New bill compels foreign firms to source 60% supplies, 80% jobs locally

Foreign companies operating in the country will be required to source at least 60 per cent of their goods and services from local firms if a new bill is approved.

The Local Content Bill, 2025, also seeks to ensure that 80 per cent of the foreign firms’ workforce comprises Kenyan citizens.

The bill, sponsored by Laikipia Woman Representative Jane Kagiri, aims to compel firms to support the local industry.

It is geared towards creating jobs for the youth and ensuring that foreign investments translate into tangible benefits for the local economy.

It defines a foreign company as one incorporated outside Kenya, with most non-Kenyan shareholding and control vested outside the country.

Financial and insurance services, construction, transport, warehousing, logistics and security are affected.

“A foreign company shall provide technical and other capacity building support to local companies to ensure compliance with the relevant prescribed standards,” the bill reads in part.

One of the aims is to avoid tax evasion by foreign firms. Present laws provide for a 40 per cent cap.

In efforts to support agricultural sector growth, the bill stipulates that any foreign manufacturer requiring agricultural produce as raw materials must source all of it from Kenyan farmers.

“A foreign company undertaking any business in Kenya, which requires agricultural produce as raw materials for the manufacture of goods, shall source all the agricultural produce from Kenyan farmers,” the proposed law reads.

Kagiri said, “As it is presently, foreign companies import agricultural supplies from foreign countries despite there being an adequate supply of agricultural produce in Kenya.”

On employment, the legislation demands that foreign firms employ qualified and skilled Kenyan citizens in the management and all levels of the organisation.

Specifically, at least 80 per cent of a company's total workforce must be Kenyan, in compliance with constitutional provisions on fair labour practices and the right to fair remuneration.

To ensure compliance, the bill introduces stringent penalties for foreign firms. Those in violation will face a fine of not less than Sh100 million.

Chief Executive Officers of an offending company face the risk of serving a jail term of no less than one year.

“The penal provisions are intended to ensure compliance with the requirements of local content, unlike the current practice where companies are required to only submit local content plans indicating how they intend to give consideration to locally produced services and goods.”

The new law, if approved, would be implemented within a year of its enactment, “to allow foreign companies time to adjust their supply chains and human resource strategies”.

The provisions would not apply to existing contracts between a foreign company carrying out business in the country.

A supplier of goods or services existing before the law’s enactment would not be affected either.

Their contractual arrangements “shall continue in force for the unexpired period of the contracts”.

In the bill’s memorandum, Kagiri argues that the absence of a local content framework is a key inhibitor of local industry growth.

“This has resulted in unfair business practices that have rendered the local business uncompetitive,” the MP said.

"Additionally, the investments by foreign companies in Kenya have had minimal positive economic effect on the country due to profit repatriation," the MP notes.

She has underscored the urgency of a legal framework to ensure that foreign investments create local employment opportunities.

“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,” Kagiri said.

The bill also seeks to address issues of transfer pricing and align the country’s practices with international standards, such as those in the European Union, which gives priority to goods and services originating from within the bloc.

The Cabinet Secretary for Trade will be empowered to make regulations to operationalise the Act.

This would include the CS specifying other services to which the local content rules will apply and defining the relevant quality standards for local goods and services.