Discussion Paper No. 234 of 2020 on Youth Employment in the Pharmaceutical Industry in Kenya

Abstract

The challenge of creating jobs for the youth is at the core of the development agenda in Kenya. This agenda has been driven by the youth bulge that the country is experiencing which calls for adoption of targeted initiatives to actively involve the youth in the labour market. In line with this, the Government of Kenya made a commitment to create 1.3 million jobs for the youth annually during the Third Medium Term Plan 2018-2022 period by supporting value addition and development of industries with the potential to spur job creation and overall economic growth. The pharmaceutical industry in Kenya has been identified as one of such industries, with the potential to contribute to creation of both direct and indirect jobs. This study used value chain analysis as a guiding framework to assess how the industry can create more jobs and help in solving the youth employment challenge in the country. To do this, a mapping of the industry value chain was done and key constraints to the growth of the industry along the value chain identified. An analysis of the job creation potential of the industry was done using Labour to Value Added Ratios (LVAR), employment elasticities, and employment multipliers. Finally, a skills gap analysis was conducted by comparing the skills demanded by the industry and the skills that unemployed youth in Kenya have. From the value chain mapping, 88 per cent of local manufacturers engage in secondary manufacturing, 6 per cent in tertiary manufacturing with only 3 per cent engaging in research and development. Results from constraint analysis show that access to finance is a key cross cutting constraint across the value chain. This challenge prevents firms from upgrading to WHO compliance standards and accessing donor funding markets where WHO compliance is a prerequisite for participation in the tendering process.