Kenya’s manufacturing competitiveness faced significant pressure from elevated energy costs, with industrial electricity and diesel fuel prices surging 28% during 2025-2026. Manufacturing enterprises reported energy costs consuming 22-35% of operating budgets depending on industry sector. Cement, chemical, and food processing sectors suffered disproportionately as energy constituted major input costs. Manufacturing profit margins compressed despite stable product pricing, forcing operational adjustments including reduced production volumes or workforce rationalization. Energy-intensive export-oriented manufacturers in Export Processing Zones faced particular pressure affecting Kenya’s trade competitiveness.
Energy supply reliability concerns compounded cost challenges. Hydroelectric power generation faced capacity constraints during dry seasons, increasing reliance on costly diesel generation. Kenya Power and Lighting Company implemented rolling blackouts during peak demand periods, disrupting production schedules. Manufacturing enterprises invested in backup power systems including solar panels and diesel generators, increasing capital expenditures. Renewable energy adoption accelerated, with manufacturing companies installing rooftop solar systems and participating in power purchase agreements with renewable energy developers.
Mitigation strategies included energy efficiency investments and operational restructuring. Manufacturing facilities upgraded to efficient machinery and LED lighting reducing consumption. Process optimization minimized energy waste through improved production scheduling. Some manufacturers relocated operations or outsourced energy-intensive processes to countries with lower electricity costs. Energy management systems enabled monitoring and optimization of consumption patterns. Industry associations lobbied government for manufacturing-focused electricity tariff structures.
Government policy responses included renewable energy expansion and targeted manufacturing support. Kenya’s 100% renewable energy generation target by 2030 promised long-term cost relief through solar, wind, and geothermal capacity additions. Manufacturing preferential electricity tariffs under discussion aimed to restore competitiveness. Industrial park development included dedicated power infrastructure improving supply reliability. Energy cost stabilization and renewable energy availability offered medium-term solutions maintaining manufacturing sector viability and export competitiveness through 2030.
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