East Africa Breweries Limited’s (EABL) #ticker:EABL announcement a couple of weeks ago that it was on course to establishing a Sh15 billion brewery in Kisumu was arguably the biggest piece of economic news in Kenya this year.
The investment, which is anticipated to create at least 110,000 direct and indirect jobs, is crucial for Kenya and region for a number of reasons.
First, EABL’s is an investment in industry and manufacturing. The Overseas Development Institute (ODI) and the Kenya Association of Manufacturers (KAM) developed a 10-point plan to catalyse industrialisation in Kenya, which points to the significance of industrialisation to the economy.
Many economic development success stories around the world owe a great deal to the manufacturing sector.
It can play a crucial role in Kenya’s inclusive growth by absorbing large numbers of workers, by creating jobs indirectly through forward and backward linkages to agriculture, raising exports and transforming the economy through technological innovation.
Besides, this investment is important because it is coming from a significant private sector player that has been in the region for a truly long time, and views investment in industry and manufacturing as a viable and solid enterprise. Good for Kenya.
Secondly, investing in manufacturing is important as it is occurring in the context of a sector that has been financially neglected.
As the ODI and KAM report points out, although aggregate finance for manufacturing has benefited from increased stock of bank lending to manufacturing — from $0.8 billion in 2006 to $1 billion in 2015, the share of manufacturing as a fraction of total lending declined from 15 to 11 per cent during the same period.
EABL’s investment should therefore indicate to local and global investors that manufacturing is still financially attractive when the right decisions are made.
Thirdly, investment in the food and beverages (F&B) sector is a significant job creator.
The US’s food and beverage companies are the biggest source of manufacturing jobs.
The advent of a manufacturing facility out of Nairobi will create viable, good quality jobs for the millions of Kenyans in the lakeside region, who are unemployed, under-employed or employed in the informal sector.
The quality of employment, particularly the direct jobs created by this investment, will allow numerous households in the region and country to benefit from the stability that comes from a solid and well-informed investor.
EABL’s investment also has clear linkages to agriculture. As economic journalist Jaindi Kisero has recently pointed out, it was David Mwiraria when he was Finance minister, who first to came up with the idea of introducing tax remission for beer made from sorghum, millet and cassava.
The remission is only valid if the company develops and invest in a comprehensive value chain for these food crops. Thus EABL knows it is obligated to invest in agriculture that will feed into its investment.
This presents a huge opportunity, particularly for smallholder farmers, to diversify into more profitable crops; an option that did not previously exist. Thus the effect of EABL’s investment may well reap dividends for the local community in agriculture.
As an investment in 2017, EABL will likely deliver to Kisumu a state-of-th-art facility that will encourage a reorientation of skills required to service the factory.
In Trinidad, a survey on the F&B industry found that technology has led to an increase in automation in the manufacturing process. This engendered a shift for skills in manufacturing away from manual labour to skilled machine operators.
We should, therefore, expect EABL’s investment to play a role in pointing to the skills deficit and skills requirements for F&B manufacturing in Kenya.
As a result, the local and national labour market could make good use of this opportunity to re-skill or up-skill for the development of a labour pool skilled for an industrialised Kenya in the 21st century.
To be clear, this will not be easy as education policy and educational training is still largely outdated, oriented towards social sciences and not linked to industry needs.
EABL’s investment presents an opportunity to get to grips with the types of skills required to drive F&B manufacturing forward in Kenya.
And finally, this is the first new investment in the lake region for a significant period of time.
Western and Nyanza have long complained of being neglected in terms of significant investments. And although efforts have been made to revitalise Mumias Sugar and Pan Paper, the economic logic of these investments have been questioned, and rightly so.
EABL’s investment is being made with a clear vision of return, and this will extend beyond financial gains.
While the bottom line is likely a focus for the EABL team, the investment should be one of many aimed at pulling Kenya into an industrial age of prosperity and engender economic growth in a manner that informs economic development and regeneration.
Ms Were is a development economist; firstname.lastname@example.org