Billions at stake as Parliament braces for fierce debate on Local Content Law

By Felix Njenga

A major legislative battle is brewing in the National Assembly as Laikipia County MP Jane Kagiri prepares to table the Local Content Bill, 2025, a far-reaching proposal aimed at sealing massive financial drain from the Kenyan economy.

The proposed law, formally known as National Assembly Bill No. 45 of 2025, seeks to compel foreign-controlled firms operating in Kenya to source at least 60 per cent of their goods and services from local enterprises; a move proponents argue could fundamentally reshape the country’s economic landscape.

At the heart of the proposed legislation is a damning policy research report released last month, which paints a picture of systemic capital outflows embedded within corporate procurement structures.

While public discourse has traditionally focused on dividend repatriation, the report identifies a far larger and less visible channel of capital flight; operational expenditure routed through foreign affiliates.

An audit of leading Nairobi Securities Exchange listed companies, including Safaricom, East African Breweries Limited, and British American Tobacco Kenya, reveals that these firms collectively channel over KSh59 billion annually in service-related costs through offshore entities.

Safaricom alone accounts for KSh37.1 billion in such expenditures, largely tied to platform licensing agreements with its parent company, Vodafone.

East African Breweries Limited routes approximately KSh20.9 billion through distribution and maintenance arrangements linked to its global parent, Diageo, while BAT Kenya channels over KSh1 billion through international procurement networks.

According to the report, this structure is not incidental but deliberate. “Revenue is earned in Kenya, but services are contracted abroad, bypassing capable local firms,” it states, terming the system a “procurement architecture” designed for extraction.

The implications of this model are profound. Analysts estimate that Kenya loses between KSh182 billion and KSh214 billion annually in direct procurement spending alone due to foreign sourcing practices.

However, when factoring in the economic multiplier effect; where money retained locally circulates through wages, consumption, and investment, the total lost economic activity rises sharply to nearly KSh1 trillion each year, equivalent to roughly 8 percent of the country’s Gross Domestic Product.

Economists argue that redirecting even a portion of this expenditure domestically could significantly boost job creation, industrial growth, and tax revenues.

Beyond corporate procurement, the bill also takes aim at systemic leakages in infrastructure financing. Major national projects such as the Standard Gauge Railway and the Nairobi Expressway have historically been characterized by what analysts call a “Triple External Drain.”

This includes foreign-sourced financing, foreign contractors executing the projects, and insurance premiums paid to offshore reinsurers such as Munich Re and Swiss Re.

Since 2010, an estimated KSh25 billion in insurance premiums linked to infrastructure development has flowed out of Kenya. The proposed law seeks to retain such funds within the country by mandating local underwriting, a move expected to deepen Kenya’s financial and insurance sectors.

Opponents of the bill have raised concerns over the capacity of local firms to meet the demands of multinational corporations.

However, proponents counter this argument by pointing to KCB Group as a case study.

As a fully Kenyan-owned institution, KCB generates revenues comparable to multinational firms while sourcing the vast majority of its services locally; demonstrating, according to the report, that domestic capacity does exist.

Further evidence lies in the logistics sector, where Kenyan firms reportedly own up to 90 per cent of the national trucking fleet, yet continue to be sidelined in favor of foreign-linked procurement channels.

For Jane Kagiri and supporters of the bill, the proposed legislation is not an attack on foreign investment but a recalibration of economic participation.

“The money is already being generated within Kenya,” proponents argue.

“The question is whether it circulates locally or is systematically exported.”

As the bill heads to Parliament, lawmakers face a consequential decision; one that could redefine Kenya’s relationship with multinational corporations and determine whether the country can retain more of the wealth it generates.

With stakes running into trillions of shillings, the debate promises to be one of the most consequential economic policy battles in recent years.