Only four in every 10 foreign companies operating in Kenya plan to reinvest and expand within the medium term to 2026, underlining the impact of rising energy tariffs, new taxes, and policy uncertainty on the majority of firms.
A freshly-published foreign investment survey report shows that 39.5 percent of foreign firms expressed an intention to broaden their operations in the three years starting 2023, while 25 percent said they would diversify, and 30 percent others hinted at maintaining their prevailing levels.
The survey was jointly conducted by the Kenya National Bureau of Statistics (KNBS), the Central Bank of Kenya (CBK), and the Kenya Investments Authority (KenInvest).
Kenya has, over the years, banked on its strategic location on the continent and a relatively advanced infrastructure network to woo foreign firms.
22.9 percent of the surveyed lot pointed to Kenya’s skilled labour force as the main draw, with access to regional markets and relative ease of doing business also emerging as prominent luring factors with 17.1 percent popularity scores each.
The African Continental Free Trade Area and the Pan-African Payment and Settlement System were further cited as aspects reinforcing Kenya’s appeal, as they give locally-based firms a wider African reach.
The CBK-KenInvest survey, however, established that corporates still held major concerns about Kenya’s business profile. The survey found that 70 percent of foreign companies rank electricity as their biggest cost, ahead of financial services (58.5 percent), immigration services (55.8 percent), and single business permits (51.8 percent).
“In addition, tax administration, corruption, political environment, and cost of electricity were considered as high areas of concern that require improvement,” reads the report in part.
A separate survey by the CBK revealed that Chief Executive Officers (CEOs) of corporations in Kenya worry about potential increases in input costs within the current quarter ending next month, fuelled by the recent increase in energy prices and the impact of higher global tariffs, which they said have raised the prices of key raw materials.
The CBK survey showed that 64 percent of the sampled CEOs anticipate a negative impact of the recent US trade tariff increases and policy changes through higher import costs for inputs and finished goods.
“Concerns on price developments in the future remain, following the recent increase in energy prices and the impact of higher global tariffs, which have impacted the prices of raw materials,” the CBK said in a report.
President Donald Trump imposed wide-ranging tariffs on trade with countries worldwide, including Kenya, which was hit by a 10percent charge on exports to the US market from August 1, 2025.
Signs of elevated factory prices have already displayed over the past few months. For example, recent data by the Kenya National Bureau of Statistics showed that the Producer Price Index (PPI) – which tracks the movement of production costs – stood at 138.16 at the close of June 2025, up from 137.95 at a corresponding time last year.
The complaints echo concerns raised by the Kenya Association of Manufacturers and the Kenya Private Sector Association in recent years, who flagged the high tariffs as well as tax unpredictability as eroding competitiveness and driving firms to consider shifting operations to cheaper markets.
The United Nations Conference of Trade and Development’s World Investment Report published last year showed that Kenya’s foreign direct investment (FDI) inflows fell by $93 million (about Sh12.1 billion) in 2023 to an estimated $1.504 billion (Sh194.9 billion) down from $1.597 billion (Sh206.9 billion) the year before.
The 5.85 percent dip in foreign investment deals came at a time when investors complained of a multiplicity of licences and permits at the national and county levels, amidst overlapping regulations.
To partly ease the bureaucracy, Kenya has been moving some business registration processes online, where foreigners are allowed to use their passports to register their ventures locally via the eCitizen platform.
They are then required to register the company and directors with the Kenya Revenue Authority for taxation.
