Kenya has distinguished herself as one of the leading producers of agricultural and horticultural produce. However, we are yet to become world leaders in these sectors.
How do we carve our niche and dominate global markets through production of exquisite quality produce, and ensuring that we derive maximum value from these products and their value chains?
Conquering global markets calls for forward and backward value chain integration, which will ensure that all stakeholders, from the farmer to the manufacturer and their service providers, earn good returns.
Attaining full value chain integration calls for sound actions, policy and regulatory support coupled with intentional initiatives to enhance market access.
Take packaging of agricultural and horticultural produce, a vital component of the production process, and market access for agricultural and horticultural produce. How can we build the packaging industry and ensure our products are globally competitive?
First, we must champion local sourcing by ensuring that inputs used to package our top exports are sourced locally. Kenya has a well-established packaging manufacturing industry, producing world class products for domestic and export markets ranging from paper, plastic, glass, among others.
The packaging sector supports export products, for instance, floriculture and horticulture, with avocados and flowers being among our top export products.
However, all good intentions to build and nurture a thriving manufacturing sector in Kenya are deterred by some facets of the business environment, which continue to hamper competitiveness and productivity.
For instance, in the Finance Act 2025, the government introduced excise duty at the rate of 25 percent or Sh50 per kg (whichever is higher) - 50 percent per kilogramme is equivalent to 55 percent excise duty on kraft paper, a critical raw material used in the manufacture of packaging.
Currently, Kenya does not produce kraft paper and relies on imports from various countries, including the East African Community which caters for 30 percent of the required volumes, to meet demand.
In three years, cumulative tax on kraft paper has increased from less than 50 percent to 111 percent, which includes – additional to 55 percent excise duty, 10 percent Export and Investment Promotion Levy, 25 percent Import Duty, 16 percent VAT, 2.5 percent Import Declaration Fee and 2 percent Railway Development Levy.
This is a lopsided policy that promotes imports rather than locally manufactured packaging. This places Kenya at a competitive disadvantage, because our neighbours in the EAC charge lower taxes.
Kenya will lose her competitiveness compared to competitors such as Ecuador, Columbia and Peru on key export products such as tea, coffee, avocado and flowers. The net effect is reduced demand for agricultural and horticultural produce from Kenya.
To promote local manufacturing, the government should introduce VAT exemption on inputs for the manufacture of packaging bags rather than on finished packaging.
Local sourcing is an effective strategy in today’s highly volatile business climate partly characterised by shifting geopolitics which leads to risks such as supply chain disruptions.
Hence, it is important for the government to put in place policies and regulations that encourage the purchase of locally produced goods and promote the Buy Kenya Build Kenya agenda.
Other drivers of increasing Kenya’s agricultural and horticultural exports are research and development to ensure that our products are of high value, which will lead to better returns for all players in the value chain.
Value chain integration will lead to better controls, pricing and enhance Kenya’s competitive edge in global markets.
Moreover, it also increases certainty of access to raw materials supply and improved manufacturing processes for better quality, increased efficiency and higher profit margins. Kenya must be intentional in the agriculture and horticulture sectors to derive maximum value from her products.
In doing so, we shall also be better positioned to understand global market dynamics and demands, as well as implement informed product development standards that are commensurate with various consumers worldwide.
A good example of a country that has successfully implemented this is China, a leading exporter of tea, which has heavily invested in research and development for value added tea and production of new products, a sharp contrast with Kenya which mostly exports bulk black tea.
Kenya can emulate China and diversify the tea it exports through value addition, innovation and production of a wide variety of tea.
The writer is the Chief Executive of Kenya Association of Manufacturers (KAM) and can be reached at [email protected].
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