Jitters as Ruto clampdown rattles businesses

Businesses and investors are growing uneasy over President William Ruto’s recent directives affecting foreign traders and Tata Chemicals Magadi. [Courtesy, Standard]

For decades, the script during every election cycle in Kenya has always been the same for businesses. Pause any major plans; wait and see the outcome first. As a result, economic growth during the electioneering period has been at a slower rate compared to previous years.

And now, President William Ruto has pushed this political uncertainty a notch higher with his utterances. Twice in one week, Dr Ruto has rattled investor confidence, initially ordering a crackdown on foreigners who are seen to be taking away opportunities for Kenyans and further ordering Tata Chemicals Magadi to park and leave.

On Thursday, President Ruto directed Tata Chemicals to exit Kenya, noting that the government would no longer allow one company to monopolise operations in Magadi at the expense of residents and the wider economy.

He had argued that Tata and its predecessors had been exploitative and extractive and had failed to deliver adequate benefits to Kenyans, particularly the residents of Kajiado.

He said the companies that will be contracted for mining tenders at Lake Magadi will be required to establish processing and manufacturing facilities for value addition in Kenya.

Despite the uproar that followed, the President said the decision to kick out the company was irreversible.

“For nearly 100 years, Kenyans, especially the people of Kajiado, have not received their fair share of benefits from the minerals extracted from their land,” he said, even as he told off critics opposed to the termination of Tata Chemicals' contract, accusing them of defending arrangements that do not serve the interests of Kenyans.

“You have no clarity on the Magadi issue. You talk about the rule of law, but no rule of law undermines the interests of Kenyans and the people of Kajiado.”

Following the directive, the President tried to explain himself when he toured Samburu on Sunday, noting that kicking out Tata was part of a plan that would see Kenya no longer export raw materials for processing abroad. Instead, the President said, the Government is pushing for local value addition here at home in order to create jobs and retain more wealth in the country.

He explained that Kenya is moving away from an extractive model in the exploitation of minerals, oil and other resources because the country earns little from its resources while foreign companies reap most of the benefits.

“It is now the policy of the Government that Kenya will no longer be exporting raw materials. All our raw materials, including soda ash from Lake Magadi, are going to be added value in Kenya," he said.

Earlier that week, he had ordered a crackdown on foreigners doing businesses that he felt should be firmly in the hands of Kenyans.

“We have not built investor confidence for hawkers to come to Kenya. The investor confidence we have built is for investors, not hawkers and small traders. We should not be misunderstood,” said the President when he addressed local traders at State House.

But these utterances have not gone over well with various stakeholders.

While economic analysts say the President might have valid concerns, his approach of kicking out a multinational and ordering a crackdown on small businesses run by foreigners has been termed scary for investors and also reckless coming from the Head of State. They further noted that it does not inspire confidence and, if anything, it is eroding the little confidence that is left, coming at a time when several major firms have exited Kenya citing toxic business conditions.

Dr Patrick Muinde, an economist, termed Ruto’s remarks unfortunate, noting that being at the helm, he should be steering the process of ensuring that there are adequate measures to enable business to add value to the local resources.

“You don't build an economy in a vacuum. Right now, the immediate priority is protecting what jobs are available, which are very few and scattered. You cannot just wake up one morning and say you want to do value addition in an economic system that does not have structures and that has not been supporting that,” he said.

“If you want to do value addition on local products and commodities, it is not done through roadside declaration. It has to be a structured policy intervention, well-targeted, well-reasoned, mapped out on sectors and also to attract capital.”

Muinde added that countries that have successfully undertaken value addition, including Singapore, opened up their economies to investors, and when they sorted out the challenges of unemployment, they started building up the quality of jobs through value addition.

“You cannot talk about value addition when you have nothing in the first place,” he said, noting that Kenya should be holding on to the few jobs that are there rather than kicking out investors, many of whom are already fleeing due to the tough business environment.

“This is coming at a time when we have lost quite a few companies. We have so many multinationals that have left Kenya in the last two to three years. They have all been talking about the same thing: a toxic business environment. Now, when you start encroaching on labour issues, it becomes extremely dangerous.”

Muinde says the unfortunate statement should never be accepted as the official policy. "Unfortunately, it's coming from the head of the policymakers.”

He also dismissed arguments that Kenyans are being displaced by traders coming from neighbouring countries.

“Kenyans are by nature competitive. It is unlikely that somebody coming from another East African country will deny a Kenyan an opportunity on merit,” he said, adding that this aggressiveness is what has also created a vacuum of sorts that is now an opportunity for traders from neighbouring countries to offer certain goods and services at price points that Kenyan traders would not be able to.

