Inside Kenya’s Manufacturing Squeeze as Production Costs and Imports Rise

Kenya’s manufacturing sector faces rising production costs, import competition, and weakening demand, with GDP contribution dropping to 7.1% in 2025 from 7.3% in 2024, as high electricity tariffs, transport costs, and unstable tax policies squeeze profitability. The Kenya Association of Manufacturers (KAM) warns that local producers struggle against cheaper imports and limited pricing power, while a Stanbic Bank Kenya PMI contraction in March 2026 signals broader economic caution." "article": "Kenya’s manufacturing sector is under pressure from rising costs, increased imports, and slowing demand, threatening the country’s industrialization goals. Data from the Kenya National Bureau of Statistics (KNBS) shows the sector’s GDP contribution fell to 7.1% in 2025, down from 7.3% in 2024, despite broader economic growth. Manufacturers cite high electricity tariffs, transport costs, and unstable tax policies—including frequent changes and levies on raw materials—as key challenges. The Kenya Association of Manufacturers (KAM) highlights that local producers face competition from cheaper imported goods, particularly in steel, plastics, textiles, and electronics, while struggling to pass on rising costs to consumers. Weakening consumer demand adds to the strain, with Stanbic Bank Kenya’s Purchasing Managers’ Index (PMI) contracting to 47.7 in March 2026, the first decline since August 2025. Economists attribute this to demand-side concerns and supply-side pressures, including the impact of the Middle East conflict. While imports threaten local production, policymakers argue they also supply essential machinery and industrial inputs. The focus remains on improving domestic competitiveness through lower costs and higher efficiency rather than restricting imports. KAM CEO Tobias Alando emphasizes that high operational costs and tax instability are major hurdles, forcing manufacturers to operate on thinner margins. The sector’s challenges reflect broader economic caution, with declining output and new orders across multiple industries.