By Dean Shillaw
With its diversified economy, robust industrial base in East Africa, and strategic location as a regional trade hub, Kenya is uniquely positioned to capture a portion of the market shift as companies look for alternatives to China and other non-native trade markets.
This favourable positioning allows Kenya to attract competitive brands and encourage international manufacturers, producers, and investors in the textile industry to take advantage of first-mover benefits.
Kenya has preferential access to markets within the region, the European Union, the US, and Asia that can create a platform for locally produced goods for both local and international markets.
The country is actively enhancing its critical infrastructure to lower business costs, facilitate the movement of people and goods, boost competitiveness, and attract investment in key sectors such as manufacturing.
Kenya’s Vision 2030 prioritises sectors such as manufacturing which are expected to increase GDP growth to around 10% in the next few years.
When compared to other East African Community (EAC) countries and Ethiopia in terms of specific macroeconomic conditions (outlined below), Kenya stands out as the most attractive destination for investment and expansion.
Several factors contribute to this. As the seventh largest economy in Africa, Kenya’s GDP is projected to grow by 5.2% in 2025-2026. In the medium term, this growth is expected to be primarily driven by increased international investment and the implementation of recently signed trade agreements, including those under the European Union Economic Partnership Agreement and the African Continental Free Trade Area, according to the World Bank.
A recent report by RMB highlights that Kenya contributes nearly half of East Africa’s GDP, with an average growth rate of 4.8% over the five years leading up to 2019.
A steady influx of foreign direct investment (FDI) positions Kenya as an attractive investment destination. The country offers financial incentives, favourable economic policies, abundant raw materials, a skilled workforce, and advanced technology to draw in more FDI.
China currently accounts for a significant portion of FDI in Kenya, but the government's incentives have the potential to attract additional manufacturing investments, particularly from regions like the United Arab Emirates. By enhancing manufacturing FDI, Kenya can stimulate economic growth, create jobs, and help reduce poverty within the textile and apparel industry.
A young population is a significant advantage for a growing economy, particularly in sectors like textiles and apparel, which are both labour- and skill-intensive. Kenya has available workforce for the textile and apparel industry.
Since 2021, Kenya has become a preferred destination for many international tenants, despite a shortage of A-grade warehouse parks and facilities to meet the growing demands of manufacturers.
The country’s strong regulatory framework protects both property developers and tenants, leading to a surge in the development of modern warehouse parks to accommodate these rising needs.
Investors are increasingly drawn to environments where their interests are safeguarded by law.
An additional boon for manufacturers is the acceleration of Special Economic Zones (SEZs) and Export Processing Zones (EPZAs) which offer tax benefits and financial incentives.
Tenants are increasingly seeking high-quality, built-to-international-standards warehouse facilities with expansion capabilities, located in secure parks within Special Economic Zones (SEZs) and Export Processing Zones (EPZAs).
Additionally, investors are looking for facilities that provide competitive rental rates, low utility costs, and ideally sustainable and renewable energy solutions, along with backup water systems. Electricity is generated from geothermal and hydraulic sources, and Kenya offers attractive power rates within SEZs, enhancing its appeal for these investments.
Nairobi Gate Industrial Park is the first Special Economic Zone (SEZ) with a fully consolidated customs-control area in East Africa. Earlier this year, it launched a 100 000m2 Textile Park for international manufacturers and producers offering A-grade built-to-suit solutions based on tenant’s requirements.
The SEZ status provides several financial and non-financial benefits for licensed tenants which include corporate tax rate reductions from 10%-30%, zero-rated VAT, reduced withholding taxes, preferential import duties, excise duty and import declaration fees, a 100% investment deduction allowance and lower business permit fees.
The status, accessibility, and efficiency of infrastructure are vital for the movement of raw materials and finished products. Unlike landlocked countries such as Ethiopia, Rwanda, and Uganda, Kenya benefits from access to Mombasa, the leading port in East Africa. The country boasts high-quality infrastructure across its international and domestic airports, highways, road systems, and ports.
Kenya’s strong performance in these critical areas enhances its appeal to investors seeking stability, competitive costs, and growth opportunities in the region. As Kenya is poised to become Africa’s textile and apparel hub, the SEZ status and accessibility of Nairobi Gate make it an attractive location for international investors, potentially serving as a catalyst for market growth.
Dean Shillaw, Managing Director at Impact North, a company formed by unlisted SA property investment group Improvon, and private equity investor Actis.