A manufacturing plant in Kenya.[Photo/anzetsewere.wordpress.com]
A study done by the Centre for Global Development has ranked capital and labour costs as key reasons Kenya is an unattractive manufacturing hub.
The findings show that labour cost per Kenyan worker is Sh218,725 compared to Ethiopia sh 93,872 and Bangladesh where it is 86,230. Other attributable reasons included unstable electricity, low level of education and lack of proper transport networks. These reasons show Kenya as the most expensive country compared to at least 28 African countries in the study.
The study covered 5,500 firms in 29 countries and focused on comparing capital costs, labour, efficiency and productivity in Sub Saharan Africa with Bangladesh.
Ethiopia exhibited potential of being the ‘New China’ as the overall running costs of small African firms were 39 percent more expensive than elsewhere in the world. Medium and large firms were found to be 50 percent more expensive than other competitors in the world.
Kenya, a middle-income country, has a higher GDP per capita of Sh115,249 as compared to Bangladesh at Sh88,089. Senegal, a low-income country has GDP per capita at Sh80.034 and has double the cost in terms of labour and capital costs as compared to Bangladesh.
Alan Gelb, one of the researchers, noted that labour costs were rising faster than Kenya’s productivity and was bound to get worse with poor policy structures.
The findings of the study summarized that Africa has not done enough to be a global market leader in manufacturing.