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Manufacturing Sector in Kenya

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The Government of Kenya in recognition of the role of private sector in spear heading industrialization has put in place a policy frame-work to foster the creation of a conducive environment for private sector participation in economic development.  Pursuant to this, the Government has designed suitable incentive packages and export promotion programmes to attract investment in manufacturing in Kenya to tap the larger markets of East African Community (EAC) and Common Market for Eastern and Southern Africa (COMESA).

These include Manufacturing Under Bond (MUB), Export Promotion Zones (EPZs), and Value Added Tax Remission. Other incentives enjoyed include tax holidays, exemption from duty on machinery, raw materials and intermediate inputs as well as removal of restrictions on foreign capital repatriation. In addition, Kenya has been designated as a beneficiary sub-Sahara African country to benefit from Africa Growth and Opportunity Act (AGOA). Under the AGOA initiative, Kenya’s manufactured products enjoy duty free market access into USA market. The Government has put in place measures to take full advantage of this arrangement. Both foreign
and local investors are encouraged to channel their resources towards the production of textile, leather, horticulture, fish, rubber, iron and steel products which can benefit under the AGOA scheme.
Kenya offers numerous investment opportunities in, agro-processing, agro-chemicals, chemicals, pharmaceutical, mining and mineral processing, metallurgy, engineering and construction industry.
Kenya has no generalized incentives schemes governed by an industrial development law. Certain fiscal incentives may be available on a case-by-case basis. To encourage industrial development the Government allows an investment allowance of 150% for investments located outside Nairobi, Mombasa, Kisumu, and Eldoret (35% in Nairobi and Mombasa) on plant, machinery, buildings and equipment in the first year of business. This is also applicable to the hotel industry. The allowances are given as tax deductions in the year of expenditure.
Depending on the earnings of the business, the investment allowance can produce a tax free  holiday of several years.
1. Development of Industrial and Manufacturing Zones
In order to harness the resources available in different parts of the country, region specific industrial and manufacturing clusters will be promoted. Necessary infrastructure and services will be provided to stimulate development of these clusters. Investment opportunities exist in development of Industrial Parks including Small and Medium Enterprises (SMEs) Parks and Export Processing Zones (EPZs) which offer a range of fiscal incentives that help in reducing start up and operational costs thereby making exporters internationally price competitive. The investor will recover his/her investments either through rent or selling the units.
Potential location for Industrial Parks include Nairobi due to its proximity to most important markets, Eldoret due to its location in high-potential agricultural areas and access to airport, Kisumu due to access to the regional markets and availability of raw materials such as limestone (Koru), chemicals (e.g. ethanol from sugar factories).
Special Economic Cluster (SEC) will be set up in Mombasa to allow for easy importation of necessary raw materials and exporting of finished goods. The project will include an agro industrial zone incorporating activities like blending and packing of fertilizers, tea and coffee and a consolidated meat and fish processing facility. The second SEC will be located in Kisumu to allow for access to regional markets and availability of limestone to support cement, chemicals and metal industries; agro-processing through increased horticultural production along the lakeshore.
2. Development of Small and Medium-Enterprises (SME) Parks
SME industrial parks in key urban centres will be developed. This will entail development of High Tech Parks which will be set up in Nairobi because of proximity to most important market, Eldoret because of location to high-potential agricultural area and access to airport, Mombasa, Kisumu and Nakuru.
3.  Micro and Small Enterprise (MSE) 2030 Initiative Project
The Government is in the process of developing centres of excellence for micro and small enterprises (MSEs) to promote transfer of technology, build capacity and market MSE products. The centres will be developed in each province, with specialization in given subsector of the MSEs. Due consideration will be made to the resource endowment in each region. Land has been set aside for MSEs operators across the country. Most of these sites are partially serviced and have great investment potential for private investors. To revolutionize and modernize the MSE sector, concerted efforts are required towards upgrading the following sub-sectors; agro-processing such as fruit processing, essential oil extraction, vegetable processing and cereal processing, animal products and fish processing, milk and meat processing, hides and skins and fish products. Other areas are chemical, electrical and electronics, building and construction, metal and metal works and motor vehicles accessories. These present major investment opportunities.
