By Pankaj Bedi
Kenya’s economic narrative today is one of energy and ambition. New investments are being announced, investor engagement is active, and business registrations remain strong, with over 130,000 new entities entering the system each year. The Government of Kenya deserves recognition for its visible efforts to position the country as a preferred investment destination across various sectors of the economy.
This is an important and positive foundation. However, beneath this momentum lies a quieter trend that deserves equal attention. Many existing businesses are facing increasing pressure. While new enterprises continue to enter the market, many operational companies, especially in manufacturing and the formal SME sector, are under strain. The challenge is not one single factor, but the combined effect of multiple cost layers. These include high financing costs, elevated energy tariffs, rising water and utility charges, increasing logistics costs, port congestion and inefficiencies, expanding regulatory requirements, increased instability and unpredictability of the operating environment and a growing number of taxes and levies at both national and county levels. At the same time, the evolving geopolitical tensions affecting key trade routes have increased freight costs, disrupted supply chains, and added to the uncertainty businesses must already navigate.
Recent trends also show that business closures are rising, even as new registrations remain high. While Kenya continues to see net growth in the number of registered businesses, this does not fully reflect the quality or sustainability of that growth. This raises an important question: are we placing enough focus on the survival and competitiveness of existing businesses, or are we overly focused on new entries? Because in reality, the two are not equal.
An established manufacturing business supports hundreds, sometimes thousands, of jobs. It builds export relationships and contributes significantly to the tax base. When such a business weakens or exits, the impact is immediate. By contrast, many new business registrations represent small or early-stage enterprises, often with limited employment and uncertain survival. Over time, this imbalance can quietly weaken the industrial base.
Manufacturing makes this challenge very clear. It is a globally competitive sector. Kenya competes with countries where the cost of finance is lower, energy is cheaper, logistics are more efficient, and policy environments are more stable. Even moderate cost differences, when combined, can significantly reduce competitiveness.
The effects are gradual but real. Businesses delay expansion, reduce investment, or shift focus. Over time, this can lead to slower export growth, fewer jobs, and reduced industrial depth.
At the same time, Kenya’s move toward stronger environmental and regulatory standards reflects a forward-looking commitment. This is necessary and aligned with global expectations. However, the pace and cost of compliance must be balanced to ensure that businesses remain viable as they adapt.
The issue, therefore, is not intent, but alignment. As Kenya’s economic policy clearly prioritizes export-led industrialization, there is a strong case for viewing export manufacturing through a global competitiveness lens. Businesses operating in the Export Processing Zones (EPZs) and Special Economic Zones (SEZs) compete internationally, not locally. They require a stable and predictable environment aligned with global benchmarks.
A ring-fenced policy approach for such sectors, with consistency in taxation, utilities, and regulatory costs, would enable them to compete on a level playing field. This is not about special treatment. It is about ensuring that Kenya remains competitive in global value chains. Such an approach would strengthen exports, increase foreign exchange earnings, support large-scale employment, and deepen industrial capability.
Looking ahead, a few strategic shifts can further strengthen Kenya’s trajectory.
First, policy decisions must be evaluated through a consolidated cost-of-doing business lens. At present, multiple agencies, departments, and levels of government act in silos, each adding costs and compliance requirements. Individually justified, these measures together can steadily erode competitiveness. Second, regular benchmarking with peer economies is essential to maintain competitiveness in globally traded sectors such as manufacturing. Third, stability and predictability in policy are critical to support long-term investment and expansion. Finally, stronger alignment between national and county frameworks will help reduce duplication and improve efficiency.
Above all, the focus must shift from how many businesses are created to how many competitive businesses endure, scale and thrive.
Kenya has the fundamentals to become a leading industrial and investment hub in the region. The next phase of growth will depend not only on attracting new businesses, but on enabling existing ones to survive, compete, and grow. Because sustainable economic progress is built not just on entry, but on resilience.
The writer is the Apparels Manufacturers and Exporters (EPZ) Sector Chair and a Board Member of Kenya Association of Manufacturers and can be reached at info@kam.co.ke.