NAIROBI, Kenya, May 19 — The Kenya Association of Manufacturers (KAM) has warned that surging fuel prices and ongoing public transport disruptions are threatening industrial productivity and pushing the economy toward deeper instability.
The warning came as a nationwide matatu strike entered its second day following the collapse of high-stakes talks between the government and public transport operators over rising diesel prices.
In a statement issued on Monday, KAM said the sharp increase in fuel prices announced by the Energy and Petroleum Regulatory Authority (EPRA) on Thursday, May 14, was already disrupting supply chains, raising production costs, and making daily commuting unaffordable for many workers.
The adjustment drove fuel prices to Sh214.25 for super petrol, Sh242.92 for diesel, and Sh152.78 for kerosene — the highest ever recorded in Kenya.
KAM noted that fuel prices had risen by an average of Sh80 between March and May despite the government’s earlier decision to reduce VAT on petroleum products from 16 per cent to 8 per cent in April.
“Fuel prices have a far-reaching impact across the economy. They directly influence the cost of transportation, food production, agriculture, manufacturing, and the movement of goods and services nationwide, ultimately affecting the cost of living and the competitiveness of businesses,” the association said.
The manufacturers’ lobby issued the warning hours after talks between government officials and matatu operators collapsed publicly at Transcom House in Nairobi.
Energy Cabinet Secretary Opiyo Wandayi had earlier announced what he described as progress in negotiations, saying the government intended to narrow the price gap between diesel and kerosene.
“We have come to an understanding that for prudence purposes… we are going to bridge the gap between the prices of diesel and kerosene,” Wandayi said, indicating diesel prices would reduce while kerosene prices would increase.
‘No deal’
However, matatu sector representatives later rejected the government’s position in full view of cameras, insisting no agreement had been reached.
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“With all due respect… we did not agree on anything,” one operators’ representative said after the meeting.
Operators said the government had only proposed a Sh10 reduction in diesel prices, far below their demand for a cut of between Sh30 and Sh46 per litre.
Association of Matatu Transport Owners chairperson Kushian Muchiri later clarified that the only area where consensus had been reached concerned efforts to curb fuel adulteration.
“On the issue of diesel prices, that one we have not agreed,” Muchiri said.
Matatu Owners Association president Albert Karagacha warned operators remained under severe financial strain.
“We are paying our loans… we’ve not gotten any solution,” he said, signalling the strike would continue.
The standoff paralysed transport operations in parts of Nairobi, Nakuru, and other towns on Monday, leaving thousands of commuters stranded as fares surged on routes still operating.
KAM said the disruptions were already affecting businesses and workers across the country.
“This has made daily commuting increasingly unaffordable for many Kenyans, particularly employees who depend on public transport to access their livelihoods,” the association warned.
Weakened efficiency
The manufacturers’ body said recent protests and work stoppages by public transport operators highlighted the growing severity of the economic situation.
“The nationwide protests and work stoppages by public transport operators, which left many citizens stranded and unable to report to work, further underscore the severity of the situation,” the statement read.
KAM cautioned that prolonged disruptions could trigger wider economic consequences by interrupting factory operations, delaying deliveries, and weakening supply chain efficiency.
“For manufacturers, these disruptions result in interrupted operations, delayed production schedules, supply chain inefficiencies, and reduced productivity, ultimately affecting overall economic performance,” the association added.
The association further warned that rising fuel prices would likely trigger higher consumer prices because petroleum products remain critical inputs across several industries.
“For the manufacturing sector, fuel is a critical input throughout the value chain from sourcing of raw materials to production and the distribution of finished goods,” KAM said.
The lobby noted that manufacturers rely heavily on Automotive Gas Oil (AGO), Industrial Diesel Oil (IDO), and Heavy Fuel Oil (HFO), while some industries use petroleum products directly as raw materials.
Manufacturers of products such as resins and shoe polish, KAM said, depend on kerosene in production, meaning recent increases in kerosene prices could directly raise retail costs.
KAM also warned that electricity prices could rise further as the fuel cost component in power tariffs is projected to increase from the current Sh3.47 per kilowatt hour.
Tax review
According to the association, taxes and levies currently account for approximately 46 percent of retail fuel prices, placing heavy pressure on businesses and households already grappling with high living costs.
“Currently, taxes and levies, including Excise Duty, VAT, the Road Maintenance Levy, Petroleum Development Levy, Railway Development Levy, and the Anti-Adulteration Levy, account for approximately 46 percent of retail fuel prices,” the statement said.
KAM has now urged the government to urgently review fuel-related taxes and levies to cushion households, stabilize supply chains, and protect local manufacturers from further economic strain.
“The Government should consider reviewing various fuel-related taxes and levies to ease pressure on the economy and protect the competitiveness and productivity of local manufacturers,” the association said.
“KAM remains committed to working with the Government and other stakeholders in identifying sustainable solutions to the challenges currently facing businesses, consumers, and the economy at large,” it added.