4.  Tyre Manufacturing Plant
The country currently has only one tyre manufacturing facility i.e. Firestone (E.A.) Limited. Another tyre manufacturing facility would be a feasible proposition.
5.  Agro-processing industry
The government has created an enabling environment for agro-processing by both local and international investors in urban and rural areas. Kenya is a member of regional trading blocs (i.e EAC and COMESA) and signatory to various trade protocols that enable Kenyan businesses participate in international trade competitively. It has a thriving private sector that can service any business and offers stiff competition to ensure high standards are maintained. Agro-processing is a lucrative business venture in Kenya in the processing of tropical fresh foods, fruits and vegetables. There is a guaranteed source of raw materials, cheap labour, unexploited local, regional and international markets for products and the ever growing demand for food stuffs.
(i). Processing of White refined Industrial sugar
Refining of industrial sugar is an area of great investment potential. It is a critical input in food, beverage and pharmaceutical sectors. Currently, it is imported. There is a large market for the inputs and the demand is growing.
(ii). Processing of Fruit Concentrates
Fruit processing is an industry, which is growing. Kenya produces only two type of concentrate namely pineapple and mango. The rest of concentrates are imported outside the EAC region. There are investment opportunities in the processing of other concentrates.
(iii). Vegetable Oil Processing Industry
In some areas in Kenya, oil seeds are grown commercially. This requires a very strong oil seed processing industry to utilize the products and to sustain local production of oilseed. This presents investment opportunities. Cashew nuts: Establishment of cashew nut processing factory at Kwale in Kenya’s South Coast. A facility with capacity to process up to 20,000 tons of raw nuts per year. Up to 85% of the output will be for export. An earlier facility at Kilifi (North Coast) has closed down due to mismanagement. This was  processing 15,000 tons of raw nuts per year. Soya Bean: There is huge potential for creation or joint ventures for processing of vegetable oil.
6.  Horticulture
There is ample scope of investing. Processed horticultural produce consists of a range of products. These include: Frozen: French beans, snow peas, Juice concentrates; Canned products: Baby corn, Juices, Jams, Marmalade, Pineapple Slices, Pickled Cucumbers, Mango Slices, etc; Dehydrated products: Cabbages, Onions, Carrots, etc. Most of the processed products have been canned,  ehydrated or preserved in brine water. However, the market trend is shifting from canned to frozen products. Facilities for freezing of popular fruits and vegetables for export by sea need to be introduced.
7. Development of Tanneries
Currently the country has 13 tanneries mostly processing 88% of hides and skins up to wet blue and 2% finished leather. The remaining 10% is exported in raw form. Most of the tanneries are located in Nairobi and its environs, far from the livestock rearing regions. The
finished leather is used to make shoes and other leather products locally. The main shoes factories produce approximately 1,000,000 pairs of shoes annually while the informal sector produces 3,000,000, making a total of 4,000,000 pairs of shoes. However, the national demand for shoes is estimated at 28,000,000 pairs per annum. Therefore, there is a demand gap of 24,000,000 shoes costing the nation Kshs. 12 billion and 10,000 lost jobs and revenue annually.
This scenario is replicated across the Eastern African region showing that the development of leather clusters will be able to serve not only Kenya but also the entire region. Furthermore, footwear constitutes the most valuable product under the leather value chain, but Kenya’s domestic production falls short in catering to the domestic as well as international demand for the same. The top four provinces in livestock production are Rift Valley, Eastern, Nyanza and North  Eastern in descending order. Rift Valley province alone accounts for 34.4 percent of beef cattle available in the country. (KIPPRA Study Report on Cluster Analysis for enhancing productivity
and Competitiveness of the Kenyan Economy 2010)
The Location of Kenya gives her a major comparative advantage in the raw materials sector needed for the leather sector which makes it in principle very appropriate for leather product exporting: All Kenya’s neighbours keep a healthy population of livestock with Ethiopia boasting the largest livestock production in Africa, and the 10th largest in the world. Development of the Garissa and Kajiado meat and leather industry requires approximately Kshs 7.112 billion of which 5 billion is for infrastructure development. The  proposal, therefore, seeks Kshs 2.0 billion from the Kenya Government / Development Partners to kick off .According to a report by the Kenya Leather Development Council, the potential of the leather sub sector in Kenya is worth approximately Kshs 100 billion, if the leather is processed and converted into finished products locally.
The government of Kenya therefore invites interested investors to set up tanneries in the country, especially in Garissa and Kajiado counties.

