Moving target: Why Kenya's dream of industrialising keeps being deferred

This week, government leaders, policymakers, investors and delegates have gathered at the Kenyatta International Convention Centre (KICC) for the Kenya Industrialisation Summit 2026.  This is the 4th such Summit since 2021.  The first Summit focused on the Jubilee administration’s “Big Four Agenda”  while pushing the official “Buy Kenya, Build Kenya” mantra of the time.  The current Kenya Kwanza administration then hosted the second and third summits in late 2023 and 2025, respectively. 

In these summits, the focus expanded to the African Continental Free Trade Area (AfCFTA), value chain prioritisation and infrastructure support, digitalization/AI integration and green industrialisation.  This year’s summit elevates the industrialisation agenda from designs and plans to financing and markets.

This is not to say we haven’t had industrialisation summits in the past.  The difference might be that today’s are a more structured series than previously ad hoc forums and exhibitions.  Indeed, this year’s summit is running alongside the 9th edition of the Kenya Association of Manufacturers-led Changamka Shopping Festival.  

One expects that a particular highlight of this year’s summit is the launch of the 2026 National Industrialisation Policy, a draft of which was recently subjected to public participation.  Again, for Kenyans familiar with our penchant for nice talk-shops and beautiful documents, this isn’t the first time we’re setting out industrialisation ambitions for Kenya.  After settling our state versus markets debate that began with Sessional Paper Number 10 of 1965 and ended with Sessional Paper Number 1 of 1986, somewhere between 1992 and 1994 we set out to be industrialised by 2010.  A few years later, in Sessional Paper Number 2 of 1997, a comprehensive vision was set out; the plan now was to industrialise by 2020.  Then, before this 2026 policy, we had a 2008 Kenya Industrial Master Plan which was eventually overtaken by Kenya Vision 2030 (also a 2008 document) promising to industrialise by 2030, a promise retained in the current policy framework – Sessional Paper Number 9 of 2012.   The 2026 policy keeps this 2030 target.

This latest policy is built around seven foundational pillars.  Without delving into the details, let’s stress-test the policy using a hard contextual question for each pillar and an attempt at an honest rating.  On the institutions and governance pillar, does the state enforce credible commitments or do agencies exploit manufacturers through volatile taxes, levies and regulations?  Policy unpredictability and arbitrary action suggest that this pillar currently rates as poor; the extractive risk is high.  This poor rating also applies to the MSMI growth pillar, where questioning whether mass informality is an entrepreneurial choice or a defensive shield against punitive tax and licensing leads us to the second answer and our dual-economy gap.

Industrial finance also scores a poor rating against the question of why domestic financing clusters around low-risk lending to the state, or even real estate, and not tradable sectors including industry.  In this contextual questioning, the other four pillars of the policy are averagely scored.  On industrial corridors, infrastructure and land (the question of whether the productive spaces are being built, or public land is allocated for speculation), the verdict is mixed.  On why local human capital and tech joins up in digital or fintech spaces rather than physical industrial locations, it is fair to say that virtual spaces reward more easily than physical ones, while on trade and integration, opening our borders to AfCFTA rests on the balance between our export capacity and domestic competitiveness.  The same final point emerges on green industrialisation: huge low-cost potential versus a legacy of rigid power purchase agreements driving industrial tariffs.  Put it this way, the institutional context on which the policy pillars rest is not attractive.

Yet, to understand where we are today, here are four industrialisation metrics.  On the 20 per cent manufacturing-as-a-share-of-GDP threshold, we are at 7 per cent, down from 10-11 per cent a decade or so ago.  Morocco as a peer continental leader is around 15 per cent; Vietnam as a global peer up to 25 per cent. On manufacturing value added per capita at less than US$200, we are in the bottom, less than US$1,000 developing tier; Vietnam is at over US$1,000 in the emerging industrial tier.  Fully industrialised economies under this classification operate at over US$2,500 per capita.  On manufacturing jobs as a share of total employment, Kenya at 8 per cent sits at the halfway point of the lower global threshold, although this is a measure of formal manufacturing.  Our African peers are at 13 per cent; the global average is up to 22 per cent.

