Agriculture Cabinet Secretary Mutahi Kagwe has announced the removal of taxes on packaging materials for agricultural products as it bids to woo investors into the country.
Speaking at the North America Tea Conference in South Carolina on Saturday, September 6, Kagwe revealed the new reforms would be key in attracting investors and countries, particularly in the tea sector, to package tea in Kenya for export.
Kagwe cited that the move would make it cheaper and guarantee a higher value for both producers and buyers.
Furthermore, Kagwe asserted that it would allow Kenyan exporters to package tea at source according to international market specifications, delivering direct-to-shelf products with assured freshness, traceability, and better returns to farmers.
“By packaging at origin, we eliminate unnecessary costs, improve competitiveness, and strengthen Kenya’s position in the global tea market," he said.
Kenya & Packaging Materials
Currently, the government imposes a 25 per cent excise duty on packaging materials such as kraftliner and kraft paper. The tax, introduced in the 2025 Finance Bill, led to a sharp increase in the production costs of products such as avocados.
This move sparked concerns among exporters regarding the potential loss of access to international markets. In the move, the production cost of a 10kg avocado box rose by Ksh26 to Ksh182, and a flower box rose by Ksh50 to Ksh247.
Affected manufacturers and exporters of fresh produce warned of possible market losses as Kenyan exports would become less competitive due to these rising costs.
“Increasing packaging costs are directly driving up the prices of Kenyan goods, including vital exports like coffee, tea, avocados, and other horticultural products. This trend poses a serious risk to the country’s share in the global market and its export competitiveness,” stated the Kenya Association of Manufacturers (KAM) after the taxes were imposed.
In Kenya, packaging accounts for 30 to 40 percent of retail prices. Agricultural exports heavily depend on paper packaging, with corrugated cartons and kraft paper being essential components.
Kenya's Tea Exports
At the moment, Kenya mainly exports its tea through auctions such as the Mombasa Tea Auction, where exporters or buyers bid for lots. Tea is normally exported in standardised bulk units, usually 50kg paper sacks or fibreboard boxes lined with aluminium foil or polythene.
In 2024, revenues from tea exports reached Ksh181 billion. Kenya exported tea to 96 countries in 2024, with the top destinations being Pakistan with 206.27 million kgs (Sh70 billion), Egypt at 86.90 million kgs (Sh23.96 billion and the UK 57.44 million kgs (Sh17 billion).
In total, the country produced 598.47 million kgs in 2024, a 4.95 per cent increase from the previous year.