Hides, Skins and Leather industries: Various potential areas of interest have been identified and recommended due to wide collection, proximity to catchment areas and high yielding neighboring countries where the raw material can easily be sourced. These areas are;

Exciting Articles

  • – Eldoret (which can capture the whole of the North Rift Valley and western)
  • – Kitale (to capture raw materials from Western, Nyanza, North Rift Provinces and
  • Uganda)
  • – Kisumu (to capture raw materials from Western, Nyanza, Uganda and Tanzania)
  • – Mariakani (to capture raw materials from Coast, North Eastern and Tanzania)
  • – Sagana (to capture raw materials from Central province and Eastern)
  • – Athi River and Njiru (in Nairobi suburbs to capture the National flow).

In these areas there is land, assured raw material availability and also willing Kenyans who are ready to partner with potential investors. Sole investment opportunities are available in leather processing, footwear and leather products.
8. Textiles and Clothing Sector:
Potential to invest in garments manufacture for exports to US under the AGOA facility. Investments aimed at reviving and or rehabilitation of the closed textile mills ranging from spinning, weaving and garments making for local and export markets. Opportunities also exist for the revival and or rehabilitation of the cotton growing irrigation schemes. Potential exists for the establishment of a synthetic fibers’ plant to utilize the chemicals available at the petroleum refinery plant at Mombasa; Investment in dye manufacture, starch production and spare parts manufacture, which are currently imported; and Fabrics manufacture to replace
import dependence.
9. Chemicals industry
(i).  Manufacturing of fertilizers
Fertilizer is one of the major farming inputs in the country and it is widely used. Kenya and the Eastern African region do not have a fertilizer manufacturing plant. All fertilizers used in the region are imported.
Kenya’s annual fertilizer consumption is 532,000 Metric Tons. There is potential to increase this to over 1 million Metric Tons to increase agriculture productivity. A feasibility study is complete which proposes three types of plants that can manufacture 350,000 Metric Tons of fertilizer per year locally. The options include; CAN only, DAP only and a combination of CAN and DAP at an  nvestment cost of 278 million USD, 115 million USD and 393 million USD respectively.
Through the fertilizer cost reduction initiative identified under the Vision 2030, a fertilizer manufacturing and blending plant in Mombasa and Nakuru to serve the local and regional demand would be a feasible investment opportunity to be undertaken under Public-Private Partnership.
There is also potential in the following areas:-

  • Establishment of an inorganic fertilizer plant in Mombasa to manufacture DAP, CAN, NPK using imported intermediate inputs
  • Organic fertilizer manufacturing plant in Nairobi

Kenya is endowed with huge quantities of organic wastes which have not been fully utilized for enhanced agricultural production and business opportunities. The organic wastes from pit latrines and those from household and agricultural produce markets can be harnessed for recycling into organic fertilizers. Bat guano which can be incorporated during the recycling of organic wastes due to its high contents of nitrogen and phosphorous occurs as loose, fine brown powder in Rift Valley and Eastern Province. The plant is expected to produce basal, top dressing and organic fertilizers appropriate for Kenya and Eastern Africa Region.

  • Establishment of a bio-fertilizer plant in western Kenya (Mumias Sugar Co. Ltd) to utilize bagasse and wastes from timber industries.
  •   Production of nitrogen fixing micro organisms such as Rhizobium which can be used in leguminous plants to increase crop yields.

