Kenyan manufacturers have been urged to shift their focus towards high-value goods for export as part of broader efforts to spur economic transformation, according to a new report by the Kenya Institute for Public Policy Research and Analysis (KIPPRA).
The 2025 Country Economic Transformation Outlook, released this week, paints a sobering picture of the country’s manufacturing sector, which remains heavily dependent on low-value goods and is primarily geared towards domestic and regional markets.
Despite the establishment of Export Processing Zones (EPZs) to boost production capacity, the report notes that product diversification and global market penetration remain limited.
“Kenya’s manufacturing activities are geographically concentrated in just a few counties, largely due to infrastructure gaps, limited market access, and a shortage of skilled labor,” the report states.
High operational costs, regulatory burdens, and expensive input prices continue to stifle product innovation and export competitiveness, particularly among small and medium enterprises (SMEs).
Digital innovation, while steadily advancing, is being undermined by an unfriendly business climate, inadequate access to financing, and limited reach to broader markets. Complex licensing requirements and inefficient regulatory systems further discourage export growth.
KIPPRA recommends a series of targeted policy interventions, including the creation of county-level one-stop shops for licensing micro, small, and medium-sized enterprises (MSMEs), reforms to the microfinance sector to enable access to low-interest loans, and the development of digital platforms to provide real-time business intelligence to entrepreneurs.
The report also shines a spotlight on structural labor challenges within the manufacturing sector.
Many firms operate without basic labor protections, such as safe working conditions, maternity and paternity leave, or anti-harassment policies. Female employees often face disproportionate challenges including delayed payments, cultural bias, and exploitative practices.
To address gender inequality in enterprise development, the report calls for expanded mentorship programs using role models, peer learning networks, dedicated financial support for women-led businesses, and temporary regulatory relief for women in the digital economy.
KIPPRA’s findings add fresh urgency to the ongoing national conversation around industrialization, job creation, and Kenya’s place in global value chains especially as the country seeks to expand its export base and boost economic resilience.
Written By Ian Maleve
