{"id":843109,"date":"2025-04-23T21:12:01","date_gmt":"2025-04-24T02:12:01","guid":{"rendered":"https:\/\/newsycanuse.com\/index.php\/2025\/04\/23\/kenyan-ceos-say-rising-business-costs-and-tax-burden-threaten-economic-growth\/"},"modified":"2025-04-23T21:12:01","modified_gmt":"2025-04-24T02:12:01","slug":"kenyan-ceos-say-rising-business-costs-and-tax-burden-threaten-economic-growth","status":"publish","type":"post","link":"https:\/\/newsycanuse.com\/index.php\/2025\/04\/23\/kenyan-ceos-say-rising-business-costs-and-tax-burden-threaten-economic-growth\/","title":{"rendered":"Kenyan CEOs say rising business costs and tax burden threaten economic growth"},"content":{"rendered":"
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Kenyan businesses are struggling with rising taxes, high energy costs, and expensive credit\u2014challenges that CEOs say could stall investment and slow economic recovery in 2025. A Central Bank of Kenya (CBK) survey<\/a> of over 1,000 CEOs found that unpredictable taxation and regulatory instability make long-term planning difficult despite optimism about growth.<\/p>\n

While CEOs expressed confidence in Kenya\u2019s economic prospects, they warned that the cost of doing business is increasing at an unsustainable rate. Tax hikes, import duties, and fluctuating government policies have left companies struggling to stay competitive. Even though the CBK has cut interest rates three times, businesses say accessing affordable credit remains difficult, raising concerns that economic expansion could slow.<\/p>\n

According to the CBK, 63% of the surveyed CEOs represent privately owned domestic firms, with 52% overseeing companies with a turnover of over $11.5 million (KES 1 billion). The majority of the CEOs said frequent and abrupt tax changes make it difficult to plan and invest for the future.<\/p>\n

\u201cThere\u2019s no certainty around taxation. The government introduces new levies without consultation, and businesses are forced to react in real time,\u201d said Peter Mwaura, CEO of a Nairobi-based manufacturing firm. \u201cLast year, VAT on fuel increased from 8% to 16%, which doubled our logistics costs overnight. How do you make long-term investment decisions in this kind of environment?\u201d<\/p>\n

Over the past two years, Kenya\u2019s government has increased VAT on essential goods, raised import duties, and introduced new levies on mobile money transactions to boost revenue. While these measures are meant to reduce Kenya\u2019s public debt, the private sector argues they are weakening growth, stifling expansion, and eroding consumer spending power.<\/p>\n

\u201cStimulating growth requires a mix of tax incentives, better access to credit, and policies that support a developing economy like Kenya,\u201d said Steve Okoth, tax director at BDO East Africa. \u201cCountries like India and Malaysia offer tax holidays or reduced tax rates for new businesses to encourage investment. Kenya should consider similar incentives.\u201d<\/p>\n

Another key concern for businesses is access to affordable credit. The CBK has cut interest rates three times in the past year<\/a> to spur lending, but many firms report that borrowing remains difficult due to banks\u2019 cautious lending practices.<\/p>\n

\u201cThe CBK rate cuts haven\u2019t fully trickled down to businesses,\u201d said Susan Wanjiru, an economist at a Nairobi-based investment firm. \u201cBanks are still reluctant to lend to SMEs because of perceived risks, and those that qualify for loans are paying high interest rates despite the policy adjustments.\u201d<\/p>\n

Under pressure from regulators, Kenya\u2019s top banks\u2014including KCB Group, Equity Group, Cooperative Bank, I&M, and DTB\u2014have lowered interest rates by one to four percentage points. However, many businesses say these reductions are not enough to make borrowing affordable, especially for SMEs that form the backbone of Kenya\u2019s economy.<\/p>\n

Despite these challenges, most CEOs expect their companies to increase production in Q1 2025 compared to Q4 2024. To sustain growth, many are focusing on cost-cutting, diversifying operations, and exploring new markets.<\/p>\n

