMA, Private Sector
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Annex 2: Performance Appraisal Framework (M&E) for the NIP
POLICY OBJECTIVE
ACTIVITIES OUTPUT OUTCOME PERFOMANCE INDICATORS
TIME FRAME
RESPONSIBILITY
1) Creating an enabling environment through improved infrastructure for industrial development
a) Fast tracking the expansion, modernization and maintenance of road networks to areas of existing and high potential industrial development prioritized in this Policy document.
Adequate and well maintained road network
Increase in use of road transport
Number of roads constructed and maintained
5 years MoR, KRB, KURA, KNHA, KRBA, Private Sector
b) Modernizing and expanding of the rail network to areas of existing and high potential industrial development prioritized in this Policy document.
Modern and efficient rail network Increase in use of rail transport for bulky goods
Percentage of cargo transported by rail.
10 years MoT, KRC, Private Sector
c) Modernizing and expanding of the International airports and expansion of local airports network.
Modern, secure and expanded airport facilities
Increase in use of air transport for domestic passenger service and transportation of perishable goods
Percentage increase in cargo and passenger handling capacity
10 years MoT, KAA, KCAA, Private Sector
d) Prioritizing the expansion and modernization of the existing ports and fast tracking the development of new ports.
Modern and efficient sea and lake ports
Increase in use of sea and lake ports
Percentage of cargo handled
5 years MoT, KPA, KMA, Private Sector
e) Harmonizing, streamlining and automating clearing and forwarding procedures at the ports.
Harmonized, streamlined and automated clearing and forwarding procedures at the ports
Speed in clearance of goods Reduction time in goods clearance
Immediately
MoT, KPA, KMA, Private Sector
f) Fast tracking the expansion and diversification of the power generation sources in a cost effective manner.
Additional power generated Reduction in frequency of power cuts
Percentage reduction in transmission losses
5 years MoE, KIRDI, Universities, Private Sector
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g) Separating the power feeders for industrial consumers from power supplied for residential use to increase reliability especially during times of rationing.
Power feeders separated for different users
Reduction in frequency of power cuts
Affordable, reliable and improved supply of energy
2 years MoE, KIRDI, Universities, Private Sector
h) Fast tracking the provision of energy to areas of existing and high potential industrial development prioritized in this Policy document.
Energy provided Increase in use of energy by new industries in areas prioritized by this document
Number of new power projects
5 years MoE, KIRDI, Universities, Private Sector
i) Providing preferential electricity tariffs for heavy industrial consumers in key industries prioritized in this Policy document.
Preferential tariffs provided Drop in cost in electricity for heavy industrial consumers
Affordable, reliable and improved supply of energy
1 year MoE, KIRDI, Universities, Private Sector
j) Promoting the Public-Private-Partnerships in generation and distribution of energy.
Public-private-partnerships in energy distribution
Increase in number of energy distributors
Number of distributors 6 months MoE, KIRDI, Universities, Private Sector
k) Fast tracking the provision of clean and
reliable water to areas of existing and high
potential industrial development prioritized
in this Policy document.
Clean water provided Increase in number of water projects
Number of new water projects
5 years MoWI, LA, NEMA, Private Sector
l) Providing preferential water tariffs for industrial consumers in key industries prioritized in this Policy document.
Preferential water tariffs provided Drop in cost for industrial consumers
Affordable, reliable and improved water suppply
1 year MoWI, LA, NEMA, Private Sector
m) Promoting the Public-Private-Partnerships in provision of water and waste management systems, including water harvesting, storage and recycling.
Public-private-partnerships formed Increase in public-private-partnerships
Number of new water projects under PPP
6 months MoWI, LA, NEMA, Private Sector
n) Providing incentives for construction and fabrication of effluent treatment plants and solid waste management facilities in industrial areas.
Effluent and solid waste management facilities constructed
Increase in volumes of effluent and solid waste management facilities constructed
Number of new effluent treatment plants and solid waste management
6 months MoWI, LA, NEMA, Private Sector
o) Fast tracking the provision of ICT infrastructure to areas of existing and high
Accessible and affordable ICT infrastructure
Increase in number of ICT users and level of
No of ICT users and level of national
2 years MoIC, ICT, CCK,
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potential industrial development prioritized in this Policy document.
connectivity connectivity.
p) Promoting use of ICT in transport and logistics systems, manufacturing processes and all industrial related activities to enhance cost effectiveness and efficiency.
