In a significant policy shift aimed at revitalizing Kenya's agricultural export sector, the government has officially removed taxes on packaging materials used for agricultural products. This development was announced by Agriculture Cabinet Secretary Mutahi Kagwe during the North America Tea Conference held in South Carolina on September 6.

Previously, essential packaging materials like kraft liner and kraft paper were subject to a 25% excise duty under the 2025 Finance Bill. This had placed a heavy financial burden on horticultural exporters, inflating costs across the board—from avocados to cut flowers. The packaging cost of a 10kg avocado box had surged by 26 Kenyan shillings (US$0.20), while a flower box saw an increase of 50 shillings (US$0.37).

According to Kagwe, the tax removal is designed to bolster competitiveness and attract new investors. "By packaging at origin, we eliminate unnecessary costs, improve competitiveness, and strengthen Kenya's position in the global tea market," he stated. He further emphasized that exporters will now be able to comply with international packaging standards, offering direct-to-shelf products that enhance traceability and ultimately improve earnings for farmers.

“Increasing packaging costs are directly driving up the prices of Kenyan goods, including vital exports like avocados and other horticultural products,” warned the Kenya Association of Manufacturers (KAM). “This trend poses a serious risk to the country's share in the global market and its export competitiveness.”

The decision is expected to be a game-changer, especially for the tea, flower, and avocado industries, which have been under pressure due to rising global competition and logistical challenges. Notably, packaging accounts for 30% to 40% of retail prices in Kenya’s export-oriented agriculture, making it one of the most critical cost components in the value chain.

With the elimination of excise duties on packaging materials, exporters can now enjoy reduced production costs and increased profit margins. This policy not only enhances the global competitiveness of Kenyan products but also encourages investment in local value addition—a step forward for both economic growth and sustainability.

Moreover, this move aligns with Kenya's broader economic vision of becoming a regional hub for agro-processing and exports. By allowing products to be packaged locally to international standards, the country positions itself as a reliable source of high-quality, traceable goods for global retailers.

Stakeholders in the packaging and agricultural sectors have welcomed the reform. Many anticipate that it will revive investor confidence, promote local manufacturing of packaging materials, and ensure that Kenyan farmers get better value for their produce through enhanced market access and pricing power.

As the international demand for responsibly sourced and well-packaged agricultural products continues to rise, Kenya’s timely policy shift could serve as a blueprint for other export-dependent economies across Africa.