Kenya stands at a critical inflection point, armed with a powerful green energy arsenal but facing a manufacturing sector in retreat. As the continent marks Africa Industrialisation Day, the nation confronts a stark choice: harness its sustainable advantages to become a regional powerhouse or risk falling behind as economic borders open under the African Continental Free Trade Area (AfCFTA).

The challenge is urgent. The manufacturing sector's contribution to Kenya's GDP has alarmingly declined from 11.3% in 2010 to just 7.3% in 2024, according to figures from the Kenya Association of Manufacturers (KAM). This decline threatens job creation and long-term economic stability, placing immense pressure on policymakers to create an environment where industry can thrive.

Green Power, Faltering Factories

Kenya's energy profile presents a powerful competitive advantage. The country is a global leader in renewable energy, a fact underscored by the latest Energy and Petroleum Regulation Authority (EPRA) report. For the financial year ending in June 2025, renewables made up a staggering 80.17% of the country's power generation.

The breakdown of this green energy portfolio includes:

• Geothermal: 39.51%
• Hydropower: 24.21%
• Wind: 13.18%
• Utility-Scale Solar: 3.27%

This strong foundation supports the government's ambitious goal to generate 100% of its power from renewable sources by 2030. However, this clean energy surplus has not been enough to shield manufacturers from systemic problems, including high operational costs and unpredictable policies.

The Twin Threats: Illicit Trade and Red Tape

Analysts and industry players consistently point to two major brakes on industrial growth: a burdensome regulatory environment and the pervasive threat of illicit trade. Counterfeit and smuggled goods create an uneven playing field, robbing legitimate businesses of market share and the government of essential tax revenue. A recent report highlighted that illegal tax-evaded cigarettes alone now account for approximately 37% of the tobacco market, costing the nation over KES 9 billion in lost revenue annually. Overall, illicit trade is estimated to drain between KES 243 billion and KES 253 billion from the economy each year.

These financial losses directly impact the country's ability to invest in infrastructure and public services, creating a vicious cycle that further impedes industrial development. Tackling this requires a concerted, multi-agency effort to secure supply chains and protect both businesses and consumers.

Forging a Path Forward

Despite the hurdles, the path to a revitalised industrial sector is clear. The AfCFTA presents a monumental opportunity, creating a unified continental market that allows Kenyan firms to leverage economies of scale. Kenya's renewable energy credentials and diversified economy make it an attractive hub for companies looking for a stable and sustainable base to reach the wider African market.

To seize this opportunity, investment in human capital is crucial. Initiatives like the KOICA–GIZ TVET Project, a partnership between the Ministry of Education and international development agencies, are vital for equipping young Kenyans with the skills needed in modern manufacturing and green industries. By aligning technical training with the demands of a sustainable economy, Kenya can build a workforce that is ready for the future.

Ultimately, as analyst Mimi Mavuti argues, sustainable industrialisation is no longer an ambition but a necessity for enhancing Kenya's global competitiveness. The country's future prosperity hinges on its ability to create a stable, innovation-friendly environment where its green energy advantage can finally power a manufacturing renaissance.