How traders forced Ruto and KRA into State House retreat

President William Ruto's administration was forced into a humiliating retreat on Wednesday, striking a deal with small-scale traders that slashes a controversial customs valuation used to tax consolidated imports.

The climb down came after thousands of protesters paralysed Nairobi's central business district over rising business costs and vowed to sustain the protests in the coming days.

Under the agreement reached at State House Nairobi on Wednesday, the Kenya Revenue Authority (KRA) will reduce the "applicable benchmark for general consolidated cargo from Sh2.5 million to Sh2 million," according to the official communiqué issued on Wednesday evening.

The benchmark, the minimum customs value used to calculate taxes on a container of mixed goods, had been hiked to Sh3.2 million, sparking outrage.

The advance cargo declaration requirement will now be removed, "to streamline cargo clearance and facilitate legitimate trade."

The deal is, however, conditional on several measures that will define the new regime.

KRA will be required to develop and publish an exclusion list of goods that will not qualify for clearance under the general consolidated cargo framework.

The exclusion list will be informed by the value and nature of the goods, applicable specific tax rates, excisable goods and other relevant customs and revenue considerations, the communiqué states.

"This will provide traders and consolidators with certainty on which goods qualify for consolidation and ensure that the new framework is applied consistently and transparently."

"All cargo consolidators will be vetted and registered afresh by KRA and will be required to submit a comprehensive list of the individual traders and importers whose goods they consolidate," the document adds, setting a deadline of 15 October 2026 for completion.

 "The government will facilitate the establishment and operation of designated de-consolidation centres in Nairobi and Mombasa," to enable efficient separation of cargo for individual traders and reduce logistical costs.

A multi-stakeholder committee chaired by the Cabinet Secretary for Investments, Trade and Industry will be formed, bringing together KRA, relevant Government agencies, traders, consolidators and other key stakeholders.

The committee will oversee implementation of the agreed measures, address emerging issues and report quarterly to the President on progress.

The communiqué further states that "the State will work with counties to create a conducive business environment for traders, leveraging the County Aggregation and Industrial Parks programme, while protecting legitimate businesses from unnecessary harassment, intimidation and disruption.

Legislation will also be expanded "to reserve retail trade and specified lower-level jobs for Kenyans, while clearly defining areas for foreign participation," though "foreign investment that brings capital, technology, value addition and quality jobs will continue to be encouraged."

The retreat came just days after hundreds of traders marched through the capital, blowing vuvuzelas and waving Kenyan flags, to demand the tax man reverse the hike that had raised the benchmark from Sh2.5 million to Sh3.2 million for a 40-foot container.

Shops in Nairobi's Kamukunji, Gikomba, Luthuli and Nyamakima markets, major hubs for imported clothing, electronics and household goods, shuttered as demonstrators converged on Times Tower, the KRA headquarters, with police deployed to contain crowds.

"If they add the Sh700,000, there is no profit we will make," a Kamukunji vendor said during the mobilisation leading up to the protests. Traders had vowed to march every Friday until their concerns were addressed, and business activity ground to a halt as shops remained closed throughout the morning.

The KRA had been adamant in defending the regulations, insisting the benchmark was a risk-management tool rather than a flat tax.

The authority had argued the review was necessitated by changes in exchange rates, freight costs and tax laws, and that traders could opt for individual customs verification if they did not wish to use the simplified arrangement.

 That defence did little to quell the unrest, forcing the president to intervene directly.

The climbdown marks a significant political setback for Ruto, who swept to power in 2022 on a populist platform championing the cause of "hustlers", the small-scale traders and informal workers who form the backbone of Kenya's economy.

Since taking office, his administration has faced relentless pressure to create a conducive environment for micro, small and medium enterprises, with business leaders repeatedly warning that a raft of new levies and taxes is choking the very constituency that propelled him to power.

In April this year, more than 1,000 CEOs presented Ruto with a policy roadmap calling for urgent cuts to levies, licensing fees and compliance costs. In June, the president signed the Finance Act 2026 into law despite warnings that new taxes on everything from second-hand clothing to digital transactions would further squeeze small businesses.

The cargo dispute became the latest flashpoint in that broader reckoning, forcing the administration to choose between its revenue targets and its political base.

Existing rates for ready-made garments, footwear and fabrics will remain unchanged, while newly negotiated rates for air cargo will stay in effect.

The communiqué notes that "traders and consolidators will comply with customs and tax requirements and operate within the agreed framework.

The government will, in turn, continue simplifying trade procedures, lowering unnecessary costs, improving infrastructure and creating an enabling environment for legitimate businesses to grow."

"The government recognises traders, importers, manufacturers, logistics operators and MSMEs as an essential pillar of Kenya's economy," the document states. "The agreement reached today establishes a new partnership based on consultation, predictability, compliance and mutual responsibility."

For the thousands of small-scale traders who shut their businesses and marched through Nairobi's streets, the question now is whether the government's retreat signals a genuine shift in approach or merely a tactical withdrawal ahead of the August 2027 election.

Ruto has faced multiple rounds of protests over high living costs over the past three years, and Wednesday's deal, while welcomed, offers no permanent reprieve from the underlying fiscal pressures that drove the KRA's original hike.

The multi-stakeholder committee will be the key test. Charged with overseeing implementation and addressing emerging issues, it will determine whether the new framework delivers the predictability traders have long demanded.