By Tobias Alando
Earlier this year, the Strait of Hormuz became the focus of global attention. For businesses, governments and financial markets, this was enough to unsettle global trade.
The Strait of Hormuz is a narrow stretch of water about 167 kilometers long, roughly the distance between Nairobi and Nakuru, measuring 33 kilometers at its narrowest point. Yet this passage serves as the only maritime gateway out of the Persian Gulf and carries close to a fifth of the world’s traded oil, alongside significant volumes of liquefied natural gas and industrial cargo destined for markets across Asia, Europe and Africa.
For Kenya, what was unfolding thousands of kilometers away quickly became a domestic economic issue. Kenya imports most of its refined petroleum products from Gulf countries, including the United Arab Emirates, Oman, Kuwait and Saudi Arabia. As tensions escalated, global oil prices reacted almost immediately. Fuel costs came under pressure, increasing transport costs, raising production expenses, and affecting the price of goods and services across the economy.
Manufacturing experienced the impact even more directly.
Kenya’s industries depend heavily on imported raw materials, including aluminium ingots, industrial chemicals, plastic, paper, glass and specialized manufacturing inputs. Many of these products either originate from the Gulf or pass through the Middle East before reaching Kenya. As shipping lines reviewed routes, vessels experienced delays, security protocols tightened and insurance costs increased, manufacturers found themselves navigating an increasingly uncertain operating environment.
A survey conducted by Kenya Association of Manufacturers during the disruption illustrated the scale of the challenge. More than 78.6% of manufacturers reported being affected. Delivery timelines stretched significantly, with 92.9% of firms experiencing delays as average lead times increased from 28 days to almost 60 days. At the same time, 35.7% of respondents reported that sea freight costs had risen by more than 30%.
The impact went well beyond shipping schedules. The rising cost of moving goods became another immediate consequence. A 20-foot container that previously cost between US$1,000 and US$2,000 to ship rose to between US$3,000 and more than US$4,000 on many routes. For 40-foot containers, freight charges that had averaged below US$2,000 climbed in some instances to as high as US$10,000. These increases were driven not only by longer or diverted routes, but by the growing risks associated with moving cargo through the region.
Shipping lines introduced war-risk surcharges and rerouted some vessels, while marine insurers sharply increased premiums and, in some cases, limited or withdrew cover altogether. Without insurance, cargo simply does not move, and where cover remained available, the added cost was passed through the supply chain. Suppliers also tightened payment terms, with many requiring full upfront payment before dispatch instead of extending credit, placing additional pressure on cash flow for Kenyan manufacturers, particularly small and medium-sized enterprises, at a time when production costs were rising and delivery schedules remained uncertain.
Exports also faced growing pressure. Kenya’s exports to Iran are valued at approximately US$48 million, largely consisting of tea worth US$44.8 million and coffee valued at US$1.25 million, accounting for about 96 per cent of exports to that market. More broadly, the Middle East accounts for roughly 18 per cent of Kenya’s exports, valued at approximately US$1.5 billion. Delays in shipping, higher freight charges and rising production costs reduced competitiveness and made it more difficult for exporters to meet delivery commitments in key markets.
The events left behind by the disruptions exposed a broader reality and offer important lessons that should not be overlooked. Kenya, like many African economies, remains heavily dependent on distant supply chains for key industrial inputs. While global trade has created new opportunities for manufacturers, it has also increased exposure to risks that lie well beyond our borders.
For years, the conversation around strengthening domestic manufacturing has featured prominently in policy discussions, industry forums and economic debates. The events surrounding the Strait of Hormuz have added fresh urgency to that conversation. They reinforced the need to invest in local production of industrial inputs, not only to support growth and create jobs, but also to give manufacturers greater stability when global supply chains come under pressure.
The experience also brings renewed focus to regional trade. The African Continental Free Trade Area offers an opportunity to build stronger regional value chains, increase sourcing within Africa and encourage greater investment in manufacturing across the continent. Africa will remain connected to global markets, but a stronger regional industrial base would reduce reliance on a handful of distant suppliers and strategic shipping routes.
Building that resilience will require deliberate policy choices. Reducing the Import Declaration Fee (IDF) and Railway Development Levy (RDL) on industrial inputs would ease production costs and improve competitiveness. Equally important is maintaining a predictable tax environment and continuing to invest in efficient ports, transport infrastructure and logistics systems that enable manufacturers to move goods more efficiently within Kenya and across the region.
These measures go beyond reducing the cost of doing business. They strengthen the foundations of Kenya’s manufacturing sector and improve its ability to withstand future disruptions. Preparing for future shocks should not begin when the next crisis emerges, but long before it does.
The writer is the Chief Executive of Kenya Association of Manufacturers and can be reached at [email protected].
