Kenyan companies are fighting rising taxes, excessive power prices, and costly credit score—challenges that CEOs say may stall funding and gradual financial restoration in 2025. A Central Financial institution of Kenya (CBK) survey of over 1,000 CEOs discovered that unpredictable taxation and regulatory instability make long-term planning troublesome regardless of optimism about development.
Whereas CEOs expressed confidence in Kenya’s financial prospects, they warned that the price of doing enterprise is growing at an unsustainable charge. Tax hikes, import duties, and fluctuating authorities insurance policies have left firms struggling to remain aggressive. Despite the fact that the CBK has reduce rates of interest thrice, companies say accessing reasonably priced credit score stays troublesome, elevating issues that financial growth may gradual.
In keeping with the CBK, 63% of the surveyed CEOs symbolize privately owned home corporations, with 52% overseeing firms with a turnover of over $11.5 million (KES 1 billion). The vast majority of the CEOs stated frequent and abrupt tax modifications make it troublesome to plan and make investments for the longer term.
“There’s no certainty round taxation. The federal government introduces new levies with out session, and companies are pressured to react in actual time,” stated Peter Mwaura, CEO of a Nairobi-based manufacturing agency. “Final 12 months, VAT on gas elevated from 8% to 16%, which doubled our logistics prices in a single day. How do you make long-term funding choices in this type of atmosphere?”
Over the previous two years, Kenya’s authorities has elevated VAT on important items, raised import duties, and launched new levies on cellular cash transactions to spice up income. Whereas these measures are supposed to cut back Kenya’s public debt, the personal sector argues they’re weakening development, stifling growth, and eroding client spending energy.
“Stimulating development requires a mixture of tax incentives, higher entry to credit score, and insurance policies that assist a growing economic system like Kenya,” stated Steve Okoth, tax director at BDO East Africa. “International locations like India and Malaysia supply tax holidays or diminished tax charges for brand spanking new companies to encourage funding. Kenya ought to take into account related incentives.”
One other key concern for companies is entry to reasonably priced credit score. The CBK has reduce rates of interest thrice up to now 12 months to spur lending, however many corporations report that borrowing stays troublesome resulting from banks’ cautious lending practices.
“The CBK charge cuts haven’t absolutely trickled right down to companies,” stated Susan Wanjiru, an economist at a Nairobi-based funding agency. “Banks are nonetheless reluctant to lend to SMEs due to perceived dangers, and people who qualify for loans are paying excessive rates of interest regardless of the coverage changes.”
Underneath strain from regulators, Kenya’s prime banks—together with KCB Group, Fairness Group, Cooperative Financial institution, I&M, and DTB—have lowered rates of interest by one to 4 share factors. Nonetheless, many companies say these reductions should not sufficient to make borrowing reasonably priced, particularly for SMEs that kind the spine of Kenya’s economic system.
Regardless of these challenges, most CEOs anticipate their firms to extend manufacturing in Q1 2025 in comparison with This fall 2024. To maintain development, many are specializing in cost-cutting, diversifying operations, and exploring new markets.
“We’re optimistic about Kenya’s long-term potential, however optimism alone gained’t repair the actual issues companies face,” stated Wanjiru. “Until the federal government offers tax certainty and ensures simpler entry to credit score, financial restoration may very well be slower than anticipated.”
Whereas Kenyan companies stay resilient, CEOs warn that with out clear, supportive insurance policies, development shall be pushed extra by survival techniques than by real growth.
Kenyan enterprise leaders have warned that rising operations prices and unpredictable taxation may weaken the nation’s financial development and erode buyers’ confidence.
A Central Financial institution of Kenya (CBK) survey of over 1,000 CEOs revealed that whereas they expressed optimism about Kenya’s economic system, persistent issues like excessive power prices, taxation uncertainties, and provide chain disruptions may derail the progress.
“The January 2025 CEOs Survey confirmed increased development prospects for the Kenyan economic system over the subsequent 12 months, pushed by beneficial climate situations and macroeconomic stability expectations,” the report stated. “Nonetheless, corporations reported the price of doing enterprise as a key concern.”
The surveyed CEOS had been drawn from numerous sectors of the economic system, together with manufacturing, agriculture, tourism, ICT, and logistics. In keeping with the CBK, 63% of the individuals had been CEOs in privately owned home firms, with 52% having a turnover of over $11.5 million (KES1 billion in 2024).
The CEOs need the federal government to “create certainty round taxation as there are abrupt modifications within the regulatory framework and tax construction,” making it troublesome to plan and make investments for the longer term.
Previously two years, companies have confronted tax changes, together with elevated VAT and import obligation on important items and new levies on cash transfers. Whereas the federal government has defended these measures as essential to generate income for improvement, the personal sector has maintained that they weaken development, hinder growth, and eat into client’s disposable earnings.
The CEOs additionally referred to as for elevated lending to companies. Regardless of three consecutive CBK charge cuts, entry to credit score stays a big problem for many Kenyan firms.
After months of strain from the regulator, industrial banks have began slicing lending charges, which enterprise leaders hope will unlock entry to credit score. Main banks, together with KCB Group, Fairness Group, Cooperative Financial institution, I&M, and DTB, have reduce rates of interest by one to 4 share factors, with extra anticipated within the coming weeks.
“Stimulating development requires a mixture of tax incentives, funding mechanisms within the type of higher entry to credit score, and supportive insurance policies tailor-made to the wants of a growing economic system like Kenya,” stated Steve Okoth, Tax Director at BDO East Africa.
“Providing tax holidays or diminished tax charges for modern companies throughout their first 5 years like in India and Malaysia can encourage development and reinvestment.”
The CEOs anticipate manufacturing volumes in 2025 Q1 to be increased than 2024 This fall. The report stated Kenyan firms prioritize diversification and price optimization to maintain development over the subsequent three years.
