Kenya risks losing Sh676 billion in exports annually over policy gaps and high costs

Kenya risks forfeiting billions of shillings in potential export revenue each year as domestic policy gaps and high production costs continue to weaken the country’s competitiveness in global markets.

According to a report by the Kenya Association of Manufacturers (KAM), the nation misses out on about Sh676 billion annually due to weak domestic value chains, poor trade logistics and policy inefficiencies.

The Kenya Export Competitiveness Study 2025 cites several setbacks, including high electricity costs, underdeveloped transport corridors, port bottlenecks and policy gaps, which leave rival countries to capture markets that Kenya could serve.

While merchandise exports have grown in nominal terms, they remain small relative to the country’s gross domestic product, and export competitiveness has declined by roughly 40 per cent over the last two decades.

“The report’s modelling shows that the annual opportunity cost of inaction on export competitiveness is already about Sh261.3 billion ($2.01 billion), accumulating to over Sh780 billion ($6 billion) in three years,” reads the report, compiled in partnership with the German development agency, GIZ.

KAM warns that about half of these cumulative losses risk becoming permanent as competitors consolidate their positions in markets traditionally or potentially served by Kenya.

“Conversely, resolving the most binding domestic constraints and making fuller use of existing and new trade windows could unlock on the order of Sh325 billion ($2.5 billion) in additional exports,” reads the report.

The study further highlights that addressing these challenges could create hundreds of thousands of jobs over the medium term and widen fiscal space through increased revenue and lower unit costs.

“Kenya faces a persistent and sizeable trade deficit, with exports covering about 41 per cent of imports and an unrealised export trade opportunity of roughly Sh676 billion ($5.2 billion) per year,” reads the report.

KAM points out that domestic value chains remain weak, with manufactured goods accounting for only about one-fifth of domestic exports. The report links export underperformance to fiscal and regulatory drag, industrial energy costs, poor trade logistics, import dependency and gaps in policy credibility.

Among the barriers identified are input tax traps and inverted duty structures, VAT refund delays, multiple fees and levies and overlapping regulatory mandates, which act as hidden taxes inflating every export price. The study also highlights ports, transport corridors and border bottlenecks, as well as underdeveloped cold chains, as additional challenges.

The report highlights that import dependence and scale gaps result from shallow local supply bases, sub-scale plants and missing upstream activities, which lock firms into high unit costs and limit local value addition.

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