Manufacturers want urgent regulatory reforms to cut cost of doing business

MANUFACTURERS in the country want the government to urgently implement reforms to address the rising cost of regulation and duplication of levies that are undermining local industries’ competitiveness.

These are adding to the production costs that have traditionally been pushed up by high cost of power and costly raw, amid lack of predictability which is hurting investments.

This emerged yesterday during the launch of the Regulatory Audit Report for the Manufacturing Sector by the Kenya Association of Manufacturers (KAM).

The study reveals that manufacturers face a complex regulatory environment characterised by multiple licensing requirements, overlapping mandates among regulatory agencies and rising compliance costs imposed at both national and county levels.

It identifies five core regulatory challenges that undermine the competitiveness and sustainability of Kenya’s manufacturing sector.

These are high and unpredictable taxation, overlapping regulatory mandates (multiple state agencies often share the same regulatory functions, creating a costly and time-consuming compliance environment), and inconsistent county-level regulations.

No county has adopted a tariff pricing policy since the requirement was introduced in 2012, resulting in fees and charges that are arbitrary and have grown without clear justification.

Other challenges are illicit trade and counterfeits, and excessive licensing requirements.

Businesses are required to obtain numerous permits and undergo repeated inspections from different agencies regulating similar operational areas, significantly increasing the cost of compliance.

Speaking during the launch, KAM chief executive Tobias Alando noted that regulatory inefficiencies, particularly the duplication of fees, levies and compliance requirements imposed at both national and county levels, have become a major structural constraint to industrial growth.

“The cumulative regulatory burden on manufacturers has grown significantly over time. In some manufacturing sectors, businesses must obtain more than 50 licences, permits, fees and charges from multiple regulatory agencies at both national and county levels,” Alando noted.

The pharmaceutical and Medical Equipment sector for instance requires up to 57 licences, the Chemical and Allied sector 53, and the Food and Beverage sector 51.

“These overlapping mandates and rising compliance costs divert resources away from investment and innovation, ultimately weakening Kenya’s competitiveness in regional and global markets,” he said.

He warned that unless regulatory processes are streamlined, Kenya risks losing ground in regional trade frameworks such as the African Continental Free Trade Area, East African Community, Comesa and other preferential trade arrangements including the EU–Kenya Economic Partnership Agreement and AGOA.

The report recommends harmonization of regulatory mandates among national and county agencies, improved fiscal predictability and the adoption of county tariff pricing policies to ensure that fees and levies reflect the actual cost of services provided.

It also calls for strengthened enforcement against illicit trade and the development of a national AfCFTA implementation strategy to support Kenyan manufacturers in accessing regional markets.

Investments, Trade and Industry CS Lee Kinyanjui acknowledged the regulatory challenges raised by manufacturers and reaffirmed the government’s commitment to strengthening Kenya’s industrial policy framework.

He noted that the government is currently developing an Industrial Policy aimed at addressing key structural challenges affecting the manufacturing sector, including fiscal policy, regulatory predictability and industrial competitiveness.

According to the CS, manufacturing remains the only sector with the strong potential to create sustainable jobs for the economy.

“The industrial policy which we are developing will set out solutions to many of the issues raised by manufacturers, including fiscal policy concerns and regulatory stability and predictability,” Kinyanjui said.

The report was developed with support from TradeMark Africa through funding from British High Commission in Kenya.

The study combined primary and secondary data collection methods.

It reviewed secondary information and data related to legal, regulatory and institutional framework with implications on manufacturing in Kenya while  primary data collection was undertaken through self-administered questionnaire that was shared to manufacturers.

Filled questionnaires were received from 35 respondents drawn from 11 key manufacturing subsectors in the country.

KAM which has also unveiled its Manufacturing Priority Agenda (2026) last month called for a review of power tariffs, removal of taxes on industrial inputs and creation of a predictable regulatory environment to make Kenya competitive.

As Kenya intensifies efforts to transform into an industrial-led economy and increase the manufacturing sector’s contribution to GDP from the current 7.3 per cent to 20 percent by 2030, deliberate policy action will be essential, KAM says.

This includes creating a stable regulatory environment, attracting long-term investment, strengthening governance frameworks and addressing structural challenges that hinder industrial growth.

On competitiveness, KAM is calling for strict adherence to the National Tax Policy which creates a predictable tax environment.