Kenyan businesses are facing significant challenges, including rising taxes, high energy costs, and expensive credit, which could hinder investment and slow economic recovery in 2025, according to a survey by the Central Bank of Kenya (CBK). The survey, which polled over 1,000 CEOs, found that unpredictable taxation and regulatory instability are making long-term planning difficult, despite optimism about growth.

The CEOs expressed confidence in Kenya's economic prospects, but warned that the cost of doing business is increasing at an unsustainable rate. Tax hikes, import duties, and fluctuating government policies have left companies struggling to stay competitive. Even though the CBK has cut interest rates three times, businesses say accessing affordable credit remains difficult, raising concerns that economic expansion could slow.

According to the CBK, 63% of the surveyed CEOs represent privately owned domestic firms, with 52% overseeing companies with a turnover of over $11.5 million (KES 1 billion). The majority of the CEOs said frequent and abrupt tax changes make it difficult to plan and invest for the future. "There's no certainty around taxation. The government introduces new levies without consultation, and businesses are forced to react in real time," said Peter Mwaura, CEO of a Nairobi-based manufacturing firm.

Over the past two years, Kenya's government has increased VAT on essential goods, raised import duty, and introduced new levies on mobile money transactions to boost revenue. While these measures are meant to reduce Kenya's public debt, the private sector argues they are weakening growth, stifling expansion, and eroding consumer spending power. "Stimulating growth requires a mix of tax incentives, better access to credit, and policies that support a developing economy like Kenya," said Steve Okoth, tax director at BDO East Africa.

Another key concern for businesses is access to affordable credit. The CBK has cut interest rates three times in the past year to spur lending, but many firms report that borrowing remains difficult due to banks' cautious lending practices. "The CBK rate cuts haven't fully trickled down to businesses," said Susan Wanjiru, an economist at a Nairobi-based investment firm. "Banks are still reluctant to lend to SMEs because of perceived risks, and those that qualify for loans are paying high interest rates despite the policy adjustments."

Under pressure from regulators, Kenya's top banks—including KCB Group, Equity Group, Cooperative Bank, I&M, and DTB—have lowered interest rates by one to four percentage points. However, many businesses say these reductions are not enough to make borrowing affordable, especially for SMEs that form the backbone of Kenya's economy.

Despite these challenges, most CEOs expect their companies to increase production in Q1 2025 compared to Q4 2024. To sustain growth, many are focusing on cost-cutting, diversifying operations, and exploring new markets. "We are optimistic about Kenya's long-term potential, but optimism alone won't fix the real problems businesses face," said Wanjiru. "Unless the government provides tax certainty and ensures easier access to credit, economic recovery could be slower than expected."

In conclusion, Kenyan businesses are facing significant challenges, including rising taxes, high energy costs, and expensive credit. To stimulate growth and support a developing economy, the government needs to provide tax certainty, ensure easier access to credit, and implement policies that support businesses. Unless these challenges are addressed, economic recovery could be slower than expected, and Kenya's growth prospects may be hindered.