Kenya to launch KSh 150B pharma hub in Murang’a, cutting imports and boosting regional drug manufacturing

In a landmark announcement poised to redefine Kenya’s healthcare and industrial landscape, President William Ruto has unveiled plans to establish a monumental KSh 150 billion (approximately $1.15 billion USD) pharmaceutical manufacturing hub in Murang’a County. This ambitious project, earmarked for land generously ceded by Del Monte, is a cornerstone of the government’s aggressive industrialization agenda, aimed at drastically reducing the nation’s reliance on imported medical supplies and positioning Kenya as a regional leader in pharmaceutical production and export.

Speaking at the inaugural Murang’a County International Investment Conference on June 13, 2025, President Ruto articulated a clear vision: to ensure that the vast majority of medical supplies for all Kenyan hospitals are produced domestically. This strategic shift is driven by a desire for self-sufficiency, enhanced national health security, and a robust economic transformation.

The Vision: Local Production for National Health Security

Kenya’s pharmaceutical sector, despite being the largest in the Common Market for the Eastern and Southern Africa (COMESA) region with over 30 manufacturing plants, remains heavily dependent on imports. According to the Kenya Medical Supplies Authority (KEMSA), approximately 62% of pharmaceuticals used in the country are currently imported, representing an annual expenditure of about KSh 150 billion. This import reliance creates significant vulnerabilities in supply chains, particularly during global health crises, and drains substantial foreign exchange. Indeed, in 2015, Kenya imported an estimated $572.53 million worth of pharmaceutical products while exporting only $71.2 million, highlighting the significant trade deficit in this crucial sector.

President Ruto’s administration is resolute in reversing this trend. The proposed Murang’a pharmaceutical manufacturing hub is designed to be a game-changer, transforming Kenya from a net importer to a significant producer and, eventually, a net exporter of health products. “This transformative partnership is not just about medicine, it is about sovereignty, security and sustainability in healthcare,” Health Cabinet Secretary Aden Duale recently stated in reference to similar initiatives. The aim is to build the necessary infrastructure and expertise to achieve this transition, making Kenya a regional hub for health product manufacturing and innovation. This also aligns with the broader goals of Universal Health Coverage (UHC), ensuring more affordable and accessible medicines for all Kenyans.

Murang’a’s Strategic Blueprint: The Del Monte Legacy and Industrial Parks

The selection of Murang’a County as the site for this monumental project is highly strategic. The hub will be constructed on a significant portion of the 1,300 acres of land ceded by Del Monte Kenya Ltd. to the county government. This land, located along the busy Thika-Kenol highway, offers excellent connectivity to the capital city, Nairobi, and other major transport arteries, which is crucial for logistics, distribution, and access to raw materials and markets.

The masterplan for the ceded land is comprehensive, with 713 acres specifically allocated for industrial development. This includes:

• 432 acres for an Export Processing Zone (EPZ): Dedicated to export-oriented manufacturing, benefiting from special tax incentives and simplified customs procedures.
• 69 acres for hazardous industries: Ensuring safe and regulated operations for specific types of manufacturing.
• 87 acres for packaging and assembly plants: Supporting the final stages of product preparation.
• 120 acres earmarked for processing industries: Focusing on value addition, particularly for Murang’a’s abundant agricultural produce like avocados, mangoes, tea, and coffee.

Beyond the pharmaceutical hub, this integrated industrial development will feature a commercial hub, primary school, modern market, and a public vehicle service terminus, creating a self-sustaining ecosystem designed to spur economic activity and provide essential services for the workforce and local community. The fact that the land has already been surveyed and subdivided expedites the development process, laying a solid foundation for rapid industrialization.

Murang’a Governor Irungu Kang’ata has been a vocal proponent of this initiative, highlighting the county’s commitment to transforming its economic potential. The vision is to leverage this newly available land to attract both local and international investors, establishing diverse industries that will create widespread job opportunities and generate substantial revenue for the county. The emphasis on attracting industries that add value to local produce is a direct response to the President’s call to develop strong and competitive value chains.

