Kenya's untapped export potential hits Sh670b mark

KAM Chairperson Jane Karuku. [David Gichuru, Standard]

An unfavourable domestic policy environment might be suffocating Kenya’s export growth, leaving more than Sh670 billion ($5.2 billion) on the table.

A report by the Kenya Association of Manufacturers (KAM) analysing the country’s export competitiveness cites several setbacks among them cost of power, poor trade logistics infrastructure and policy gaps.

The Kenya Export Competitiveness Study 2025 notes that while merchandise exports have grown in nominal terms, they still remain small relative to the country’s gross domestic product (GDP). This is as export competitiveness is estimated to have declined by about 40 per cent over the last 20 years, leaving other countries to capture the market share.

“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,” the report says.

It adds that roughly half of the cumulative loss is likely to become effectively permanent as competitors cement their foot in markets that were traditionally or potentially for 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,” the report states.

This would not only create hundreds of thousands of new jobs over the medium term but also widen the fiscal space through higher revenues 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 compiled in partnership with German development agency, GIZ. 

KAM explains that the country’s domestic value chains are weak with manufactured exports accounting for about one fifth of domestic exports. The manufacturers’ lobby notes the country’s export underperformance linking it to fiscal and regulatory drag, industrial energy cost penalty, trade logistics deficit, import dependency and policy credibility gaps.

According to the report, input tax traps and inverted duty structures, VAT refund delays, multiple fees and levies, and overlapping regulatory mandates act as hidden tax on every export price. The report also notes of port, transport corridor and border bottlenecks as well as underdeveloped cold chains as a challenge.

The challenge of import dependency and scale gaps has been linked to shallow local supply bases, sub-scale plants and missing upstream activities that lock firms into high unit costs and low local value-added.