Seizing global markets through forward, backward integration
By Tobias Alando, July 24, 2025Kenya has distinguished herself as one of the leading producers of agricultural and horticultural produce, including tea, coffee, avocados and flowers.
However, we are yet to become world leaders in these sectors.
How do we carve our niche and dominate global markets through the production of exquisite quality produce, and ensure that we derive maximum value from these products and their value chains?
Conquering global markets calls for forward and backwards value chain integration, which will ensure that all stakeholders, from the farmer to the manufacturer and their service providers, as well as the government, all earn good returns.
Attaining full value chain integration calls for sound actions and policy and regulatory support, coupled with intentional initiatives to enhance market access.
Take packaging of agricultural and horticultural produce, a vital component of the production process, and market access for agricultural and horticultural produce.
How can we build the packaging industry and ensure our products are globally competitive?
First, we must champion local sourcing by ensuring that inputs used to package our top exports are sourced locally.
Kenya now has a well-established packaging manufacturing industry producing world-class packaging products for domestic and export markets, ranging from paper, plastic, glass and tins, among others.
The packaging sector supports export products, for instance, floriculture and horticulture, with avocados and flowers growing to become one of our top export products.
However, all good intentions to build and nurture a thriving manufacturing sector in Kenya are deterred by some facets of the business environment, which continue to hamper competitiveness and productivity.
For instance, in the Finance Act 2025, the government introduced excise duty at the rate of 25 per cent or Ksh50 per kg (whichever is higher) – 50 per cent per kilogramme is equivalent to 55 per cent excise duty on kraft paper, a critical raw material used in the manufacture of packaging.
Currently, Kenya does not produce kraft paper and relies on imports from various countries, including the East African Community (EAC), which caters for 30 per cent of the required volumes, to meet demand.
In three years, cumulative tax on kraft paper has increased from less than 50 per cent to 111 per cent, which includes – additional to 55 per cent excise duty, 10 per cent Export and Investment Promotion Levy (EIPL), 25 per cent Import Duty, 16 per cent VAT, 2.5 per cent Import Declaration Fee and 2 per cent Railway Development Levy.
This is a lopsided policy that promotes imports rather than locally manufactured packaging. This places Kenya at a competitive disadvantage because our neighbours in the EAC charge lower taxes.
Kenya will lose her competitiveness compared to competitors such as South American countries (Ecuador, Colombia and Peru) on key export products such as tea, coffee, avocado and flowers.
The net effect is reduced demand for agricultural and horticultural produce from Kenya, which includes flowers and avocados and subsequently, a dip in government revenue.
To promote local manufacturing, the government should introduce VAT exemption on inputs for the manufacture of packaging bags rather than on finished packaging.
Local sourcing is an effective strategy in today’s highly volatile business climate, partly characterised by shifting geopolitics, which leads to risks such as supply chain disruptions.
Hence, it is important for the government to put in place policies and regulations that encourage the purchase of locally produced goods and promote the Buy Kenya Build Kenya agenda.
Other drivers of increasing Kenya’s agricultural and horticultural exports are research and development to ensure that our products are of high value, which will lead to better returns for all players in the value chain.
In doing so, we shall also be better positioned to understand global market dynamics and demands as well as implement informed product development standards that are commensurate with various consumers worldwide.
A good example of a country that has successfully implemented this is China, a leading exporter of tea, which has heavily invested in research and development for value-added tea and production of new products, a sharp contrast with Kenya, which mostly exports bulk black tea.
Kenya can emulate China and diversify the tea it exports through value addition, innovation and production of a wide variety of tea.
Value chain integration will lead to better controls, pricing, and enhance Kenya’s competitive edge in global markets.
Moreover, it also increases the certainty of access to raw materials supply and improves manufacturing processes for better quality, increased efficiency, and higher profit margins.
Kenya must be intentional in the agriculture and horticulture sectors to derive maximum value from her products.
The writer is the Chief Executive of the Kenya Association of Manufacturers.