NAIROBI, Kenya, July 28 – Kenya’s manufacturing sector is present process a quiet however alarming migration.
Faced with escalating prices of manufacturing and more and more uncompetitive enterprise situations, extra producers are shutting down or relocating to neighbouring nations corresponding to Uganda and Tanzania.
According to the Kenya Association of Manufacturers (KAM), the first driver of this exodus just isn’t the current protests, although they’ve made issues worse, however the hovering value of producing in Kenya, which has reached unsustainable ranges.
At the center of the disaster is a string of burdensome taxes and coverage imbalances which have pushed operational prices past cheap margins.
The imposition of excise responsibility on uncooked supplies, coupled with a excessive tax burden, has made regionally produced items dearer than imported options.
“Manufacturers are dealing with excessive value pressures, with taxation on uncooked supplies, inputs, and operations making it more and more tough to stay viable,” stated Tobias Olando, CEO of KAM.
“It’s not stunning that many are selecting to maneuver their operations to nations the place they’ll produce at decrease prices.”
The downside is compounded by elevated competitors from low cost imports, particularly from throughout the East African area, the place some member states apply short-term exemptions on Common External Tariff (CET) charges.
Kenyan corporations, alternatively, proceed to bear the total weight of those tariffs, eroding their potential to compete.
“While CET charges on merchandise like iron and metal stand at 35% throughout the EAC, nations like Uganda and Tanzania have repeatedly utilized decrease charges,” Olando defined.
“This coverage inconsistency has left Kenyan producers deprived inside their very own market.”
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A Sector Under Siege
These long-standing cost-related pressures have been additional exacerbated by current anti-government demonstrations, which have introduced contemporary uncertainty and operational chaos. KAM’s Q2 Barometer reveals a grim outlook.
A majority of producers reported a decline in buy orders, attributing it to hesitation amongst merchants cautious of stocking up throughout a risky political season.
The report additionally signifies that solely a small portion of corporations operated close to full capability, whereas a big majority had been compelled to scale right down to half capability or much less.
The protests haven’t solely disrupted provide chains and compelled workers absenteeism attributable to security considerations however have additionally launched further monetary pressure by way of property harm and looting.
The end result has been a spike in manufacturing downtime, decrease gross sales, and an general decline in investor confidence within the industrial sector.
Employment can be on the chopping block, with two-thirds of corporations signalling plans to chop jobs, citing decreased demand, rising manufacturing prices, and ongoing money circulate challenges, particularly these linked to delayed authorities funds.
Investor confidence is now at its lowest in years.
According to KAM, 62.5 % of producers have suspended any plans for brand spanking new funding.
Foreign direct funding inflows into Kenya are additionally shrinking, as companies undertake a wait-and-see method or shift their capital to extra predictable regional markets.
The authorities’s rising debt ranges and perceived inaction in addressing enterprise considerations have additional rattled stakeholders.
The results are already being felt in the actual economic system.
Over the previous 12 months alone, a string of high-profile corporations have both exited the Kenyan market or shut down important operations.
Motors, as soon as Kenya’s delight in homegrown automobile manufacturing, shut its doorways in August 2024, citing insufferable tax pressures and an absence of coverage assist.
CMC Motors Group, a family identify in auto distribution, absolutely pulled out of Kenya in January 2025, pointing to declining profitability.
Global client items large Procter & Gamble (P&G) exited in 2024, shedding tons of, whereas South African retailer Foschini Group additionally withdrew its Kenyan operations.
Copia Kenya, an e-commerce platform as soon as hailed for serving rural shoppers, went into liquidation in mid-2024, whereas Twiga Foods suspended its Nairobi operations in 2025 amid monetary pressure.
Even Base Titanium, a key participant within the extractives sector, wound down operations in December 2024, finishing the image of an economic system steadily shedding its industrial and funding anchors.
Policy Paralysis and Urgent Reforms
KAM has issued a clarion name for pressing coverage and structural reforms to salvage the sector.
Top amongst their priorities is tax rationalisation to scale back the burden on uncooked supplies and manufacturing inputs.
Without such intervention, the price of doing enterprise will proceed to soar, making it unimaginable for Kenyan producers to compete.
They additionally insist that the federal government should guarantee a uniform utility of the EAC’s Common External Tariff to stop unfair regional competitors.
The present disparity, the place some nations apply exemptions whereas Kenya enforces full tariffs, is driving buyers away. Illicit commerce stays one other concern, as unregulated items proceed to saturate the market, undermining compliant native producers.
Further compounding the challenges are infrastructural inefficiencies, together with delays at ports and logistical bottlenecks that elevate the price of transport.
KAM additionally urges the federal government to introduce measures that may stimulate home demand by enhancing client buying energy, thereby serving to native industries broaden sustainably.
Regulatory readability is one other pressing want.
The manufacturing sector has endured repeated disruptions attributable to shifting and unclear guidelines, frequent tax enforcement, and a fancy compliance surroundings that has dissuaded new investments.
KAM says it stays dedicated to participating the federal government by way of structured dialogue to develop long-term options.
“We should transfer past statements and into motion. Kenya’s manufacturing future hangs within the stability,” stated Olando.
“If we proceed shedding factories, we’re not simply shedding jobs we’re shedding our potential to compete as a nation.”
With regional neighbours transferring swiftly to draw funding and strengthen their industrial base, Kenya should now make a decisive selection: reform or threat industrial irrelevance.