(ii).  Dyes for textiles industries
There are investment opportunities in the manufacture of dyes which are important for the textile industry.
(iii).  Value addition in Pyrethrum and other plant Value plants
Kenya produces a lot of pyrethrum which is exported in a semi-processed form or as dried flowers which fetch little money in the world market. Opportunities exist in processing the plant into a final product. In addition, there are opportunities for manufacturing of Insectides and fungicides using some imported ingredients mixing with locally available filler materials such as soapstone, limestone and clay for local and export market.
The processing of Neem tree extract as a source of a raw material should also be explored. The tree is being promoted by ICIPE in Kenya and it has been found that the extract has pesticidal properties. The Aloe Vera, which has been proved to have medicinal value, grows naturally in the arid and semi-arid areas of Kenya such as Baringo, the Coast, Laikipia, Nanyuki. Commercial farming of Aloe Vera is now practised in Laikipia and Baringo. However, most of the raw Aloe Vera is exported raw for processing to the EU and Asia.
All these plants offer a very promising area of investment since the extract are natural organic substance that are biodegradable and hence poses less danger to the environment due to less persistency.
10.  Manufacture of Cement
Currently Kenya has three cement plants namely: Bamburi Portland Cement Company (BPCC) in Mombasa, Kaloleni Lime Cement works Ltd in Kaloleni, Kilifi and East Africa, Portland Cement Company Ltd (EAPCC) at Athi River. The current total capacity for the three cement producers is far much below demand. This sector is identified as one of the core industrial sectors, with ample scope to boost the other sectors of the economy, especially in the building and construction industry. There is growing demand of cement from within and from outside the country from places such as Southern Sudan, Rwanda and Burundi. There is need for additional investment to cover the existing gap. New areas with investment opportunities in this sector are West Pokot, Koru (Kisumu), Athi River and Shimoni in Coast Province. The market for this sector is both local and also exports to EAC and COMESA countries.
11.  Sheet Glass Production
Currently Kenya has no sheet glass plants. There is growing demand for sheet glass due to increasing construction activities. Kenya has capacity to produce sheet glass because there is Soda Ash production at Lake Magadi. The market for this will be local, for EAC and also COMESA countries. The location for this industry which is viable is Magadi and Machakos.
12.  Salt, Sulphur, Lime and Cement:
Potential projects in these areas include the following:
Koru: Vast amount of limestone exists in Koru area of Western Kenya. Currently, only a small portion of the lime deposit in Koru is being exploited. The limestone deposits in Koru are contaminated with about 2% phosphate, which must be removed for quality cement manufacture.
The phosphate so obtained could be used as fertilizer directly or be blend with other elements to manufacture compound fertilizers. Thus the Koru limestone deposits could be harnessed to produce fertilizer.
Shimoni: The south coast of Kenya is endowed with abundant coral limestone deposits that can be harnessed to produce quality cement. There is a potential for a cement factory with a capacity of 600,000 tonnes per annum.
Other potential investment areas include using cement in the paving of the country’s roads. This would raise the demand for cement, hence the need for more cement plants.
13. Plastics and Rubber Products:
Investment opportunities exist in the following areas: Manufacture of quality electrical appliances like sockets, plugs and automotive plastics spares, so as to replace imports, and since the use of such items is on the increase; Manufacture of household wares like plastics kitchenware; Manufacture of petroleum based chemicals used in production of synthetic fibres for textile industry; Manufacture of plastics spares and housings for electronics industry.
14.  Motor vehicle components manufacturing
There are investment opportunities in manufacturing of motor vehicle components. There is a big market for vehicles in the EAC and COMESA regions.
15.  Iron and Steel Industry
Kenya has large quantities of iron and steel that could be exploited for commercial ventures. Large deposits are found in Kitui, Taita Taveta, Homa Bay and Kakamega. An Integrated Iron and Steel plant With Billet Casting Facility: The total requirement for billet
would be over 300,000 tons per annum by the year 2030. To meet these demands consideration should be given to the establishment of an integrated iron and steel plant with Billet Casting Facility to feed the existing rolling mills in the three East African countries. Billets will be supplied to downstream mills in Tanzania, Kenya and Uganda. Billets, blooms and finished products can be exported to Mauritius, Madagascar and neighboring countries which are COMESA countries like Mozambique and Zambia.
16.  Manufacture of Aluminium Cans
