My Opinion: The Bigger Problem May Be Kenya's Business Environment

There is another side to Kenya’s debate over foreign traders that deserves serious attention.

If Kenyan traders are struggling to compete, the government should not only ask who is taking their customers. It should also ask why local businesses are finding it increasingly difficult to survive and grow.

Is the challenge simply competition from foreign traders, or has the cost of doing business in Kenya become too high?

For many small businesses, the reality is a combination of taxes, import duties, licensing fees, compliance requirements, expensive credit, rent, transport costs and frequent regulatory changes. These costs can significantly reduce the margins of a small trader before they even make a profit.

Recent protests by traders over higher customs valuation benchmarks for consolidated imports further demonstrate the problem. Traders argued that increased import costs would put additional pressure on small businesses that rely on such shipments. The government, however, maintained that the measures were intended to address under-declaration and undervaluation of imports.

This raises a fundamental policy question: Can Kenyan businesses become more competitive simply by reducing the number of competitors, or does Kenya need to address the costs that make local businesses uncompetitive in the first place?

Make It Easier for Kenyans to Do Business

Removing some competitors from the market may offer short-term relief to local traders, but it cannot be the entire economic strategy.

If the government wants Kenyan businesses to succeed, it must also create an environment in which entrepreneurs can start, operate and expand businesses at a reasonable cost.

Policymakers should therefore examine some basic questions.

Could lower taxes help small businesses retain more of their earnings?

Could import procedures be simplified without compromising revenue collection?

Could licensing fees and other regulatory charges be reduced?

Could small businesses gain better access to affordable credit?

Could unnecessary compliance costs be eliminated?

Could Kenyan manufacturers receive stronger incentives to produce goods locally rather than relying heavily on imported finished products?

These are not questions about protecting foreign traders. They are questions about building a stronger Kenyan economy.

Kenya's National Tax Policy itself recognises the importance of a predictable and transparent tax environment capable of supporting investment, production, employment and expansion of the tax base.

That principle deserves greater attention.

The debate should therefore move beyond a simple choice between foreigners and Kenyans. The more important question is whether Kenya has created the economic conditions necessary for Kenyan-owned businesses to compete, grow and create jobs.

Lower Taxes Could Be Part of the Solution

One possible solution is to reduce the cost of operating a formal business.

A small trader facing high taxes while simultaneously dealing with expensive transport, rent, financing and regulatory requirements can struggle regardless of who their competitors are.

The government could consider targeted tax relief for micro and small enterprises, particularly businesses that create employment, invest in local production or operate within the formal economy.

Lower taxes do not necessarily mean abandoning government revenue.

A simpler and more predictable tax system could encourage more businesses to formalise, improve compliance and ultimately expand the tax base. The goal should be to make compliance affordable rather than creating conditions in which businesses are forced to choose between paying taxes and remaining viable.

Kenya's tax framework continues to evolve, but businesses need more than periodic changes. They need predictability.

An entrepreneur should be able to make a three- or five-year business plan without constantly worrying about unexpected changes in taxation, licensing requirements or import costs.

Kenya Needs Competition — But It Must Be Fair

There is nothing inherently wrong with regulating foreign participation in particular sectors of the economy.

There is also nothing inherently wrong with welcoming foreign investment.

The two principles can coexist.

Kenya can welcome large foreign investors while requiring them to comply with the law, employ local workers, transfer skills and contribute to the country's economic development.

At the same time, the government can establish clear rules for sectors where small-scale businesses provide livelihoods for millions of Kenyans.

What matters is that the rules are clear, fair and consistently enforced.

A foreign national operating a business without the necessary permits should be dealt with according to the law. But a legitimate foreign investor who complies with Kenyan regulations should not automatically be treated as a threat to local enterprise.

The same principle should apply to Kenyan businesses.

Enforcement, however, should not become a substitute for economic reform.

If a Kenyan trader is struggling because taxes, import costs, rent, transport and regulatory burdens consume most of their profit margin, removing a foreign competitor may provide temporary relief—but it does not address the underlying weakness.

The sustainable solution is to make Kenyan entrepreneurs stronger and more competitive.

What Policy Should Kenya Pursue?

A more sustainable approach could rest on three key pillars.

First, enforce the law fairly. Foreign nationals operating businesses without the required immigration status, work permits or business licences should be required to regularise their operations or face lawful enforcement.

Second, reduce the cost of doing business. Government should review taxes, import duties, licensing charges, access to credit and other regulatory barriers that make it unnecessarily expensive for small businesses to operate and expand.

Third, reward businesses that create local value. Whether a company is Kenyan-owned or foreign-owned, businesses that create jobs, manufacture locally, transfer skills and invest in communities should operate within a clear and predictable policy framework.

This approach would shift the conversation from who should leave the market to how Kenya can build stronger businesses.

The Real Test of Government Policy

Kenya does not need an economy built around excluding outsiders. It needs an economy in which Kenyan citizens have the tools, capital and policy environment necessary to compete.

The success of the government's approach should therefore not be measured simply by how many foreign traders leave the country.

The more important question is what happens afterward.

Will more Kenyan traders be operating profitable businesses?

Will more small enterprises grow into medium-sized companies?

Will businesses create more jobs?

Will more goods be manufactured locally?

Will entrepreneurs have access to affordable credit?

And will the tax system encourage businesses to formalise rather than push them into the informal economy?

Those are the measures that should ultimately determine whether the policy has worked.

The debate, therefore, should not simply be about whether foreigners should leave.

The deeper question is whether the government is creating the right policies to ensure that Kenyans can succeed in their own economy.

Protecting local businesses is important. But the strongest protection is not necessarily the removal of competition. It is creating an environment in which Kenyan entrepreneurs are competitive enough to succeed even when competition exists.