ICT use in transport and logistics Increase in ICT use in transport and logistics
Number of new ICT use in transport and logistics systems
1 year MoIC, ICT, CCK,
q) Developing a National Industrialization Act. Well coordinated industrial sector National Industrialization Act enacted
No of expanded and new industries
1 year MoI, SLO, KLRC, OP-CO
r) Establishing a National Industrial Development Commission.
Well coordinated industrial sector National Industrial Development Commission established
National Industrial Commission established
1 year MoI, SLO, KLRC, OP-CO
s) Providing land for industrial development in areas of existing and high potential industrial development prioritized in this Policy document.
Land for industrial use provided Reduction on cost of industrial land
Number of acres set aside for industrial use
1 year MoL, MoLG, LA, MOI, Private Sector
t) Planning, demarcating, zoning and acquire land for industrial development in every county.
Industrial land set aside Ease of obtaining industrial land by new investors
Number of industrial zones demarcated
2 years MoL, MoLG, LA, MOI, Private Sector
u) Fast tracking the reforms in the legal and judicial systems in line with the constitution.
Relevant bills enacted Reforms done in the legal and judicial systems in line with the constitution
Number of bills enacted 5 years SLO, MoI
v) Fast tracking the business regulatory reforms to support industrial development
Regulatory bills enacted Business regulatory reforms undertaken
Number of licenses, permits reduced
1 year SLO, MoI
w) Revising the labour laws to incorporate labour productivity in industries.
Labour laws revised Reduction in labour disputes
Reduced number of disputes
1 year SLO, MoI
x) Inculcating a culture of compliance with the law.
Increased compliance with laws Drop in court cases Reduced court cases 1 year SLO, MoI
y) Fast tracking the development and implementation of the OSH Policy.
OSH Policy implemented Less work related injuries Number of work related court cases
1 year MOI, MoL, Private sector
z) Mainstreaming HIV/AIDS Policy at the workplace especially for MSMIs.
HIV/AIDS Policy mainstreamed Increase in awareness Number of MSMIs with HIV/AIDS Policy
6 months All Ministries and Government Agencies, Private
73
Sector
2) Attracting local and foreign industrial investment
a) Fast tracking the development of Special Economic Zones, Industrial zones and parks in line with Vision 2030.
Special economic Zones, Industrial zones developed
Industries in Special economic Zones, Industrial zones and parks operating
Number of special economic zones, Industrial zones and Parks developed
1 year MOI, MOT
b) Providing incentives for establishment and dispersion of industries across the counties.
Industries dispersed across counties Increase of number industries in the county
Number of new industries in counties
6 months MOI, Private Sector
c) Promoting development of MSMIs in rural areas.
MSMIs set in rural areas Increase in the number of MSMIs in rural areas
Number of new MSMIs in rural areas
1 year MOI, Private Sector
5) Promotion of the development of Micro, Small and Medium Industries
(MSMIs)
a) Fast tracking the enactment of the Micro and Small Enterprise Bill.
MSE bill enacted Increase in the number of MSEs
Number of new Micro and Small
1 year MOI, SLO
b) Establishing an Industrial Development Fund.
Industrial Development Fund developed
Improvement of capitalization by industries
Amount of money in the Industrial Development Fund
6 months MOI, SLO
c) Developing a National Industrial Incubation Policy
National Industrial Incubation Policy developed
Increased in number of industry incubated
Number of stable new industries
1 year MOI, SLO
d) Developing a ‘One-Stop-Shop’ for business registration, licensing and taxation for MSMIs.
“One-stop-shop” for business registration developed
Increased number of new industries registration
Number of new industries formed
1 year MOI, SLO, KRA,
e) Developing a National Industrial Subcontracting Policy.
Subcontracting Policy developed Increase in number of MSMIs
Number of contracts 1 year MOI, SLO
10) Enhancing value addition to Kenya’s natural and agricultural resources
a) Promoting the usage of locally manufactured products in prioritized industrial sectors in this Policy document.
Improved productivity and value chain Decrease in export of raw materials
Percentage increase in productivity and market share
2 years MoI, MoA, MoLD, MoFD, MENR, MoCDM
b) Strengthening the regional and bilateral trade arrangements to enhance market access for manufactured products.
Bilateral trade arrangements established
Volume of product exports increased
Number of bilateral trade agreements signed
Immediately
MoI, MoA, MoLD, MoFD, MENR, MoCDM, MoT
74
c) Aligning the Trade Policy with Industrialization Policy to address issues of tariffs, bi-lateral and multi-lateral trade policies, for enhancing competitiveness and market access for industrial products.
