Manufacturers raise concerns over controversial EPR fee

Kenya's manufacturing sector is increasingly vocal about the impact of the Extended Producer Responsibility (EPR) fee—a Sh150 (approximately €1.10) levy imposed on every imported item entering the country. While environmental regulations are essential for sustainable development, this particular implementation is creating friction across supply chains and raising questions about the cost-benefit trade-off for both local producers and international businesses.

The EPR framework, designed to shift waste management responsibility upstream to producers, is a globally recognised environmental mechanism. However, Kenya's execution has proven problematic. The flat Sh150 fee per import consignment—regardless of item category, size, or actual environmental impact—represents a blunt policy instrument that fails to differentiate between high-impact and low-impact goods. For manufacturers reliant on imported raw materials or components, these costs accumulate rapidly, effectively creating a hidden tariff on production inputs that doesn't align with the item's actual environmental footprint.

European manufacturers with operations or supply chains in Kenya face a particular challenge. The fee structure lacks transparency regarding how revenues are allocated toward waste management infrastructure. Without clear ring-fencing of EPR revenues for environmental projects—landfill remediation, recycling facilities, or circular economy initiatives—the fee risks being perceived as a tax rather than a genuine environmental investment. This perception undermines compliance incentives and creates regulatory uncertainty.

The timing of this levy is also significant. Kenya's manufacturing sector is already navigating post-pandemic supply chain disruptions, rising logistics costs, and currency volatility. The additional Sh150 per import transaction compounds operational pressures, particularly for small and medium-sized enterprises without economies of scale to absorb the cost. European SMEs operating regional distribution hubs in East Africa are similarly affected, as Kenya serves as a critical gateway for goods destined for the broader region.

Market implications are multifaceted. First, manufacturers may respond by consolidating shipments or reducing import frequency, potentially slowing inventory turnover and creating stock-outs. Second, the fee may accelerate the cost of locally produced alternatives, which could paradoxically increase reliance on smuggling routes circumventing official channels—undermining the EPR scheme's actual environmental objectives. Third, companies may relocate light manufacturing operations to neighbouring countries with more predictable regulatory environments, eroding Kenya's competitive advantage as a manufacturing hub.

For European investors, this develops a broader concern: policy unpredictability. Environmental regulations are non-negotiable, but their design matters enormously. A well-structured EPR system—with differentiated fees, transparent fund allocation, and stakeholder consultation—is attractive to responsible investors. A blunt, opaque levy is a red flag for operational risk.

The Kenyan government should consider recalibrating the fee structure to reflect actual environmental impact by product category, publishing detailed waste management spending reports, and establishing a formal dialogue with the manufacturing sector. Without these adjustments, the EPR fee risks becoming a barrier to investment rather than a catalyst for sustainability.