Why tech is key in Kenya’s 20pc GDP goal for manufacturing

The manufacturing’s share of gross domestic product (GDP) has for long stagnated at about 10 percent. And as the new government looks for ways to reinvigorate the sector in a bid to make it play a more prominent role in turning around the economy and generating jobs for thousands of unemployed youth, stakeholders are banking on innovation in the value chain to unlock the industry’s vast potential.

In Vision 2030 blueprint, Kenya seeks to spur manufacturing into contributing 20 percent to the country’s GDP.

“Our sustainability and self-reliance as a nation is only guaranteed through our capacity to be a competitive economy on a global scale, and the use of technology will play a critical role in growing our economy,” says Tobias Alando, acting CEO for Manufacturers Association of Kenya (KAM), which has been at the forefront in pushing for integration of digital solutions in the sector.

A number of manufacturers have already acknowledged the importance of technology in driving their competitiveness and have thus adopted digital systems into their operations in a bid to step up efforts to cut costs, enhance efficiencies and eliminate wastes.

Though digital transformation in the sector had begun to take root before 2020, the arrival of the Covid-19 pandemic catalysed the shift as firms sought to shield themselves from the unprecedented disruptions in business operations and global supply chains.

A research by SYSPRO – a software development company, providing integrated business software designed for manufacturing and distribution operations – says the pandemic underlined the importance of technology in business operations.

“It is important for the region to keep at least one eye on this space (tech adoption). With the impetus displayed by Kenya’s international peers, the onus is fast becoming one of digital renovation,” says the study entitled Manufacturing CFO 4.0 Survey 2021.

According to the survey, adoption of Enterprise Resource Planning (ERP) software is enjoying a positive response in Kenya, with 44 percent of the firms interviewed expressing a desire to invest and migrate into new ways of doing business.

“Warehouse automation trails just behind at 39 percent, and Business Intelligence follows at 38 percent,” the study notes, adding that technology is giving many manufacturers the ability to forecast and manage supply and demand of products.

According to Paulo de Matos, Chief Product Officer at Syspro, an ERP solution that is integrated across the various functions of the business allows manufacturers and distributors to build their procurement requirements based on the forecasted demand in the system.

“With the help of the right planning tools and predictive analytics, a business can ensure that they have the full picture as well as an effective response to the risks faced,” he says.

“Tools built-in to an ERP system like performance and risk indicators often improve decision making; companies can quickly respond to supply chain issues like adjusting the prices as per the demand while moving extra products quickly to drive the revenue growth or expand the margins for a high demand product with a limited supply.”

Kenya is also keen on 3D printing, also called additive manufacturing, and several startups are using the technology to lay down the foundation for the future of industries by offering faster, low-cost and high quality production of general equipment that are imported for millions of shillings from developed countries.

“Because well designed prototypes can be accessed for free online, and the cost of materials is affordable, now is the time to use this opportunity to quickly adapt and create new products that can be used to cushion Kenyans from job losses,” said Mehul Shah, chief executive of 3D firm UltraRed Technologies based on Limuru Road in Nairobi.

A recent research by Xetova, a tech firm which provides a digital marketplace for the procurement ecosystem, interviewed CEOs drawn from diverse sectors including manufacturing to determine the scope of their digital application and the accruing benefits.

The study, ‘The CEO Perspectives; The State of Digital Transformation in Kenya, 2022’ shows how agriculture firm Sasini established an automation roadmap with focus “on projects for significant bottom-line impact”.

The firm now uses ERP at 95 percent from “barely used” before and in just two years of implementation, it witnessed a 25 percent increase in profits.

A rising number of local manufacturers, the survey notes, has embraced AI to transform how they operate – by fully automating their production lines to be in touch with their customers and suppliers, with traditional customer service models taking a back-seat.

KAM’s Alando, who is one of the CEOs interviewed for the Xetova survey, observes that digital advancements improve data sharing, product development and market strategy.

“They are crucial in developing local and global supply chains. B2B digital tools enhance Kenya’s competitiveness, creating an environment for businesses to discover and integrate new technologies, understand changing market dynamics, and compete locally and regionally,” Mr Alando explains.

“To enhance digital technology adoption, we host capacity-building programmes like the Annual Kaizen Congress, in partnership with the Kaizen Institute. KAM members are trained on existing smart manufacturing practices and technologies to enhance their productivity.”

The study says in today’s digital environment, a “do-it-alone” approach is not the best strategy for growth.

“Strategic partnerships benefit everyone: businesses, employees and customers. Companies can broaden their relevance and increase their addressable market while customers benefit from the strengths and offerings each organization brings to the table and employees expand their development opportunities through exposure to new perspectives and expertise.”

KAM also runs a centralised business information portal for manufacturers, to increase the sector’s investment competitiveness by providing necessary information for investment.

“The portal seeks to provide business information to manufacturers and other key stakeholders on areas such as legal and policy environment and matters that affect Kenyan, East African Community (EAC) and other manufacturers; economic, industrial and trade statistics relevant to the local manufacturing sector and its sub sectors; business prospects in Kenya and EAC for sourcing and supply markets; and information that is relevant to Kenyan manufacturers from a regional perspective,” says KAM.

The availability of such data in Kenya for local and foreign investors is crucial, as it will provide linkages as well as an understanding of the industry, says the industry lobby adding this is aimed at growing the competitiveness of locally made products, regionally and internationally, and ultimately, improve the ease of doing business in the country.

As manufacturers advance digital transformation, the success of the undertaking depends on how it is executed. The implementers of the process are required to be well equipped with requisite skills as well as have comprehensive understanding of what the digital shift entails.




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