Trade policy aligned to the Industrialization Policy
Volume of product exports increased
Increased market access for Kenyan goods
6 months MOI, MOT
13) Intensifying research and development, innovation and technology adoption for industrial growth and sustainability
a) Developing a framework for commercializing of research findings
Improved industrial productivity Increase in industrial research
Percentage increase in industrial productivity
1 year MoHEST , KIRDI, NCST, Universities, Private Sector, MOI
b) Formulating mechanism to facilitate collaboration with the private sector in research, technology and development
Collaboration mechanism formulated Increase in collaboration Number of mechanisms formulated
3 months MoHEST , KIRDI, NCST, Universities, Private Sector, MOI
c) Strengthening capacity for technology certification and adoption
Certification Capacity developed Increase in number of technology adoption and certification
Number of certification/adoptions
2 years MoHEST , KIRDI, NCST, Universities, Private Sector, MOI
d) Establishing a funding mechanism for Research and Development to facilitate innovation, acquisition of strategic and relevant technology for industrial development.
Research funding mechanisms developed
More innovation and industrial research being done
Amount of capital in the Research Fund
2 years MoHEST , KIRDI, NCST, Universities, Private Sector, MOI
e) Developing industrial incubation policy. Incubation Policy developed Increased in number of industry incubated
Number of new stable MSIs
I year MoHEST , KIRDI, NCST, Universities, Private Sector, MOI
f) Establishing an industrial information database.
Industrial database established Increase in industrial productivity
Number of hits for the Industrial information database
2 years MoHEST , KIRDI, NCST, Universities, Private Sector, MOI
19) Facilitating the provision of
a) Fast tracking the harmonization and implementation of EAC and COMESA common quality standards.
Quality standards harmonized Reduction in arbitration cases
Number of common quality standards
1 year KEBS, MOI, MEAC,ACA
75
internationally recognized standards, measurement and conformity assessment solutions
b) Developing a National Quality, Standards and Anti-counterfeit Policy.
The policy will address among others; (i) the responsibilities of importer, exporting countries, shipping lines, clearing and forwarding agents and government agents with respect to sub-standard, counterfeit and illegal goods imported into Kenya;(ii) graduated and progressive standards for local Small Medium Industries; and(iii) harmonize and streamline levies charged by the regulatory agencies.
Standards and anti-counterfeits policy formed
Reduction of counterfeit goods in the market
Guidelines for importers, exporters, clearing and forwarding agents with respect to sub-standard, counterfeit and illegal goods imported into Kenya and graduated standards
2 years KEBS, MOI, MEAC,ACA
c) Strengthening and operationalising the Standards Tribunal to enhance arbitration of violation of quality and standards.
Tribunal strengthened Reduction in the number of appeals after arbitration by IPT
Number of arbitrations carried by the Tribunal
1 year IPT, MOI
22) Ensuring protection of Intellectual Property Rights
a) Developing and implementing a National IP Policy.
IP Policy developed Increase in IP related registrations
Number of IP related registrations
2 years MOI,KIPI, KEBS, ACA
b) Increasing the awareness on intellectual property rights
Public awareness of IP increased Reduction of IP related disputes
Number of IP related enquiries
3 months
c) Strengthening the Kenya Industrial Property Institute and the Industrial Property Tribunal to enhance institutional capacity for protection of IPR and arbitration.
KIPI and IPT strengthened Reduction in the number of appeals after arbitration by IPT
Number of new IP related registrations and number of arbitrations
KIPI, IPT, MOI
25) Enhancing access to financial services and markets
a) Establishing an Industrial Development Fund (IDF).
IDF established Increase in capitalization by the DFIs
Amount of capital in the IDF fund
6 months MOI, IDB, KIE, MOF
b) Developing a funding structure to the IDF through a 2% levy of CIF to all imported finished goods; flotation of industrial bonds; public private partnerships; cooperatives; pension funds; insurance schemes and National budgetary allocation.
IDF funding structure developed Increase in productivity by industries
Amount of capital generated
6 months MOI, IDB, KIE, MOF
c) Re-capitalizing of DFIs through IDF, national budgetary allocation, and government guarantees to external lines of
DFIs capitalized Increase in the number of new investors
Amount of money disbursed through DFIs
1 year MOI, IDB, KIE, MOF
76
credit.
d) Increasing from 2% to 10% of the National budget to fund activities in the productive sectors.
National budget raised Increase in industrial support by the Ministry
Number of new projects in the productive sectors
3 years MOI, IDB, KIE, MOF
e) Fast tracking the enactment of the insolvency bill to include provisions for protection of ‘sick’ industries due to external factors that will cover the lenders, creditors and taxation.
