Business lobby calls for urgent reforms to unlock private sector

Kenya’s private sector is straining under the weight of systemic challenges, according to a nationwide survey conducted by the Kenya National Chamber of Commerce and Industry (KNCCI).

Businesses are owed an estimated Sh626 billion in pending bills by both national and county governments—a crisis KNCCI warns is forcing closures, layoffs, and stalling investment.

“We have businesses that delivered goods and services over two years ago and are still waiting to be paid. This isn’t just a cash-flow issue, it’s a matter of survival,” said KNCCI president Eric Rutto.

To address the unpaid government debts, KNCCI is proposing the issuance of a special Treasury bond to fast-track payments.

This, he argues, would inject immediate liquidity into the economy and restore confidence in doing business with the government.

“Settling these debts will not only prevent business closures but also generate a tax return of up to 20 per cent. It’s a smart economic stimulus,” Rutto said during a meeting with President William Ruto.

Drawing from over 15,000 members in all 47 counties, KNCCI has compiled a compelling case for sweeping reforms to revive local businesses and reignite economic growth. Another major concern is the inconsistent and duplicative licensing regime across counties.

A business expanding beyond its home county must often acquire separate permits, pay additional advertising fees, and navigate divergent compliance rules.

KNCCI is calling for a Unified National Business Permit—a one-stop regulatory solution valid across all counties. Such a reform would cut costs, streamline compliance, and encourage inter-county trade.

Additionally, limited access to affordable credit continues to throttle the growth potential of micro, small, and medium-sized enterprises (MSMEs). Despite recent reforms, high interest rates and collateral demands remain insurmountable hurdles for many.

To counter this, KNCCI is proposing to scale up its Jiinue Growth Programme — a partnership with Mastercard Foundation that has empowered over 26,000 MSMEs with low-interest loans and capacity building.

A proposed Sh2 billion injection into the KNCCI Sacco would help reach more businesses.

KNCCI is also pushing for the modernisation and recapitalisation of institutions like Kenya Industrial Estates, Kenya Deposit Insurance Corporation (KIDC), and the Agricultural Finance Corporation to serve as engines for industrial and agricultural credit.

The private sector still battles poor roads, unreliable power, and inconsistent internet access and KNCCI advocates for competitive electricity rates (7–8 cents per kWh) to support industrial activity, especially in rural counties.

However, as many employers report a mismatch between graduate skills and market needs, particularly in technical fields, the traders lobby calls for closer collaboration between academia, vocational training centres, and employers.

Foreign firms continue to dominate public contracts, even for mid-sized projects. KNCCI is proposing an executive directive to reserve all public tenders below Sh 5 billion for Kenyan firms, which they say will build local capacity and retain capital within the country.

To support this, the Chamber recommends creating a Construction and Export Guarantee Bank to provide credit guarantees, bid security, and insurance for local contractors.

“This is about self-reliance. We can’t keep outsourcing our infrastructure development and expect to build a domestic industry,” KNCCI asserts.

KNCCI's new international offices, particularly in China, are already bearing fruit. Since its launch in late 2023, the Changsha office has facilitated over Sh665 million in export orders and attracted significant foreign direct investment.

“The China office is a game changer. Kenyan macadamia, tea, and coffee are now reaching Chinese consumers faster and in greater volumes,” said a KNCCI representative.

There are now plans to open additional offices in DRC, Europe, the Middle East, and the U.S. to scale this momentum.

KNCCI has formally requested that it be established as a statutory body, similar to chambers in Germany and Singapore. This would formalise its role in policy design, export promotion, and economic development.

The Chamber is also calling for a permanent National Public-Private Dialogue (PPD) Framework. This platform would institutionalise quarterly consultations between the government, county governors, and the private sector, giving business leaders a structured voice in shaping policy.

Despite the challenges, some macroeconomic indicators are improving. Inflation has dropped to a 17-year low of 2.7 per cent, the shilling has appreciated by nearly 20 per cent, and the fiscal deficit is narrowing.

Reforms such as the Electronic Government Procurement (e-GP) System, digitisation of over 5,000 government services, and the Hustler Fund providing unsecured loans at eight per cent interest have also improved the business climate incrementally.

Sector-specific progress is visible too—record-high tea exports (Sh180.5 billion in 2023), higher coffee cherry prices (Sh80–149 per kg), and the revitalisation of the sugar sector via the new Sugar Act.

Yet, KNCCI warns that these gains will only be sustainable if the deeper structural issues, like pending bills, credit access, and policy fragmentation, are addressed urgently. “Kenya’s economic engine is the private sector. If we don’t fix the fuel lines now, the engine may stall,” the Chamber says.

The Chamber also called on the government to acquire its underutilised Ufanisi House, which lies within Parliament’s security perimeter, to free up capital and expand member services.