Making “Made in Kenya”

It’s because everybody is going to India these days. Not that I know any particular hospital there. But I am told that their hospitals typically have all the machines that could be required for any tests, and because there are so many hospitals, their prices are quite reasonable. But Nairobi! How many hospitals have equipment beyond the basics? OK, maybe Nairobi Hospital, Aga Khan, Kenyatta, Karen and one or two others, but how much will they charge you for a full set of tests?

I got this response just yesterday afternoon from a friend as we discussed healthcare, and why India in particular has become the go-to destination for Kenyans needing medical attention. “The car in front is always a Toyota”; it used to be loudly proclaimed by the SUV tire covers that Toyota Kenya used to issue their customers. I don’t know about that, but I think one would not be remiss in saying that “the car in front is usually Japanese.” But why is that? Why is it that India has become so popular for medical tourism? Why is it that a disproportionate number of the best footballers in history are from South America, specifically Brazil and Argentina? Why is it that most worldwide blockbuster films come from Hollywood? Why is it that most tech unicorns have their origins in Silicon Valley? How come most middle and long-distance champion runners are from Kenya, or that nearly everything is made in China?

Location. Location. Location.

Location matters. It seems that your odds of becoming a champion marathoner are much higher if you are born Kipsang in Keiyo than Kipling in Kensington. We can all bear witness that you are probably much better placed to have sung the song that takes the continent by storm if you live in Lagos than if you live in Lang’ata. This phenomenon where people and things with similar qualities or characteristics seem to concentrate in a certain area is called clustering. The Institute for Strategy & Competitiveness at Harvard Business School defines a cluster as a “geographic concentration of related companies, organizations, and institutions in a particular field that can be present in a region, state, or nation” (Institute for Strategy & Competitiveness, 2017). The renowned business thinker and strategist Michael Porter puts it that “a cluster is a critical mass of companies in a particular field in a particular location, whether it is a country, a state or region, or even a city” (Porter, 1998, p. 10). I have expanded Porter’s definition slightly to include footballers, athletes, and musicians, and I’m sure it can be expanded further. This is not random. Coffee and tea in Kenya are mainly grown in what were the “White Highlands” where the cool and wet climate offered ideal conditions for these cash crops to flourish. Post-independence, many of these farms were maintained by the elite who  acquired them, while the ordinary citizens who worked on the white farms went on to till their own plots. And so we have grown coffee and tea in the Mt. Kenya region for decades since. This is an example of a geographical cluster which grew out of natural factor endowments: cool and wet climate, hilly topography of the land and deep red volcanic soils. If you’re a trader in Nairobi, it is very likely that the goods you sell were manufactured in China. With a workforce of over half a billion people and heavy state investment in infrastructure over several decades, the country has built the capacity to produce nearly any industrial product. With thousands of factories on standby ready to produce your order of nuts or bolts or cars or cranes, the country has become a global leader with immense competitive advantages in low-cost manufacturing of nearly anything. In a similar way, Ethiopia has raced ahead of us to join Bangladesh and Vietnam as a low-cost manufacturer of textiles. For anyone in IT or software development, or if you are looking to outsource business processes such as customer service, you probably have a company based in India high on your list or possible service providers. The country enjoys competitive advantages in these knowledge services owing to the their vast pool of labour, good telcoms infrastructure in their major cities and the low cost base to teach these skills. Is there a region in Africa that produces more and better wine than the winelands of Cape Town? The Western Cape province of South Africa enjoys factor endowments such as warm climate and gently sloping lands surrounded by mountains that are great for growing grapes. A historic know-how-based cluster of expertise and the concentration of complementary industries in the Western Cape has made it possible for the region to process the quality and quantity that makes South Africa a leading exporter of wine. As we can see, clusters develop for all sorts of reasons: from natural factor endowments (such as coffee and tea in Central Kenya) to historic know-how (watchmaking in Switzerland), to low costs of production (China for nearly anything to do with industry or manufacturing).

So what, for Kenya?

