The Kenyan government’s decision to revise the Standards Levy has reignited debate over the balance between revenue collection and industrial sustainability. The changes, introduced through the Standards (Standards Levy) Order, 2025, seek to modernise how levies are collected from manufacturers. However, industry players and civil society groups argue that the new framework places an excessive financial burden on businesses and risks slowing economic growth.
Under the revised structure, manufacturers are required to pay a levy equivalent to 0.2 per cent of their monthly turnover, after excluding Value Added Tax, excise duty, and allowable discounts. All manufacturers with annual turnover above Sh5 million fall under this requirement. While the rate itself remains unchanged, the shift in calculation and the increased annual cap have significantly altered the financial impact on affected firms.
Supporters of the reform argue that the revised levy will strengthen Kenya’s quality assurance systems and improve regulatory capacity. Critics, however, view the changes as a revenue-driven measure that fails to consider the current challenges facing manufacturers. The debate has since moved to the courts, raising broader questions about fairness, predictability, and constitutional safeguards in economic policymaking.
Understanding the Standards Levy and Its Evolution
The Standards Levy was originally designed to support standardisation, product testing, certification, and consumer protection. These functions help ensure that goods produced locally meet safety and quality requirements and can compete in regional and international markets. For many years, manufacturers accepted the levy because it operated within predictable limits and was clearly linked to regulatory services.
Previously, the levy was charged at 0.2 per cent of the ex-factory price and capped at Sh400,000 per year. This cap provided certainty, allowing businesses to plan their costs regardless of sales fluctuations. The new framework replaces this model with a turnover-based system, while increasing the annual cap to Sh4 million for the first five years and Sh6 million thereafter.
Payments are now made monthly through the tax system and are due by the 20th day of the following month. Although firms with annual turnover below Sh5 million remain exempt, the revised approach exposes medium and large manufacturers to significantly higher and more variable costs, particularly in periods of high sales but low profitability.
Revenue Expectations and Economic Impact
The government projects that revenue from the Standards Levy will nearly double, rising from about Sh700 million annually to approximately Sh1.4 billion under the new framework. This increase is intended to strengthen regulatory capacity and expand testing and certification infrastructure.
However, manufacturers argue that the timing and scale of the increase could hurt an already struggling sector. Manufacturing currently contributes about 7.6 per cent to Kenya’s Gross Domestic Product, a figure that has remained below national targets for several years. Rising energy costs, high interest rates, and weak consumer demand have already squeezed profit margins across many industries.
The new levy ties payments to turnover instead of production value or profit. As a result, companies with high sales volumes pay more even when their margins remain thin. For example, a firm with annual turnover of Sh500 million can quickly approach the new cap and face much higher operating costs. Many manufacturers warn that they will pass these costs to consumers, pushing up prices and adding to inflationary pressure
The revised definition of “manufacturer” has also raised concern. The inclusion of non-traditional sectors under the levy framework has created uncertainty and fears of uneven application. Businesses argue that such expansion blurs regulatory boundaries and increases compliance risks.
Legal Challenge and Questions of Fairness
The revised levy has sparked a legal challenge. Petitioners say the government introduced the changes without proper consultation. They argue the move breaks long-standing regulatory expectations. They also say the sharp increase in payments is discriminatory, unreasonable, and unconstitutional.
At the core of the dispute is whether the levy still serves its original regulatory purpose or has evolved into a general revenue-raising tool. Petitioners argue that while revenue collection has increased, there is no clear evidence that manufacturers will receive proportional benefits in the form of improved services or infrastructure.
Courts play a critical role in resolving such disputes by examining the legality, proportionality, and procedural fairness of government actions. Judicial scrutiny serves as a safeguard against arbitrary policymaking and reinforces accountability in economic regulation.
Policy Design, Trust, and Long-Term Growth
Beyond the courtroom, the Standards Levy debate highlights the importance of policy design in fostering economic growth. Manufacturers depend on regulatory certainty to make long-term investment decisions. Sudden and steep policy changes disrupt planning and weaken investor confidence.
Sustainable regulation requires transparency, gradual implementation, and continuous engagement with affected stakeholders. When levies are predictable and clearly linked to service delivery, compliance improves and resistance declines. When policies appear rushed or punitive, trust erodes.
Kenya has set ambitious goals to raise the manufacturing sector’s contribution to GDP to 20 per cent in the coming years. Achieving this target will require a supportive regulatory environment that balances revenue needs with competitiveness and growth.
The Standards Levy reform debate underscores a timeless lesson in public policy. Regulation should strengthen industries, not strain them. Levies should fund quality and safety, not become sources of uncertainty. Ultimately, the success of such reforms depends on maintaining trust between the state and the private sector, and ensuring that economic regulation serves both public and industrial interests.
