In a significant move aimed at boosting homegrown businesses, the Kenyan government has finalised plans to reserve all state tenders valued below Sh3 billion exclusively for local firms.
This decision marks a substantial increase from the current Sh1 billion reservation limit proposed in pending legislation and responds directly to long-standing appeals from the domestic private sector.
Cabinet Secretary for Investments, Trade and Industry, Moses Kuria, announced the new threshold. He revealed that while businesses had aggressively lobbied President William Ruto for a Sh5 billion reservation ceiling during recent consultations, the government deemed that level potentially too high.
“We think that could be a bit too high. We are likely to settle at Sh3 billion,” Kuria stated, addressing industry leaders from agriculture, finance, manufacturing, real estate, and mining.
This policy shift supersedes a clause in the Public Procurement and Asset Disposal (Amendment) Bill, 2024, currently undergoing its second reading in the National Assembly. That bill proposed reserving tenders up to Sh1 billion for Kenyan entities.
The new Sh3 billion rule means foreign firms will only be eligible to bid for contracts exceeding this amount—and even then, only through joint ventures in which a local partner holds at least a 30 per cent stake.
The existing requirement reserving a minimum of 30 per cent of all procurement budgets for enterprises owned by women, youth, persons with disabilities, and other disadvantaged groups remains intact.
The move is championed by the government as essential empowerment for local businesses, addressing years of complaints that international companies unfairly captured lower-value contracts due to ambiguous regulations. “It had reached a stage where even in the Sh1 billion range, non-indigenous firms would tender,” Kuria noted, highlighting the need for stronger protection.
However, the decision has drawn mixed reactions. Leading law firm Oraro & Company Advocates warned in an analysis that, while aiming to build local capacity, the restrictions “may… deter foreign investment, reduce competition, and inflate procurement costs.”
They also cautioned that the joint venture mandate could foster superficial partnerships lacking real skill transfer, urging a “clear implementation framework” to balance local content goals with market competitiveness.
Kuria defended the Sh3 billion ceiling as striking a balance, offering “adequate competition among local firms” while providing necessary protections. He also linked the government’s reluctance to meet the Sh5 billion demand to the crippling issue of pending bills—unpaid government debts to suppliers.
“When Sh200 billion is removed from the economy, from small and big companies, eventually it affects all of us,” Kuria emphasised, revealing that settling these bills is a Cabinet priority.
The scale of the pending bills crisis is stark. The Pending Bills Verification Committee, established by the Cabinet in June 2023 and chaired by former Auditor General Edward Ouko, has so far verified Sh229 billion in unpaid government obligations.
Treasury Principal Secretary Chris Kiptoo confirmed that Sh80 billion is owed specifically to the roads sector, with the remaining Sh149 billion factored into the upcoming 2025/2026 budget. Kiptoo stated, “Once Parliament approves, we will be able to settle the first amounts of pending bills from July.”
The new Sh3 billion reservation threshold represents a major concession to local industry. Yet, its success hinges on effectively building domestic capacity to handle larger contracts while concurrently resolving the massive backlog of unpaid bills that strangles business cash flow. The government walks a tightrope between empowering Kenyan enterprises and maintaining an attractive investment climate.
– By Nusurah Nuhu