I think Kenya can benefit greatly from implementing a well-thought-out deliberate plan that clusters our economic activities. With a blueprint that is

  • conscious of the cultures of various communities and their historical economic activities,
  • adaptive to the present spatial structure of our country,
  • mindful of weather, climate, topography, and other natural factor endowments,
  • aligned with Vision 2030 and other long-term national plans, and
  • mobilizes the political will required to implement it,

I am convinced Kenya can make huge leaps in a decade or two. The kind of leaps needed to achieve the economic goals of Vision 2030.

For example, most of the maize we consume comes from the Trans Nzoia region. With such a plan in place, infrastructure in the county can be deliberately built to facilitate growing and processing maize and the crops it is rotated with. County water dams should be built to sustain the population that lives and works there and to irrigate maize farms all year round. Universities in the county should be leaders in the region on agricultural science and research, with specializations on maize. Storage silos should be constructed in the county, or as close as possible to reduce transportation costs for harvests. Maize millers should be incentivised to have their processing mills in Trans Nzoia or the surrounding counties. Supporting industries such as seed grain producers, fertilizer manufacturers, farming equipment companies and others should be supported to ensure that they have a heavy presence in Trans Nzoia and surrounding counties. Now, this is not to say that farmers in the county should plant only maize, nor to say that economic activity in Trans Nzoia should be restricted to maize. No. Only to say that because the region enjoys natural factor endowments such as weather and climate that support maize growing, and that the communities in the area have a long history of growing the crop, it is only makes sense that the conditions for profitably and reliably growing the crop are improved as much as possible. The county is predisposed to being a major producer of maize for the country, we should do all we can to support it. The same applies to the other 46 counties, and constituencies within the counties. With such a development blueprint, physical infrastructure would be built in a way that catalyses the development of specific economic activities in clusters where economies of scale can be enjoyed. That a Kenyan looking to start a business in the supply chain of coffee should be heading to Kiambu or Nyeri, and another one interested in milling maize should be heading to Trans Nzoia. Again, this is not to say that a region or county should be engaged in one economic activity only. Just that the focus or specialization inherent in each region or county should be enhanced. To my mind, if such a development plan was strictly implemented, the economic clusters that would emerge would stimulate technological specialization and improved productivity in the area of focus. Economic opportunities would flourish at local levels as core activities and their complementary industries receive the attention and support they need for them to grow quickly. Value-adding processing industries are more likely to sprout in such clusters, attracted by the targeted supporting infrastructure that would reduce costs of production. The accumulation of specialized labour at the local level would cause a pool of specialist skills to swell, attracting even more value-adding processors and increasing the overall economic yield from a core economic activity.

Doing it

A national dialogue forum that sets the strategic agenda for the country in the next decade can be called and conducted at the national level within a year. County governments can thereafter engage at the local level to surface the deeper aspirations of the people, understand the factor endowments they enjoy, and map the competences at their disposal. Within a year of the national dialogue forum, each of the counties can have their unique county development plans in hand. And by the year 2020 we can begin to seriously implement the 47 county development plans with the aim of achieving Vision 2030.

There is value in watch brands that carry the reference, Swiss Made. There is value in being German or Japanese if you are a manufacturer in the automobile industry. There is value in being Danish if you are a maker of pastries, or Belgian if you are a chocolatier. Or being Kenyan if you are a long-distance runner. Kenya could be known for a lot more, “Made in Kenya” could mean refinement, excellence, heritage, attention to detail and prestige. Each of the 47 counties should be a hotbed for a specific thing, and Kenya can become a major exporter of that thing. Maize, handcrafts, coffee, retail, miraa, avocados, professional business services like audit, beef, beer, tech, the Safari rally, fish, films, tourism, microfinance, music, healthcare, chocolate, hospitality, fashion, dairy products, university education, potatoes, flowers, leather, sports, herbs and spices, or anything else we can imagine. Are we willing to make “Made in Kenya”?

 

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References

Institute for Strategy & Competitiveness. (2017). What Are Clusters? Retrieved September 25, 2017, from http://www.isc.hbs.edu/competitiveness-economic-development/frameworks-and-key-concepts/Pages/clusters.aspx

Porter, M. E. (1998). The Adam Smith Address: Location, Clusters, and the “New” Microeconomics of Competition. Business Economics, 33(1), 7–13.