In Kenya and East Africa region, all cans for use in packaging of canned beers and soft drinks are imported. Consumption of canned beverages is becoming very popular. Export of Kenyan beers in bottles is being hampered by the limitations of glass, which include bulkiness and breakages. The production of beers and carbonated beverages in Kenya has grown tremendously over the years. Investors are invited to put up an aluminum canning plant, which can also cater for the needs of Uganda, Tanzania, Mauritius, Rwanda and Burundi.
17.  Component Manufacture
Design and Local Manufacture of components and parts for use in the steel plants with capacities of 10-30,000 tons per annum which are very popular in the COMESA region is lacking. The rate of growth of steel mills in the region has been steadily rising pointing to an
exciting business opportunity for whoever can supply such equipment with good spare part back up and after sales services. Currently these plants are being imported complete from India. There is no reason why at least some of this equipment cannot be produced locally.
18.  Manufacture of Ductile Iron rolls
There is only one country (Egypt) which is currently producing such rolls in the region. Gauging by the over 20 mills in the country and the East Africa region at large, a great deal of business opportunity exists in this field.
19. Production of High Strength Reinforcement Bars
A hot rolled square bar of mild steel, subsequently twisted when cold to produce the required strength is used almost exclusively in Kenya for concrete reinforcement purposes. This technology has completely been phased out in major steel companies in the world.
20.  Production of casting sand/Molding
A majority of foundry industries in the country still employ sand casting techniques. Sand casting material is available in the country but has not been fully exploited for commercial purposes. Such a project would meet casting sand requirement for the whole spectrum of foundry industries in the country. Along with foundry sand is the design and production of  dies and patterns. The import bill on spare-parts is still increasing due to inability of local plants to produce them. A study to take stock of both industrial and agricultural spare parts requirements would be necessary, as this would form the basis upon which to set up a center or an institute to start mass production of components and replacement parts.
Other Opportunities
• Forgings to manufacture wagon wheel, railway components, axles, etc
• Powder Metallurgy components for auto-spares
• Foundry and Shops for the manufacture of pumps and motors
21. Machine Tool Industry
There is a big market in Kenya for the production of the following products: Industrial machinery and spares for agriculture, transport industry and workshop, pumps for irrigation, domestic waste handling purposes, equipment and hand tools for building sector, metal and wood working machine tools. The government is looking for joint venture between local and foreign investors in the manufacture of high precision engineering capital goods; and industrial spares.
22. Manufacture of Medical Equipment
There are vast opportunities for investment in the manufacture of medical equipment including electro-medical equipment. Investment in such opportunities could be in form of assembly with the target market being EAC and COMESA.
(i). Pharmaceutical plants
Possible areas of investment in this area include:
• Setting up pharmaceutical manufacturing industries which can produce drugs, ARVs, and Vaccines;
• Provision of production of medical gases and oxygen generators plants;
• Production of Medical Equipment and Maintenance;
• Provision of specialized diagnostic services e.g., DNA tests, MRI, Nuclear/radiologist tests and open heart surgery in specific centers.
• Multipurpose chemical plant for bulk production of intermediate inputs such as paracetamol, aspirin, etc.
• Chemical plant to manufacture the anti-tuberculosis, anti-leprosy, antibiotic rifampicin from the penultimate state.
• Manufacture of Quinine by extraction from Cinchona bark and subsequent purification and synthesis to Quinine sulphate.
• Extraction of Hecogenin from sisal waste and synthesis of Betamethasone from Hecogenin.
Once fully explored, these opportunities will lead to production of adequate pharmaceuticals/non pharmaceuticals, medical equipment and specialized services for use in the country and for export to EAC and COMESA market.
(ii).  Raw materials for pharmaceutical industry
Considering majority of the inputs used for making pharmaceutical products are imported, there is a wide scope for investment in making these inputs available to EAC and COMESA market.
(iii). Manufacture of Male Latex Condoms and medical
The Government of Kenya welcomes with optimism any proposal that seeks to set up a factory to manufacture medical latex products including male latex condoms and gloves. The manufacturing facility should be a fully automated dipping line along with modern electronic testing and packing equipment with a modern laboratory. Kenya would then be the second
country in Africa to manufacture male latex condoms and therefore, this initiative would be most welcome. Currently, the Government is engaged in discussions on how to adequately provide incentives for this venture so as to ensure its successes and promote sustainable industrial development. This project would receive considerable attention within Government, as a project of national strategic importance. The Kenya National AIDS Strategic Plan III 2009 – 2013 identified condoms as the most effective tool to combat HIV/AIDS prevalence