Foreign companies doing business in Kenya will be required to source at least 60 percent of their services, supplies and goods locally or risk punitive sanctions as the government moves to regulate the local content in proposed law to promote the local manufacturing industry.
In so doing, the Local Content Bill 2025 by Laikipia County Woman MP Jane Kagiri, currently before the National Assembly, seeks to provide a framework for the regulation of local content quotas in various sectors, promote local industry and sourcing of locally produced goods and services.
The Bill also seeks to promote the agricultural sector through sourcing of agricultural produce from Kenyan farmers and fostering economic growth through promotion of Foreign Direct Investments (FDIs), and reduce profit repatriation.
The Bill states that local content shall be subject to the services and goods meeting the locally prescribed standards and regulatory requirements.
However, where the locally available goods and services do not meet the relevant standards, the Bill makes it mandatory for a foreign company to provide technical and “other capacity building support to local companies to ensure compliance with the relevant prescribed standards.”
“A foreign company carrying out business in Kenya shall source at least 60 percent of locally manufactured goods and any of the services from local companies where goods and services meet the relevant prescribed standards,” reads clause three of the Bill.
Any existing contractual obligations as at the date of commencement of the Act, shall continue in force for the unexpired period of the contracts.
Offenders risk Sh100 million in fines in case of a body corporate and jail term of not less than a year in case of a CEO of the company.
Clause two of the Bill defines “local content” to mean “the added value brought to the Kenyan economy through procuring locally available services, goods, supplies and workforce.”
Local company is defined as a company incorporated and registered in Kenya under the Companies Act and is “fully owned by the Kenyan citizens or a majority of its shareholding is by Kenyan citizens.”
“A foreign company domiciled and operating in Kenya shall employ qualified and skilled Kenyan citizens in the management and all levels of the organization of the company,” the Bill proposes.
The National Assembly during a past session.
Photo credit: File I Nation Media Group
To achieve this, the Bill states; “a foreign company shall ensure that at least 80 percent of the workforce of the company are Kenyan citizens and comply with the constitutional provision on fair labour practices including the right to fair remuneration of workers.”
Clause four of the Bill states that the local content requirements shall apply to services that include financial, insurance, construction, transport, warehousing, logistics, and security, and any other services as the CS may determine.”
The lack of a local content framework has inhibited the growth of the local industry in key economic sectors as companies incorporated outside Kenya procure their goods and services, supplies and work force from foreign companies.
The flooding of the Kenyan market with foreign content has resulted in unfair business practices, rendering the local produce uncompetitive.
The investments by foreign companies in Kenya have also had minimal positive economic effect like profit repatriation, for a country that continues to grapple with youth unemployment.
“It is paramount that a legal framework that would foster job creation be put in place to ensure that foreign investments in Kenya create employment opportunities for the Kenyan youth,” says Ms Kagiri.
The Bill proposes that, in line with the government policy of promoting the agricultural sector and harnessing market opportunities, for the Kenyan farmers, “the legal framework is necessary to ensure that foreign companies source their agricultural supplies from Kenyan farmers.”
“The Bill, if enacted, shall hence promote the agricultural sector and improve the livelihoods of Kenyan farmers by guaranteeing markets for their produce,” says Ms Kagiri.
Currently, foreign companies import agricultural supplies from foreign countries despite there being an adequate supply of agricultural produce in the country.
The Bill further seeks to promote the use of locally manufactured goods and services from local companies, such as transport services, avoid tax evasion, and promote the use of locally available workforce.
This as it enhances the benefits harnessed from the supply chain while addressing issues related to transfer pricing as it aligns with international standards such as the European Union (EU), which gives priority to goods and services originating from the EU.
