Unpredictable market dynamics, raw exports stifles manufacturing growth

Kenya has a blueprint as a net importer of finished goods and exporter of raw unprocessed goods, robbing its people economic self-reliance.

To shift the country into a manufacturing powerhouse, the country is targeting massive job creation, Import substitution, and export dominance cross leather, footwear, cotton and textile apparel, edible oils, dairy and pharmaceutical value chains.

Market volatility; including policy and regulatory instability and unpredictability have been blamed for the increased operational costs that have hindered long term investments and eroded market competitiveness for Kenya’s manufacturing value chains.

Also, the volatile business environment such as shifting global geopolitics, has been attributed for the disruption of supply chains.

Export of raw and unprocessed materials has been criticised as a factor robbing Kenya’s youth job opportunities.

At the 8th Edition of the Changamka Shopping Festival, themed driving Kenya’s manufacturing competitiveness through inclusive and sustainable industrialization, economic diversification, and trade partnerships, inclusive and sustainable industrialization was lauded.

The need to support Micro, Small, and Medium Enterprises (MSMEs) who are the lifeblood of Kenya’s economy by improving access to credit, technology, and markets was emphasized.

According to the Kenya Association of Manufacturers (KAM), increasingly, more youth and women are venturing into the manufacturing sector.

“It is important to have a moderated policy environment that upholds the best interests of the 3 spheres and at the same time stimulate the economy and reduce barriers to entry,” KAM board said.

While boasting of Kenya’s young population, resources, geographic positioning and strong export portfolio, the manufacturers have however noted that the efforts for growth are not without challenges.

“Currently, manufacturing contributes about 7.3  per cent to the GDP, below the 20 per cent target envisioned in Kenya Vision 2030,” KAM board director, Pankaj Bedi said adding that to enhance export competitiveness, a robust local market is required.

“This calls for the establishment of stable and predictable tax policies, a reduction in production costs, and the creation of a conducive regulatory environment that fosters industrial growth. It also means nurturing a vibrant economy where citizens enjoy enhanced purchasing power, empowering them to consume more locally manufactured products,” Bedi said reiterating the need to leverage trade partnerships.

Through the African Continental Free Trade Area (AfCFTA), Kenya has access to a market of over 1.4 billion people, posing an opportunity to scale production, expand exports, and attract investment.

According to Juma Mukhwana the Principal Secretary for the state department of Industry has observed that Kenya produces approximately 4 million hides and 22 million skins annually. However, more than 80 percent of these are exported in semi-processed form, denying Kenya’s economy the opportunity for job creation and value retention.

“Our goal is to ensure that by 2030, at least 70 per cent of hides and skins are fully processed locally, transforming Kenya into Africa’s leather design and production hub,” PS Mukhwana said.

He added that the recently leased Rivatex East Africa Limited has been modernized and expanded to increase cotton uptake and support local apparel production for domestic and export markets under AGOA, EAC, and AfCFTA.

“Our ambition is to increase cotton production from 6,000 bales to 200,000 bales annually, creating over 500,000 new jobs by 2030,” Mukhwana said

Kenya imports close to 90 per cent of its edible oils, largely in finished form. This dependency has been observed to exert significant pressure on foreign exchange reserves and hinders the development of local oilseed industries.

To address this, the Ministry is implementing the Edible Oils Value Chain Development Strategy, and facilitate contract farming arrangements to achieve 60 per cent self-sufficiency in edible oils by 2027, enhance food security, create rural jobs, and reduce the national import bill.

The PS has called upon stakeholders to invest in value addition, support local sourcing, and embrace the Buy Kenya, Build Kenya initiative.

Tobias Alando, the Chief Executive of the Kenya Association of Manufacturers has lauded the Changamka festival as a platform to drive dialogue, and shape policy.

“These conversations spark new ideas, influence trade and industrial policies, and strengthen linkages across value chains,” Alando said.

He added that the platform Showcases Kenya’s diversity and innovation and boost employment and grow the economy.

At the festival, it was noted that 800 SMEs had been trained on export readiness, digital trade and operational excellence. A year ago, only 30 per of these firms were ready to export. Today, that figure has more than doubled to 70 per cent.

To improve competitiveness and investor confidence, a 2025 Regulatory Audit Study identified reforms that can simplify business licensing, harmonise taxes and strengthen enforcement against counterfeit products.

A joint analysis between TradeMark Africa and KAM has shown that Kenya holds more than (600 million USD) in untapped export potential across value chains such as tea, coffee, rice and vegetables, particularly to Egypt, Nigeria, South Africa, Ethiopia and Ghana.

The analysis observes that unlocking even a portion of this potential would create thousands of new jobs, strengthen county-level value chains and build a more resilient export ecosystem.