\u201cWe are optimistic about Kenya\u2019s long-term potential, but optimism alone won\u2019t fix the real problems businesses face,\u201d said Wanjiru. \u201cUnless the government provides tax certainty and ensures easier access to credit, economic recovery could be slower than expected.\u201d<\/p>\n

While Kenyan businesses remain resilient, CEOs warn that without clear, supportive policies, growth will be driven more by survival tactics than by genuine expansion.<\/p>\n

Kenyan business leaders have warned that rising operations costs and unpredictable taxation could weaken the country\u2019s economic growth and erode investors\u2019 confidence.<\/p>\n

A Central Bank of Kenya (CBK) survey of over 1,000 CEOs<\/a> revealed that while they expressed optimism about Kenya\u2019s economy, persistent problems like high energy costs, taxation uncertainties, and supply chain disruptions could derail the progress.\u00a0\u00a0<\/p>\n

\u201cThe January 2025 CEOs Survey showed higher growth prospects for the Kenyan economy over the next 12 months, driven by favourable weather conditions and macroeconomic stability expectations,\u201d\u00a0 the report said. \u201cHowever, firms reported the cost of doing business as a key concern.\u201d<\/p>\n

The surveyed CEOS were drawn from various sectors of the economy, including manufacturing, agriculture, tourism, ICT, and logistics. According to the CBK, 63% of the participants were CEOs in privately owned domestic companies, with 52% having a turnover of over $11.5 million (KES1 billion in 2024).\u00a0\u00a0<\/p>\n

The CEOs want the government to \u201ccreate certainty around taxation as there are abrupt changes in the regulatory framework and tax structure,\u201d making it difficult to plan and invest for the future.<\/p>\n

In the past two years, businesses have faced tax adjustments, including increased VAT and import duty on essential goods and new levies on money transfers. While the government has defended these measures as necessary to generate revenue for development, the private sector has maintained that they weaken growth, hinder expansion, and eat into consumer\u2019s disposable income.<\/p>\n

The CEOs also called for increased lending to businesses. Despite three consecutive CBK rate cuts, access to credit remains a significant challenge for most Kenyan companies.<\/p>\n

After months of pressure from the regulator, commercial banks have started cutting lending rates, which business leaders hope will unlock access to credit. Leading banks, including KCB Group, Equity Group, Cooperative Bank, I&M, and DTB, have cut interest rates by one to four percentage points<\/a>, with more expected in the coming weeks.<\/p>\n

\u201cStimulating growth requires a mix of tax incentives, funding mechanisms in the form of better access to credit, and supportive policies tailored to the needs of a developing economy like Kenya,\u201d said Steve Okoth, Tax Director at BDO East Africa.<\/p>\n

\u201cOffering tax holidays or reduced tax rates for innovative businesses during their first five years like in India and Malaysia can encourage growth and reinvestment.\u201d<\/p>\n

The CEOs expect production volumes in 2025 Q1 to be higher than 2024 Q4. The report said Kenyan companies prioritize diversification and cost optimization to sustain growth over the next three years.<\/p>\n<\/p><\/div>\n

Adonijah Ndege
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Kenyan businesses are struggling with rising taxes, high energy costs, and expensive credit\u2014challenges that CEOs say could stall investment and slow economic recovery in 2025. A Central Bank of Kenya (CBK) survey of over 1,000 CEOs found that unpredictable taxation and regulatory instability make long-term planning difficult despite optimism about growth. While CEOs expressed confidence<\/p>\n","protected":false},"author":1,"featured_media":843110,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[34851,1037],"tags":[20639,11725],"class_list":{"0":"post-843109","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-kenyan","8":"category-rising","9":"tag-kenyan","10":"tag-rising"},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/posts\/843109","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/comments?post=843109"}],"version-history":[{"count":0,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/posts\/843109\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/media\/843110"}],"wp:attachment":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/media?parent=843109"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/categories?post=843109"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/tags?post=843109"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}