Kenya Association of Manufacturers Chief Executive Officer Tobias Alando. Photo/courtesy.
The Kenya Association of Manufacturers (KAM) has decried rising taxes, high production costs and influx of counterfeits as a huge bottle-neck affecting competitiveness of the local manufacturing sector
KAM said the operating environment for manufacturers has become increasingly hostile, threatening jobs, investment and long-term industrial growth.
Tobias Olando, Chief Executive Officer of KAM, warns that persistent policy uncertainty is discouraging expansion and new capital inflows. “Manufacturers need predictability to plan, invest and grow. Frequent tax changes and rising statutory costs are making it difficult for local firms to remain competitive,” Olando said.
Recent finance policy proposals have added pressure to an already strained sector. Changes to Value Added Tax (VAT) treatment on raw materials and higher excise duties on certain manufactured goods have pushed up input costs, forcing companies to either absorb losses or pass the burden to consumers which results in reduced demand for locally produced goods.
Despite improvements in power generation capacity, electricity tariffs for industrial users in Kenya are still higher than those in neighboring countries. Olando notes that energy expenses account for a significant share of manufacturing costs, placing local producers at a disadvantage against imported goods.
“High electricity prices directly affect our ability to compete, especially against imports produced in lower-cost environments,” he said.
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The growing presence of counterfeit and substandard products has further weakened the sector. Fake goods, often sold at significantly lower prices, have flooded the market across industries ranging from fast-moving consumer goods to construction materials and pharmaceuticals. According to KAM, counterfeits not only reduce legitimate sales but also expose consumers to serious health and safety risks.
“Counterfeits undermine genuine manufacturers, reduce tax revenues and damage consumer trust. Stronger coordination among enforcement agencies is urgently needed,” Orlando said.
Many foreign manufacturers benefit from economies of scale and government subsidies in their home markets, enabling them to sell products at prices that local firms cannot match. This has led to shrinking market share for domestic producers and in some cases led to factory closures.
The manufacturing sector remains a key pillar of Kenya’s economic and employment strategy, with the sector supporting thousands of direct and indirect jobs. However, failure to stabilize tax policy, lower energy costs and intensifying the fight against counterfeits will continue to strangle the already strained sector. Olando warns, Kenya risks weakening its industrial base at a time when manufacturing should be driving economic resilience and long-term growth.
