Kenya’s unpredictable taxation coupled with regulatory burdens and the high cost and unreliable electricity have continued to dampen growth of industries, manufacturers have said.
These are curtailing the sector’s growth and contribution to the economy, amid subdued consumer demand and high cost of doing business.
Recent Kenya National Bureau of Statistics (KNBS) data shows the country’s manufacturing sector experienced a slight slowdown in 2024, with growth rates around 2.3 per cent in the third quarter.
This was primarily driven by the food sub-sector, particularly sugar production, while areas like cement and vehicle assembly faced challenges.
In a renewed call for predictability, the Kenya Association of Manufacturers (KAM) on Wednesday said there is need to create a conducive environment for businesses growth, if the country is to achieve its ambitious 20 per cent contribution to the GDP by the manufacturing sector.
“Manufacturers have set an ambitious goal of increasing the sector’s contribution to GDP to 20 per cent by 2030. This entails creating one million direct jobs and boosting government revenue through taxes. We urged for collaborative efforts to tackle barriers and create an environment conducive to growth and investment,” KAM chief executive Tobias Alando said.
Kenya’s manufacturing sector also faces challenges such as costly raw materials, stiff competition from cheaper imported goods, inadequate infrastructure, limited access to finance and currency fluctuations.
There is also duplication of taxes and levies across counties. High cost of doing business amid competition from cheaper imports have seen a significant exit of major industries from the Kenya market in recent years, with a number opting to manufacture in affordable jurisdiction including Ethiopia and Egypt, and export to Kenya.
Major companies like Procter & Gamble, GlaxoSmithKline, Johnson & Johnson, Tile & Carpet have either downsized or completely left Kenya, leading to significant job losses.
Homegrown automotive manufacturer-Mobius Motors shut down last year after years of mounting debts and a multi-million-shilling tax dispute with the Kenya Revenue Authority, amid high product costs.
In December, President William Ruto formed a ten-member task force to examine why numerous businesses are choosing to exit the country.
Reduced consumer demand and spending has in recent months added to the challenges industries are facing in Kenya, occasioned by among others, the aggressive raid on payslips by the government and job losses in the private sector as companies struggle to survive.
KAM has since called for the introduction of a stimulus package to revitalise industries, create jobs and improve Kenyan’s earnings.
The recent raid on payslips by government to fund the Social Health Insurance Fund and affordable housing is among levies blamed for reducing employee’s take-home pay, amid a myriad of tax measures that are impacting businesses.
This is in addition to PAYE, and NSSF deductions, which have since doubled, with close to 50 per cent of salaries now going to taxes.
According to the Federation of Kenya Employers (FKE), firms are struggling to comply with the “one-third rule” on payslips, where an employee must always take home at least one-third of their basic salary.