President Ruto’s Broader Industrialization Agenda: The Bottom-Up Economic Transformation

The pharmaceutical manufacturing hub in Murang’a is a key pillar of President William Ruto’s overarching economic blueprint: the Bottom-Up Economic Transformation Agenda (BETA). This agenda prioritizes industrialization, value addition, and job creation, with a strong focus on empowering counties as the primary drivers of economic growth. The President’s strategy aims to move beyond primary production, developing end-to-end value chains that will raise local incomes, improve food security, and position Kenyan counties as globally competitive exporters.

Under BETA, the government has already implemented several key economic reforms to stabilize the economy and foster a conducive investment environment. These include:

• Subsidized Fertilizer Programme: A cornerstone of agricultural reform, aimed at boosting food production and reducing living costs for farmers.
• Debt Management: Measures to manage public debt effectively, prioritizing concessional loans and renegotiating terms to maintain developmental momentum without fiscal crises.
• Investment in Local Industries: Encouraging investment in manufacturing and agro-processing to reduce import reliance and create jobs.
• Infrastructure Development: Significant investments in modernizing transportation (like the LAPSSET Corridor and Nairobi Expressway), energy access (Last Mile Connectivity Project, green energy initiatives like geothermal, wind, and solar), and communication networks.

President Ruto’s presence at the Murang’a Investment Conference, following similar engagements across other counties, underscores the government’s commitment to decentralizing economic growth and tapping into the unique comparative advantages of each region. He emphasized that the “real strength lies at the grassroots,” and that counties are poised to become “vibrant hubs of production, innovation, and enterprise.”

The Power of Special Economic Zones (SEZs)

A significant enabler for projects like the Murang’a pharmaceutical hub is the establishment of Special Economic Zones (SEZs). Kenya’s SEZ program, governed by the Special Economic Zones Act of 2015, is designed to attract both Foreign Direct Investments (FDIs) and domestic investments by providing a highly conducive business environment. These strategically planned areas offer world-class infrastructure and operate under liberal economic laws, providing a raft of attractive incentives:

Fiscal Incentives:

• Corporate Tax: Preferential rates of 10% for the first 10 years, 15% for the subsequent 10 years, and 30% thereafter. This is a significant reduction from the standard corporate tax rate.
• Withholding Tax: Reduced rates (typically 5%) on interest, management fees, and royalties, with dividends to non-residents often tax-exempt.
• Investment Deduction: 100% deduction for capital expenditures on buildings and machinery.
• VAT Exemptions: Zero-rated Value Added Tax on local supplies to SEZ enterprises.
• Customs Duty and Excise Duty Exemptions: On imported inputs and raw materials, significantly reducing production costs.
• Stamp Duty Exemption: On legal instruments related to operations within the SEZ.
• Property Transfers: Exempt from capital gains tax, enhancing financial appeal for investors.

Administrative Incentives:

• Streamlined Licensing: Operation under essentially one license issued by the Special Economic Zones Authority (SEZA), simplifying bureaucratic processes.
• Rapid Project Approval: Expedited approval and licensing processes.
• Onsite Customs: Facilitating efficient import-export logistics with onsite customs documentation and inspection.
• Unrestricted Investment: Allows for foreign currency accounts and offshore borrowing, facilitating easy repatriation of capital and profits.
• Work Permits: Entitlement to work permits for up to 20% of full-time employees, addressing potential skills gaps.

These incentives aim to reduce the cost of doing business, enhance competitiveness, and remove typical barriers to investment, making SEZs incredibly attractive to manufacturing entities, including pharmaceutical companies. Kenya plans to establish six such SEZs across the country, with Murang’a identified as a critical hub, especially for pharmaceuticals. This distributed approach aims to unlock potential in various regions, fostering balanced national development.

Global Market Access and Bilateral Engagements

A crucial aspect of Kenya’s industrialization drive is its strategy for accessing global markets. President Ruto emphasized the importance of bilateral talks with key economies like China and the United States to reduce or eliminate tariffs on Kenyan produce.

