Kenya's next industrial revolution will be built on scale

Acquisition of East African Portland Cement Company by Amsons Group illustrates the shift in Kenya’s industrial sector. [File, Standard]

Kenya’s industrial sector is entering a new phase, one defined by consolidation, capital muscle, and the logic of economies of scale. The recent wave of mergers and acquisitions across industries, from cement to banking and logistics, signals a restructuring of how business is done in a highly competitive, cost-sensitive environment.

The ongoing acquisition of East African Portland Cement Company (EAPCC) by Amsons Group, coming just months after Amsons’ takeover of Bamburi Cement, perfectly illustrates this shift. The cement industry is capital-intensive, energy-hungry, and logistics-heavy. This combination punishes inefficiency and rewards size. Larger players produce cement at lower unit costs, spread their overheads across output, negotiate better supplier contracts, and invest in cleaner, more modern technology. Ultimately, consumers benefit the most from this.

By contrast, smaller players often struggle to stay afloat. EAPCC, once an industry leader, has in recent years grappled with dead stock, weak cash flow, and years without dividend payouts. Without the financial strength or production scale to compete effectively, such firms become vulnerable to acquisition or decline. Shareholders of EAPCC went 13 years without a dividend payout and finally received one this year, but that was only because of the sale of some land.

With heightened fiscal pressures, rising energy costs, and shifting regulatory policies reshaping Kenya’s business environment, smaller firms are being forced to scale down production or temporarily halt operations due to high electricity tariffs and the rising cost of imported inputs. In such an environment, only firms able to invest in energy-efficient technology, negotiate bulk power arrangements, or diversify their sourcing strategies can remain competitive. Larger companies can absorb these new costs more easily, whether it means meeting tougher emissions rules or adjusting to new tax measures.

For smaller or struggling manufacturers, these added pressures pile on top of rising energy costs and unpredictable market conditions.

This challenge goes far beyond the cement sector; it affects the entire manufacturing industry, where size increasingly determines who survives and who struggles. Consolidation, therefore, becomes not just a strategic option but a practical response to economic headwinds that hit smaller and struggling firms hardest. When done responsibly, it can help protect jobs, stabilise supply chains, and keep Kenya competitive.

At its core, economies of scale describe the cost advantage that arises when production becomes efficient. As output grows, the cost per unit falls. This creates a virtuous cycle; larger firms can reinvest profits into innovation, expand market share, and drive prices lower, which benefits the public, especially during times of economic hardship.

Of course, consolidation must be handled carefully. Without proper regulation, it can lead to market dominance and reduced consumer choice. But when managed within a competitive framework, mergers can rejuvenate industries that have long struggled to grow. They bring new capital, modern management, and operational efficiency, the very ingredients that Kenya’s industrial sector needs to thrive in a regional and global marketplace.

For Kenya, where infrastructure expansion and housing demand continue to rise, the creation of large, efficient industrial players is not just good for business; it’s an economic necessity.

The age of small, isolated operators is fading; the era of scale, integration, and strategic consolidation has arrived, and we should welcome it.

Dr Wanjagi is an academician and strategist passionate about East Africa’s economy