January 29, 2026
Kenya’s government is pushing forward bold reforms to supercharge its agricultural export sector through the Finance Bill 2026. Set to be tabled in Parliament in March, the bill slashes input VAT from 16% to 8% for exporters, alongside other measures to cut costs and speed up cash flow.
The centerpiece is the halving of input value-added tax (VAT) to 8%, directly easing production costs for farmers and processors in export chains. This targets longstanding exporters who ship 100% of their output abroad, granting them tax treatment akin to Export Processing Zones (EPZs) and Special Economic Zones (SEZs), exempting VAT on local purchases like seeds, fertilizers, and machinery.
Additional relief includes scrapping excise duties and export promotion levies on essential packaging materials, such as kraft paper and boxes critical for horticulture shipments. Faster VAT refunds via an “offsetting” system will let exporters apply credits against future liabilities, ending chronic delays that tie up billions in working capital.
Agriculture Cabinet Secretary Mutahi Kagwe emphasized these changes during the launch of Flamingo Group Investments’ expansion in Naivasha. He revealed the government has already disbursed Sh470 million toward Flamingo’s Sh1.8 billion VAT refund backlog, with more payments imminent, signaling a commitment to immediate relief.
To tackle freight bottlenecks, the bill proposes ramping up air cargo capacity via Kenya Airways and partners like Turkish Airlines. This aims to handle surging demand from high-value perishables, ensuring quicker delivery to Europe, the Middle East, and beyond.
Regulatory levies will also be streamlined, slashing redundant charges that inflate export costs. Kagwe described this as a “permanent fix” for the exporter ecosystem, fostering competitiveness, liquidity, and reinvestment in Kenya.
Horticulture leads the pack, with cut flowers, vegetables, and fruits generating over Sh150 billion annually and employing millions. The reforms could unlock billions trapped in refunds, channeling funds back into farms, factories, and jobs, potentially expanding acreage and modernizing cold chains.
Tea and coffee exporters, burdened by similar VAT hurdles, stand to gain as well. Kenya’s tea, the world’s top auction seller, and premium Arabica coffee could see renewed growth amid global price volatility. Livestock chains, including chilled meats and live animals to the Middle East, will benefit from lower input costs and faster refunds.
Overall, these measures align with Kenya’s export-led growth strategy, positioning the nation as Africa’s horticultural powerhouse. Industry watchers predict a 10-15% uptick in export volumes within two years if enacted, bolstering foreign exchange reserves amid dollar shortages.
Kagwe framed the package as a response to long-standing pain points: refund delays averaging six months, high levies eroding margins, and logistics constraints capping growth. “When exporters get refunds on time, that money goes straight back into farms, factories, jobs, and new markets,” he stated.
This builds on prior interventions, like partial backlog clearances, but goes further by embedding structural fixes in law. For smallholder farmers supplying exporters (over 70% in horticulture) the ripple effects could mean steadier incomes and access to better inputs. If passed, the Finance Bill 2026 could inject fresh momentum into Kenya’s agriculture, which contributes 25% to GDP and supports 40% of the population.