Finally, economic complexity.  Very simply, this focuses as much on what a country makes (product) as on how much it makes.  Kenya sits in the lowest, commodity trap/low industrialisation, threshold; while its African and global peers sit in the middle, diversifying and transitioning threshold.  For perspective, it is countries like Japan, Singapore and Switzerland that export highly specialised, difficult-to-copy products that sit at the absolute peak of the top, highly industrialised economic complexity threshold.

Economic complexity is critical to our industrialisation discourse.  Countries move ahead not by making more of what they are good at, but by accumulating "productive know-how" and using it to transition into more complex, higher-value goods – what we call the product space.  The short story here is Kenya is trapped in a sparse and isolated periphery – we do great on tea, coffee and flowers, but these capabilities don’t transfer or translate into, say, manufacturing pharmaceuticals or motor vehicle assembly.  The longer story from a reading of the policy is that the effect of the (unweighted) multi-factor evaluation criteria used to prioritise value chains will be to keep us in our commodity trap as our neighbours play catch-up.

There is more to our industrialisation policy, and a second aspect worth reflecting on is the spatial context.  Is this the moment to be courageous and question the logic behind setting up CAIPs and SEZs everywhere?

The push to create 47 County Aggregation and Industrial Parks (CAIPs) has been an on-off affair over the past four years.  Meanwhile, over 25 Special Economic Zones (SEZs) are also gazetted.  But this isn’t how industrial ecosystems work.  True industrialisation relies on agglomeration, the idea that factories are more productive, innovative and cost-effective in hubs with common utilities, logistics and supplier pools.  CAIPs will not create 47 industrial engines; they will create many underfunded, underutilised parks and sheds.

Look at the data.  53.1 per cent of Kenya’s current manufacturing output is generated in the Nairobi-Kiambu-Machakos metropolis.  When you add Mombasa and Kilifi at 14.5 per cent, that is 2/3rds of our industrial economy, while over thirty counties each contribute less than one per cent.  This is not how economic gravity works to deliver 15 per cent of GDP now, 20 per cent in 2030 or 24 per cent in 2063.

How about we move from a strategy of spatial dispersion to a strategy of hyper-concentration?  To illustrate, let’s collapse our 47 CAIPs/25 SEZs map into, say, four mega-clusters to optimise our geography.

First, we have the Naivasha-Nakuru Green Geothermal Cluster.  This is the engine for energy-intensive manufacturing.  By plugging directly into our geothermal resources, we offer reliable power at low cost and market it globally as a "100% Green Energy Powered" stamp no competitor can match.

Second is the Nairobi-Machakos Mobility and Tech Hub, where we consolidate our high-tech manufacturing, pharmaceuticals and e-mobility assembly, capitalising on our premium labour talent pool and close proximity to our financial centre.  Third, the Mombasa Blue Economy and Heavy Industrial Cluster hosts our heavy metallurgy, cement, clinker and port-side commodity and oil refining.   Remember, this is where the Dangote Complex will be located, making it a true mega-cluster. Fourth, the Kisumu-Eldoret Agro-Processing Cluster as a transformation centre and EAC market gateway.

What about the other 43 counties?  Maybe the starting point for now is to turn those CAIPs into more basic County Aggregation Centres (CACs).  These CACs will not manufacture or process, but they will preserve, standardise, and bulk produce.   Simply focusing on, say, cold storage, sorting, grading and quality control begins to address our (up to) 40% post-harvest loss problem.  Think of these CACs as efficient logistics depots that aggregate standardised raw agricultural inputs, which are then moved through our transport corridors directly into the four mega-clusters for value-added processing and global export.  

This changes our national industrial map into a proper "Hub and Spoke" model where rural counties secure predictable income for their farmers, while the mega-clusters provide the scale to globally compete.