A new competitiveness study released by the Kenya Association of Manufacturers reveals that high costs and regulatory bottlenecks are slowing down export growth despite strong prospects in key value chains including leather, textiles, and agri-processing.
Kenya Association of Manufacturers (KAM), in collaboration with the Embassy of Germany in Kenya and GIZ Kenya, has urged accelerated reforms to strengthen the country’s export competitiveness and attract more global investment into the manufacturing sector. The call follows the launch of a comprehensive Exports Competitiveness Study in Nairobi, which benchmarks Kenya’s performance against peer economies and proposes targeted measures to expand industrial exports.
Speaking during the launch, Peter Njoroge, Director of External Trade at the State Department for Trade, reaffirmed the government’s commitment to improving Kenya’s competitive position. He said ongoing enhancements to the National Export Strategy will sharpen the focus on value addition and ensure the country fully utilizes preferential access granted through trade frameworks.
“The government remains committed to creating an enabling environment for exporters and strengthening our export strategy to unlock more value-added trade opportunities,” Njoroge said.
While Kenya continues to show resilience in manufacturing, stakeholders caution that export underperformance must be urgently reversed. KAM Head of Policy, Regulatory and Advocacy Mary Chepchumba said manufacturers face structural hurdles that significantly raise production and logistics costs.
She noted that exporters incur up to 15–20 percent additional cost burdens due to factors such as:
• High electricity tariffs
• Regulatory inefficiencies
• Lengthy approval processes
• Limited market intelligence
“Our manufacturers are innovative and capable, but the cost environment is undermining competitiveness both regionally and globally,” Chepchumba said. “Addressing bottlenecks highlighted in this study is essential if we are to unlock Kenya’s true export potential.”
High-Potential Value Chains Identified
Despite the competitive pressures, the study identifies robust growth prospects across several priority value chains that can deliver export-led industrial expansion. These include:
• Leather and leather products
• Textiles and apparel
• Agri-processing
• Edible oils
• Fisheries
• Pharmaceuticals and light manufacturing
These sectors have strong domestic raw material bases and can create large-scale employment if supported with technology, financing, and streamlined trade procedures.
Development partners present at the launch reiterated confidence in Kenya’s industrial prospects. Friederike Hemker, Deputy Head of Cooperation at the German Embassy in Kenya, said Kenya’s business ecosystem is backed by a strong entrepreneurial culture and sustained investor attention.
“Kenya has immense potential to scale its export footprint by fully leveraging its innovation capacity and regional trade access,” she said.
Dr Christoph Zipfel, Director for Sustainable Economic Development at GIZ Kenya, emphasized that export performance depends on strengthening value chains end-to-end—from production to market access.
“We are working closely with Kenyan industry to support competitiveness through productivity improvements, technology adoption, and enhanced manufacturing capabilities,” he said.
Reforms Needed to Close the Competitiveness Gap
The report calls for coordinated policy alignment to avoid conflicting regulations that discourage exporting. It further recommends strengthening Kenya’s participation in regional and global trade agreements such as the EAC, AGOA, and EU-EPA to close what it terms a 10–25 percent competitiveness gap versus peer markets.
Key recommendations include:
• Lowering the cost of doing business
• Enhancing regulatory efficiency and faster approvals
• Reviving idle industrial capacity currently at roughly 50 percent utilization
• Investing in export promotion and market intelligence
• Upgrading logistics systems to reduce turnaround times
Analysts say reducing energy tariffs and improving port efficiency would have immediate positive impacts on exporters’ margins and global pricing competitiveness.
Manufacturing Contribution to National Growth
Manufacturing remains a central pillar to Kenya’s economic ambition of raising the sector’s GDP contribution to at least 20 percent under the country’s industrialization agenda. However, this target has remained elusive, with the sector currently contributing about 7–8 percent to GDP.
Export earnings from manufactured goods have grown at a slower pace compared to imports, widening the trade deficit and limiting foreign exchange reserves. Economists say a stronger export-oriented manufacturing base would improve currency stability, job creation and economic resilience.
The new study aims to provide a strategic foundation for policymakers, investors and industry leaders as they pursue reforms to restore Kenya’s export growth trajectory.
As the government and private sector align on the next steps, the manufacturing community expects urgent action to put Kenya on a more sustainable and competitive export path.