Insolvency bill enacted Increase in the number of “sick” industries revived
Number of “Sick” industries rescued
Immediately
MOI, IDB, KIE, MOF, SLO
f) Providing fiscal incentives for new industrial investments and extend the same fiscal incentives to investors willing to revive ‘dead’ industries.
Incentives provided Increase in the number of new investors
Number of new investors and revived “sick” industries
immediately
MOI, IDB, KIE, MOF
g) Providing a framework for establishment of moveable bank - loans security documents to enhance competitiveness in the banking sector.
Framework for movement for bank securities provided
Ease of movement of bank securities
Number of securities moved
6 months MOI, IDB, KIE, MOF
h) Instituting prudent monetary and fiscal policies to sustain the macro-economic stability.
Prudent monetary and fiscal policies instituted
Increase in profits of industrial establishments
Amount of loans borrowed
2 years MOI, IDB, KIE, MOF
33) Upgrading technical, production and managerial skills
a) Developing curriculum in tertiary and vocational training institutions aligned to the industry skills requirements.
Curriculum developed Increase in enrollment in tertiary institutions
Enrolment in the tertiary and vocational institutions
1 year MOI, MOHEST, DIT, KITI
b) Developing a framework for continuous linkages between tertiary and vocational training institutions, and industry.
Linkages developed Increase in collaboration between training institutions
Number of linkages between tertiary and vocational training institutions and industry
1 year MOI, MOHEST, DIT, KITI
c) Expanding and modernizing technical, vocational and entrepreneurial training institutions offering artisan, craftsmanship and technician training for industry.
Modernized and expanded tertiary, vocational and entrepreneurship institutions
Increase in enrollment in tertiary institutions
Enrolment in tertiary, Vocational and Entrepreneurship Institutions
5 years MOI, MOHEST, DIT, KITI
d) Establishing entrepreneurial centres of excellence for business development services for Micro, Small and Medium industries.
Centers for excellence for MSEs developed
Increase in profitability for MSEs
Number of new MSEs 2 years MOI, MOHEST, DIT, KITI
77
34) Protection of the environment
a) Promoting investment in local manufacturing of cleaner production equipment along with other emerging technologies.
Cleaner production promoted Increase in industries using cleaner production technology
Number of cleaner production equipment manufactured locally
Immediately
MOI. MEMR, NEMA, Private Sector, KNCPC
b) Developing a National Cleaner Production Policy.
Cleaner Production Policy developed Reduction of operating costs of industries
Number of firms using cleaner production technologies
2 years MOI. MEMR, NEMA, Private Sector, KNCPC
c) Mainstreaming the operation of the Kenya National Cleaner Production Centre into the ministry responsible for industrialization.
Operations of the Kenya cleaner Production Center mainstreamed
Reduction of operating costs of industries
Operations of the Kenya cleaner Production Center mainstreamed in the Performance contract of the Ministry
3 years MOI. KNCPC
35) Investments in the priority sectors
a) Developing the Iron and Steel Industry 1. Iron and Steel Development Authority.
2. Tariffs Rationalized.3. Qualities, types, location,
quantities of iron, coal and limestone in the country established.
4. Strategies for the development of iron and steel industry established.
5. An integrated iron and steel plant in the country established
6. Coal power generation plant Established.
7. Export of scrap metal and iron ore banned.
8. Power co-generation using coal established.
Increase in the number of steel related plants
Drop in price of steel products
5 years MOI,NMC
b) Developing the Agro Machinery sector 1) Energy efficient farm machines and equipment developed
2) Tax exemptions on imported farm machines and implements
5 years MOA, NMC
c) Manufacture of machine tools and spares Capacity built in machine tools and spares
Increase in locally manufactured machine tools and spares
Reduction in cost of machine tools and spares
5 years NMC, MOI
78
d) Developing the Automotive and Aircraft
Industry
1) Local manufacture of aircraft parts developed2) Automotive industrial parks developed. 3) incentives to local assemblers and auto parts manufactures developed4) National Automotive Industry Board formed.5) A joint venture to assemble locally vehicles with an established vehicle manufacturer by relocation of their working plant and domesticate within ten years developed.
Increase in the number of locally
Price of motor vehicle reduction
15 years MOI, MOT
e) Establishing the Biotechnology and nanotechnology Industry
1. Major investment in bio- and nano- technology research and product development
2. Industrial skills development for bio- and nano- technologies applications developed.
Increase in investments in bio-and nanotechnology
Number of products developed using bio- and nano-technology
5 years MOHEST, MOH, MOA, MOI
f) Undertaking high value Agro-Processing (Tea,
Coffee, Pyrethrum, Leather)
3. Incentives for investment in high value processing of agricultural products provided
4. local manufacture of agro-processing machinery and equipments such as tractors, combine harvesters, cotton ginneries, tea picker
5. Clustering of industries around specific agricultural resources undertaken.
6. Processing of biodiesel crops undertaken.
7. Rice mills revived.8. processing of sugar and sugar
products to enhanced
Increase in exports of agro-processed products.
