Business leaders have issued a stark warning that Kenya’s manufacturing sector faces collapse due to punitive taxes on industrial inputs, eroding competitiveness against regional neighbours Tanzania, Uganda and Egypt.
The alarm comes amid parliamentary scrutiny of the contentious Finance Bill 2025, which proposes reducing the Export and Investment Promotion Levy from 17.5 per cent to 5 per cent—a move industry leaders dismiss as insufficient.
Kenya’s industrial output has plummeted under the weight of raw material taxes: cement production nosedived to 8.9 million tonnes in 2024 (from 9.6 million in 2023); cement imports surged to 10.3 million tonnes (versus 148,000 tonnes in 2023); and steel and textiles face similar declines, with milk exports paralysed.
“We’ve become the most expensive manufacturer in the region,” declared Vimal Shah, Chairman of Bidco Africa, citing Egypt’s duty-free access to COMESA markets. “Multinationals relocate to Egypt to produce for Africa. We lost our continental hub status due to these taxes.”
Caught in the raw material trap, industry leaders presented a unified demand: eliminate input taxes and shift levies to finished goods. Shah highlighted the absurdity of Kenya’s system: “Egypt sources our raw materials, processes them tax-free, and floods our market with cheaper products through COMESA.”
Thika Cloth Mills MD Tejah Dodha exposed another imbalance: “Textile exporters pay high taxes while importers enjoy low rates. Why tax our exports but not their imports?”
Kevian Kenya MD Kimani Rugendo added that foreign supermarkets prioritise imports over Kenya’s 60 per cent local-content rule, “creating deadly competition for our products.”
Investment, Trade and Industry CS Rebecca Kinyanjui acknowledged the dilemma: “Removing input taxes risks revenue collapse, but retaining them kills industries.”
She revealed that Chinese investors seek 1,000 acres in Murang’a for an Export Processing Zone (EPZ). Plans are advancing for a Kenyan Export-Import (EXIM) Bank—lagging behind Tanzania (1997) and Uganda (2016)—but EPZ approvals remain sluggish, frustrating local firms.
Kenya’s poor utilisation of international trade deals drew sharp criticism, with only 20 per cent capacity used in EU trade agreements and a mere 1 per cent utilisation of AGOA’s duty-free US access. “Negotiating market access is wasted when businesses don’t export,” Kinyanjui conceded.
Business leaders, however, proposed urgent solutions such as scrapping all raw material duties immediately, accelerating EPZ approvals for local manufacturers, extending foreign investor incentives (like Special Operating Frameworks) to Kenyan firms, and enforcing supermarket local-content rules with strict penalties.
As Rugendo warned, “Small industries are dying. Employees face mass job losses.” With regional rivals leveraging EXIM banks and tax-efficient models, Kenya’s industrial survival hinges on the Finance Bill 2025 delivering more than token reforms.
– By Nusurah Nuhu