Partnership with China:

Kenya has been actively strengthening its economic ties with China. Recently, Kenya inked a KSh 65 billion (approximately $500 million USD) deal with China to build drug and vaccine factories by 2028. This comprehensive agreement goes beyond mere construction, including investment in advanced pharmaceutical infrastructure and crucial workforce development. The partnership is designed to establish domestic manufacturing zones equipped with Chinese medical technology, boosting local employment and strengthening health supply systems. This aligns with Kenya’s goal to become a net exporter of vaccines and health products and positions it as a regional medical production center. The Chinese delegation has committed to funding 500 full scholarships for Kenyan students in health sciences programs in China, alongside an annual exchange scheme for 20 Kenyan health professionals, signifying a long-term commitment to human capital development.

Trade with the United States:

Historically, Kenya has benefited from preferential trade terms with the United States under the African Growth and Opportunity Act (AGOA), which grants eligible sub-Saharan African countries duty-free access to the U.S. market for specified commodities. Pharmaceutical products, alongside textiles and coffee, have been among Kenya’s major exports to the U.S. under AGOA. For instance, in 2023, vaccines, blood, antisera, toxins, and cultures contributed significantly to Kenya’s exports to the U.S.

However, AGOA’s extension from 2015 is set to lapse in September 2025, creating uncertainty. Furthermore, new U.S. tariffs, including a 10% baseline duty on all imports, have been imposed, impacting Kenyan goods. While the U.S. administration temporarily suspended these new tariffs for 90 days from April 10, 2025, amid ongoing trade tensions with China, the looming expiration of AGOA and the broader shift towards protectionist measures necessitate a proactive strategy from Kenya. President Ruto’s discussions aim to secure continued preferential access and navigate these evolving trade landscapes to ensure Kenyan products, including those from the new pharmaceutical hub, remain competitive in the U.S. market. Diversifying export markets, including strengthening ties with the African Continental Free Trade Area (AfCFTA) and the European Union, is also a crucial part of Kenya’s long-term trade strategy.

Opportunities Beyond Pharmaceuticals in Murang’a

While the pharmaceutical hub is the flagship project, Governor Irungu Kang’ata’s presentation at the Murang’a County International Investment Conference showcased a diverse array of investment opportunities, underscoring the county’s holistic economic development plan. These opportunities are designed to tap into Murang’a’s agricultural strengths and address local needs while creating new revenue streams for the county:

• Murang’a Industrial Park: Beyond the pharmaceutical section, this park, with a total allocation of 500 acres for EPZ and 800 acres for SEZ (including the pharma hub), is designed to accommodate various manufacturing and processing industries, especially those adding value to local produce.
• Gikono Landfill: A project aimed at modernizing waste management, offering opportunities in recycling and waste-to-energy initiatives.
• Milk Processing Plant: Murang’a is a significant milk producer. A modern processing plant would add value to raw milk, create dairy products, and enhance farmer incomes.
• Mukurwe wa Nyagathanga Cultural Site: Investment opportunities in cultural tourism and related services.
• Mariira Farm Kenyatta Agricultural Training Centre: Potential for partnerships in agricultural research, training, and agribusiness development.
• County Aggregation and Industrial Park (CAIP): The state has already disbursed KSh 230 million to support this park, established in partnership with the county government, to facilitate aggregation of agricultural produce and initial processing.
• Small and Medium Enterprises (SMEs) Parks: Dedicated spaces to nurture and grow smaller businesses, fostering local entrepreneurship.
• Affordable Housing: The first phase of affordable housing units in Murang’a is scheduled for commissioning in August, providing accommodation for workers in the new industrial zones and reducing land fragmentation.

The Governor highlighted that these initiatives are geared towards creating new revenue streams for the county, thereby reducing the need to increase taxes on residents. The conference served as a vital platform to showcase these opportunities for potential partnerships with local and international investors.

Investor-Friendly Environment and Long-Term Commitments

Both President Ruto and Governor Kang’ata emphasized the government’s commitment to providing an investor-friendly environment. This includes streamlining regulations, improving infrastructure, ensuring stable policies, and fostering innovation to lower the cost of doing business. The County Assembly has already given its nod to the industrial park’s establishment, demonstrating strong local political will.

