Manufacturing Decline Raises Concerns Over Kenya’s Industrial Growth
Although manufacturing output expanded by about 4.4 percent in 2024, analysts say the growth remains modest and vulnerable to high production costs, policy uncertainty and limited private investment.
By Suleiman Mbatiah
Kenya’s manufacturing sector is losing ground in the economy, raising concerns among lawmakers about weakening industrial growth and the country’s ability to expand exports and create jobs.
A report by the National Assembly’s Budget and Appropriations Committee reviewing the 2026/27 Budget Policy Statement shows the sector’s contribution to gross domestic product has been steadily shrinking in recent years.
“The Committee confirmed manufacturing has continuously declined from approximately 8 percent in 2022 to 6.5 percent by 2025,” the report states, highlighting a sustained erosion of the sector’s economic weight.
The decline places manufacturing well below the levels needed to drive structural economic transformation. The sector has long been viewed as central to job creation, export diversification and reducing dependence on raw commodity exports.
Separate data from the Economic Survey 2025 shows manufacturing accounted for about 7.2 percent of GDP in 2024, a sharp fall from nearly 12 percent recorded about a decade earlier.
World Bank estimates place the sector’s share at roughly 7.6 percent in 2023, also below the global manufacturing average of about 12 percent, underscoring Kenya’s prolonged industrial stagnation.
Although manufacturing output expanded by about 4.4 percent in 2024, analysts say the growth remains modest and vulnerable to high production costs, policy uncertainty and limited private investment.
Members of Parliament say the sector’s performance continues to trail overall economic growth, partly due to weak value-chain linkages, limited value addition and structural bottlenecks affecting industrial competitiveness.
The committee also warns that Kenya’s export structure remains heavily concentrated in primary agricultural commodities such as tea, coffee and horticulture products.
“The deficit widened from -1.1 percent of GDP in the third quarter of 2024 to -3.2 percent in the third quarter of 2025, reflecting stronger import demand relative to export growth,” the committee report states.
Trade data cited in the review shows export earnings declined during the first half of 2025, widening the country’s trade deficit to about Sh783.91 billion.
While tourism receipts and diaspora remittances continue to support foreign exchange inflows, lawmakers note that these inflows are insufficient to offset the widening merchandise trade imbalance.
Global assessments by the United Nations Conference on Trade and Development classify Kenya among commodity-dependent economies, where reliance on raw exports often slows industrial development and domestic value addition.
“The Committee observed that the share of manufacturing in GDP has been on a declining trend, which raises further concern about the realism of the current policy frameworks,” the report states.
Lawmakers say reversing the decline will require deeper structural reforms, including stronger industrial policy, lower energy costs, improved logistics and predictable taxation to attract investment into domestic manufacturing.
The committee also recommends expanding agro-processing, strengthening industrial parks and building local supply chains to reduce reliance on imports.
Without sustained reforms, Parliament warns the weakening manufacturing base could slow job creation and undermine Kenya’s long-term economic transformation plans under Vision 2030 and the Bottom-Up Economic Transformation Agenda.
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