Number of new agro-processed products
2 years MOA, MOI
g) Developing the Green Energy(Generation, Component manufacturing{solar panels, wind mills})
(i) Solar panels, windmills, digesters, cookers, refrigerators and micro-hydro generators developed locally.(ii) Investments in energy saving technologies established.
Less dependence on the national grid
1) Number of green energy equipment developed.
2) Number of investments in energy saving
3 years MOE, MOI
79
technologies
h) Developing the pharmaceutical industry 7. Rule of procurement of locally manufactured pharmaceutical products enforced,8. Anti-counterfeit Act 2008, enforced9. Use local raw materials for the manufacture of pharmaceutical products enforced.
Reduction in cost of pharmaceutical products
Number of locally manufactured drugs
2 years MOH,MOI, ACA, KEBS
i) Promote Minerals, mining andextraction (Coal, Iron ore, oke, Fluorspar, Gemstones, Soda Ash, Lead, Gold)
(i)Partnerships between County Governments and private investors in exploration, mining and processing developed,(ii) Policy governing the exploitation of minerals in the country developed.
Volumes of minerals mined Number of investments in the mining sector
2 years MEMR
j) Promote waste recycling 3. Waste Utilization and Recycling Policy developed.4. Waste minimization in industry through cleaner production technologies adopted.
More investments in waste recycling
Reduction in pollution in water bodies
3 years MEMR, MOI, NEMA
k) Packaging industry 1) Kenya Packaging Institute strengthened.
2) Training curriculum on packaging introduced at the tertiary institutions.
More packaging investors Number of packagings undertaken
4 years MOI, KPI, KIE
l) Petrochemicals 1) KPRL modernized and expanded. 2) R&D programmes in research
institutions and institutions of higher learning established
3) Curriculum in petroleum engineering in tertiary institutions developed.
Increase in the number of investors in petrochemicals industry
Amount of petrochemicals produced
5 years MOE, KPRL, PIEA
m) Wood and wood products 1) Guidelines for procurement for all furniture consumed in all government institution is procured from local manufacturers developed.
Investments in wood and wood products
Number of finished wood products
2 years MOI, MPW
80
2) Strict enforcement of standards in the sector to ensure quality and competitiveness undertaken.
3) Utilization of wood waste for production of chip boards.
n) Paper and paper products 1. Investment in the production of paper including use of other raw materials other than wood.
2. Revival of Pan African Paper Mills Limited.
Investments in the paper and paper products
Number of new investments in paper industry
5 years MOI, PAPM
o) (i) ‘Dead’ textile mills and ginneries in the country revived.
(ii) Weaving and milling plants through incentives on capital equipment set up.
(iii) Regional development of textile within the EAC region to maximize on comparative advantage established.
(iv) Competitive prices for cotton farmers, through the Cotton Development Authority, developed.
(v) Export of cotton lint banned.(vi) Import of used clothes banned.
Increase in cotton price Number of new investments in textiles
5 years CDA, EAC, MOI
p) Meat and meat products (i) The processing, packaging and branding of Kenyan meat and dairy products enhanced.
(ii) Exports to regional and global markets for products in the sub-sector promoted.
Increase in investments in the sector
Number of new meat products exported
5 years MOI, KMC, MOL
q) Leather and leather products (i) Establish a LeatherDevelopment Council that will address the following:
(ii) Promote quality and control management in the industry;
(iii) Promote value addition to hides and skins;
(iv) Promote market diversification and expansion; and
(v) Promote research and technology in the leather industry.
(vi) The Training and Production
Increased investment in the leather sector
Number of new leather products exported
5 years MOI, KIRDI,MOL
81
Centre for the Shoe Industry (TPCSI) mainstreamed.
(vii) Leather training and incubation programmes in KIRDI and KITI.
(viii) Importation of used leather products banned.
(ix) Exportation of raw hides and skins.
r) Electrical and electronics sector (i) An assembly plant for ‘Madaraka’ computers and other ICT accessories established.
(i) production of parts, components and sub-assemblies established;
(ii) International companies to locate their subsidiaries within Kenya and utilize locally available resources identified.
Increased investment in the sector
Number of electrical and electronic components exported
JKUAT, MOHEST, MOI
82