To secure long-term investments, interested parties will be offered 30-year leasehold agreements on the parcels of land they intend to develop. This provides a significant tenure, allowing businesses to plan for long-term operations and recoup their investments. The process for engaging investors involves filling out an expression of interest form, with vetting of applications expected to be completed by September. This transparent and structured approach aims to formalize deals efficiently, paving the way for construction and operation.

The government’s commitment to surveying and erecting beacons on the earmarked land, alongside planned programs for road development, water provision, and internet connectivity, further de-risks investments for potential manufacturers. The requirement for investors to employ 40% of their workforce locally underscores the project’s focus on inclusive economic growth and job creation for Murang’a residents.

The Broader Landscape: Challenges and Opportunities for Kenya’s Pharmaceutical Industry

While the Murang’a hub represents a monumental opportunity, Kenya’s pharmaceutical manufacturing sector faces both inherent strengths and persistent challenges.

Strengths:

• Strong Domestic Demand: A growing population, increasing awareness of preventive healthcare, and rising trends in both communicable and non-communicable diseases ensure a substantial local market for pharmaceuticals.
• Regional Market Access: Kenya’s membership in regional blocs like COMESA, EAC, and the broader AfCFTA provides preferential trade terms, enabling access to a wider East African and continental market.
• Regulatory Expertise: A core cadre of pharmaceutical manufacturing and regulatory expertise exists within the country.
• Political Will: Strong government support and strategic policy contexts are now actively pushing for the strengthening of local production.

Challenges:

• High Import Dependency: Despite local manufacturing, Kenya still imports around 62-70% of its drugs, and heavily relies on imported raw materials for local production. This leads to higher costs and supply chain vulnerabilities.
• Under-capacity Production: Local firms often operate below their full capacity due to various constraints.
• Cost of Utilities: High costs and inconsistent quality of electricity and water supply can increase operational expenses.
• Lack of Local Raw Materials and Equipment: The absence of local manufacturing for pharmaceutical raw materials, equipment, and spare parts necessitates costly imports.
• Skills Gap: While a core expertise exists, there’s a need for more specialized skills in industrial pharmacy, engineering, and business within the workforce.
• Regulatory Inefficiencies: Issues such as the inability to strictly enforce Good Manufacturing Practices (GMP) guidelines, presence of unregistered pharmacies, and delays in registration processes due to documentation skills gaps.
• High Cost of Capital: Access to affordable financing can be a barrier for local manufacturers.

The Murang’a pharmaceutical hub, especially through its SEZ framework, directly addresses many of these challenges by providing infrastructure, tax incentives, and a concerted effort to streamline regulatory processes and attract investment in critical areas. The focus on value chain development aims to eventually foster local production of raw materials and packaging.

Global Trends and Kenya’s Positioning

The global pharmaceutical supply chain has undergone significant transformations, particularly after recent global crises highlighted the vulnerabilities of highly centralized production. Trends include:

• Diversification and Nearshoring: Companies are increasingly diversifying their supplier base and exploring nearshoring or reshoring production to enhance resilience and reduce geopolitical risks. This creates opportunities for countries like Kenya to become alternative manufacturing hubs.
• Emphasis on Supply Chain Resilience: Proactive risk management, including AI-driven analytics for predicting disruptions and having multiple suppliers, is becoming standard practice.
• Digitalization and Traceability: Adoption of IoT-enabled tracking, blockchain for documentation, and AI for compliance checks to ensure product integrity and transparency.
• Sustainability and ESG: Growing pressure for greener logistics, reduced waste, and eco-friendly practices throughout the supply chain.

By investing heavily in local pharmaceutical manufacturing, establishing SEZs, and forging strategic bilateral partnerships, Kenya is not only addressing its immediate healthcare needs but also strategically positioning itself within these evolving global trends. The Murang’a hub could serve as a model for other African nations seeking to bolster their domestic pharmaceutical industries and contribute to a more diversified and resilient global medical supply chain. The coming years will reveal the full impact of this ambitious undertaking as Kenya strives to heal itself and, eventually, the region.

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Photo Source: Google

By: Montel Kamau

Serrari Financial Analyst

16th June, 2025