Ruto’s push to shield local industries from unfair business practices takes shape as MPs pass Bill

By  David Mwere

Correspondent

Nation Media Group

What you need to know:

• The Bill provides the extent to which foreign companies operating in the country can source goods and services from the local market.
• The flooding of the Kenyan market with foreign content has resulted in unfair business practices, rendering the local produce uncompetitive.

President William Ruto’s push to shield local industries from unfair business practices is moving from roadside declarations to law after the National Assembly passed the Local Content Bill 2025.

The Bill, sponsored by Laikipia County Woman Representative Jane Kagiri, provides the extent to which foreign companies operating in the country can source goods and services from the local market.

Ms Kagiri’s Bill, now awaiting presidential assent, had originally prescribed that foreign companies doing business in the country source at least 60 per cent of their services, supplies and goods locally or risk punitive sanctions so as to promote the local manufacturing industry.

However, this was amended to establish a local content compliance committee consisting of Trade Principal Secretary, or designated representative, who shall be the chairperson, and PSs or designates for Labour, Finance, Attorney-General, to prescribe necessary sanctions.

The committee also includes three representatives of the private sector nominated by the body representing the largest number of institutions in the private sector- one representing foreign companies, local companies and one member with expertise in trade, commerce or law.

“A foreign company shall comply with the minimum local content requirements specified in the prescribed sector-specific localization plan for its respective sector,” the revised provision reads.

The compliance includes sourcing of locally manufactured goods and “any of the services from local companies, where the goods and services meet the relevant prescribed standards.”

“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.

This is in line with the government policy of promoting the “Buy Kenya, Build Kenya initiative,” while harnessing market opportunities for Kenyan citizens.

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 workforce 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, such as profit repatriation for a country that continues to grapple with youth unemployment.

Currently, foreign companies, for instance, import agricultural supplies from foreign countries despite there being adequate supply of agricultural produce in the country. 

To address this, the Bill seeks to provide a framework for regulation of local content quotas in various sectors, promote local industry and give priority to the sourcing of locally produced goods and services.

The Bill notes that a foreign company shall provide technical and other capacity building support to local companies “as specified in the prescribed sector-specific localization plan” to ensure compliance with the relevant prescribed standards.

The compliance committee’s functions shall, among others, include developing and periodically reviewing the minimum local content quotas and making recommendations to the Cabinet Secretary in charge of Trade for their inclusion in the sector-specific localization plans.

“The committee shall review and approve the local content master plans submitted under this Act, supervise, monitor and enforce compliance with the provisions of this Act and any other written law and ensure compliance with existing regional and international trade obligations,” the passed Bill reads.

The local content master plan, the Bill states, shall contain strategies through which the foreign company intends to achieve the prescribed local content requirements.

This shall include an employment plan, capacity-building and technology transfer plan, procurement plan for locally produced goods and services and an inclusive plan for ensuring the participation of women, youth, persons with disabilities and marginalized groups.

Others include a plan for partnership and collaboration with “Kenyan citizens and local companies,” the technical specifications, quality standards and projected quantities required for the supply of goods and the provision of services.

The local content requirements shall apply to financial, insurance, construction, transport, warehousing, logistics, security, agricultural, marketing and distribution services “and any other services as the CS may determine.”

Sourcing of local goods and services

The compliance committee shall be appointed by the Cabinet Secretary for Trade through a gazette notice to serve for a period of three years, renewable once.

The committee shall be mandated to maintain a public database of certified local suppliers and service providers to facilitate the sourcing of local goods and services and coordinate capacity building and technology transfer initiatives between foreign companies, local companies and Kenyan citizens.

“The compliance committee shall advise the CS on the granting of waivers or exemptions from local content requirements, receive, investigate and mediate complaints and disputes arising from the implementation of local content requirements,” reads the approved Bill.

The committee’s operations shall be supported through funds provided by the CS “for the proper conduct of its functions.” The CS shall also submit annual reports to parliament on the implementation of the local content and inclusive local content compliance.

The passage of the Bill requires that a foreign company carrying out business in Kenya shall comply with the local content requirements prescribed “and the sector-specific localization plan for its respective sector.”

This was included in the Bill on account that not all services and goods can be sourced locally.

This means that the CS in charge of Trade will prescribe, by a notice in the gazette, the minimum local content requirements for each sector specified under law and a phased implementation timeline specific to each sector.

In doing so, the CS shall consider the existing capacity of local companies to supply goods and services in a sector, the existing legal and regulatory framework applicable to the sector and the level of participation of Kenyan citizens in that sector.

The Bill also provides for checks where a sector is governed by existing legislation that already imposes local content obligations.

In such a scenario, “the CS shall ensure that any sector-specific schedule made under this section is consistent with and complementary to those obligations and in case of any conflict, the sector-specific legislation shall prevail to the extent of the inconsistency.”

A provision that had imposed a Sh100 million fine in case of a body corporate and a jail term of not less than a year in case of a CEO of the company was deleted.

This was nonetheless left to the compliance committee to decide.

In this case, the Bill proposes that where the compliance committee determines that a foreign company has failed to comply with the minimum local content requirements or the approved local content master plan, “the committee may impose an administrative sanction.”

This includes issuance of a notice to comply within 90 days, an administrative penalty as may be determined by the committee or a recommendation to the relevant licensing authority for the suspension or revocation of an operating license.

However, a foreign company shall not be held liable for an offence or be subject to an administrative sanction “where the noncompliance is occasioned by market constraints beyond the control of the company.”

These include the unavailability of locally produced goods that meet the prescribed quality standards or technical specifications and a failure of local suppliers to meet the required delivery capacity or timelines.

Market constraints may also include a proprietary formulation, concentrate or ingredient which is protected by intellectual property rights and is not manufactured in Kenya and any other justifiable market constraint as may be determined by the committee.

The Bill defines a “local company” to mean a company, body corporate or other legal entity incorporated, registered or otherwise established in Kenya in which more than 50 percent of its shares and voting rights are held, directly or indirectly, by Kenyan citizens.

It is also a company whose effective control is exercised by Kenyan citizens.

It also defines “local content” as the quantifiable value addition to the Kenyan economy through the supply of goods or provision of services by Kenyan citizens or local companies and includes local capacity building and development.

It also defines “effective control” as the power to exercise dominant influence or control over another company through majority shareholding, voting rights, committee appointment rights, contractual arrangements or otherwise.

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