More than 30 manufacturing companies in Kenya have shut down production plants within a decade, indicating the impact of an uncompetitive tax and business environment, as well as competition from cheaper imports. Additionally, several firms have downsized operations to remain operational. This trend highlights the declining competitiveness of the sector, which plays a crucial role in addressing rising youth unemployment and creating jobs.
Key Points:
- The manufacturing sector in Kenya is struggling due to challenges such as taxation, increased power costs, difficulty in doing business, and stiff competition from imported finished goods.
- High electricity costs for factories in Kenya, which are significantly higher compared to neighboring countries, pose a substantial burden for manufacturers.
- The sectors most affected by factory closures or downsizing include food and beverages, automotive, metal and allied, textiles and apparel, leather, plastics, and paper industries.
- Major multinational companies, including Procter & Gamble, Reckitt & Benkiser, Colgate Palmolive, and others, have shifted to a distribution model, producing goods in low-cost manufacturing countries and then supplying Kenya through third parties.
- Domestic firms, including Sameer Africa, Athi River Mining, and others, have also been impacted, citing competition from imports, financial difficulties, and regulatory challenges.
Analysis: The shutdown of manufacturing plants in Kenya reflects serious challenges facing the sector. Issues like high power costs, taxation, and competition from imported goods are significant hurdles. The government’s commitment to boosting the manufacturing sector’s contribution to GDP is a positive step. However, addressing the current challenges and creating a favorable business environment will be crucial to achieving these ambitious targets. Additionally, investing in human capital and improving global competitiveness will be essential for the sector’s sustained growth.
