Manufacturers warn that premature deindustrialization, policy uncertainty, and high operational costs are stifling the sector’s ability to reach its full potential.

Despite being identified as a key driver for job creation, the industry continues to struggle due to systemic challenges, according to the Kenya Association of Manufacturers (KAM). With nearly 800,000 graduates entering the job market annually, only 300,000 secure formal employment, the Economic Survey 2023 reveals. This challenge is exacerbated by sluggish structural transformation, where resources like labour and capital are not shifting fast enough from low-productivity sectors, such as traditional agriculture, to high-productivity industries like manufacturing and modern services.

In its Manufacturing Priority Agenda (MPA) 2025, KAM asserts that to revitalize the industry, there is need for a comprehensive strategy, including policy reforms, industrial incentives, and improved market access. “If we get it right, we will create sustainable jobs, grow tax revenues, and position Kenya as a competitive industrial hub,” said KAM chairperson Jane Karuku. KAM CEO Tobias Alando stressed the need for a deliberate focus on industrial competitiveness, local production, and export-led growth.

“The government must create a business-friendly environment, including settling the Sh15 billion in outstanding VAT refunds and increasing monthly VAT refund allocations to at least Sh4 billion. Liquidity is the lifeblood of manufacturing enterprises,” Alando stated.

He also called for increased capitalization of public financial institutions like the Kenya Industrial Estates (KIE) and Kenya Development Corporation (KDC) to provide long-term, single-digit interest loans, acknowledging the capital-intensive nature of manufacturing.

To boost the sector, KAM is advocating for export-led industrialization by leveraging domestic, regional, and international markets. This includes enforcing the Buy Kenya Build Kenya (BKBK) policy, eliminating domestic taxes and levies on export goods, and maximizing opportunities under trade agreements such as the African Continental Free Trade Area (AfCFTA), the Economic Partnership Agreement with the European Union (EU-EPA), the UK Free Trade Agreement (UK-FTA), and the African Growth and Opportunity Act (AGOA).alent with the risk of a renewed wave of infections coupled with the new Delta variant affecting growth.