“If you develop your country, that automatically upgrades your people and certain jobs become unattractive to them. That is one of the costs of development. That is based on data and human development indices,” he said, adding that in kicking out this cadre of traders, Kenya should also consider what could befall Kenyans working in other EAC countries.

“If you chase their people, they are likely going to retaliate. And a retaliation might not be taken in the same way across the countries.”

“We are part of the East African Community, where labour mobility is already allowed, and countries allow the use of identification cards to move from one place to another. This directive breaches progress towards realising the objectives of EAC.”

Additionally, Muinde said, the directive did not consider the historical context of how some of the people from EAC ended up in Kenya.

Some of the people, he contends, were running away from conflict in their home countries and could be at risk of persecution on return.

“Some have lived in Kenya for many years, and some were born here... how do you give such a blanket statement, especially when you don't have a clear policy on immigration?” he asked.

There are also concerns that Kenya could be opening itself to unenviable challenges, including diplomatic fallout with countries whose citizens and companies are facing expulsion.

Stephen Mutoro, secretary general of the Consumers Federation of Kenya (Cofek), noted that while the move could be populist as he tries to get Kenyans to vote for him during next year's polls, his directives might have far bigger consequences.

“Tata Chemicals Magadi may still stay on or secure huge compensation to the detriment of the taxpayer,” he said, further noting that Kenyans who have been seeking medical services in India might suffer as the country reiterates.

“There were better options of asking them out of Kenya, including a diplomatic negotiation, not a presidential decree at a public rally, which is solely meant for winning the 2027 elections.” 

While Ruto had noted that Tata had failed the people of Kajiado County, there is a feeling that both the county and national governments had not fared any better, as they have left companies such as Tata to provide critical services, which are beyond their contractual obligations.

Lawyer Donald Kipkorir noted that Tata employed thousands but also supplied water and provided health services to hundreds of thousands.

He also queried whether there is adequate infrastructure such as water, electricity and roads that would support a processing plant in Magadi. “Tata, a dual British and Indian company, is one of the biggest companies in the world. What message will we be sending to similar multinational conglomerates?” he posed.

Prof Sam Nyandemo, an economist, told Financial Standard last week that there could be valid concerns among local traders and small businesses and that Kenya should consider putting in place certain limits as to the level of access it gives foreigners to the local economy.

"Principally, even though Kenya is an open market economy, we should not allow hawkers from foreign countries to come and start hawking in Kenya, including the Chinese. This does not promote the informal sector more rationally," he said, commenting on Ruto’s directive to the Ministry of Trade and Industry to crack down on foreigners who hawk and run small retail businesses in the country, but also cautioned that the flipside to this was the possibility of high cost of goods and services.

"Once the locals are protected, they will start misbehaving by hiking prices, and that will not allow local consumers to access most of these goods from the cheapest source."

Businesses have, over the years, been calling for Kenya to mute the political noise that has, over the years, proved costly to the economy and usually results in a slowdown in the economy.

This has been seen over the years. In 2022, the economy grew by a modest 4.8 per cent compared to a growth rate of 7.6 per cent in 2021. It was the case in 2017, when growth slowed down to 4.9 per cent from 5.9 per cent in 2016. But perhaps the biggest hit, not just for the economy but for the country, was in 2008. While the economy appeared to have defied the election jitters in 2007 to post a 7.1 per cent growth, the chaos that erupted after the contested December elections saw the country nearly grind to a halt, with the economy registering a 1.6 per cent growth in 2008.

“We must move beyond temporary interventions and pursue long-term structural reforms that create a predictable, fair, and enabling business environment,” said KNCCI in its 2026 annual business barometer.

For over 100 years, Tata Chemicals Magadi and its predecessor have been extracting trona, the raw material for the production of soda ash, from Lake Magadi in what has been a calm and profitable venture, although characterised by grumblings.

The firm has in recent years faced accusations of failure to pay taxes, years of little or no local development and environmental violations. Some of the claims have led to what has been a long-running battle, including a Sh17 billion demand by Kajiado County from the firm for unpaid land rates and the July suspension of its operations by the Ministry of Mining and last week’s residential order to ship out.

Tata Chemicals has operated at the Lake Magadi site since 1911, marking 115 years of operations. Initially, the company, which operated as Magadi Soda Company through colonial Kenya and post-independence years, was owned by the UK’s Brunner Mond Group, a company that had close ties with the colonial government. The firm was acquired in 2005 by Tata Chemicals of India and later rebranded the Kenyan operation to Tata Chemicals Magadi Ltd in 2011.

When it acquired Brunner Mond Group, Tata Chemicals inherited many of the perks that the British firm enjoyed. These included colonial-era land lease rates of Sh50 per acre that Brunner Mond Group had been paying on account of its closeness with the British colonial government. The company occupies 225,000 acres of land in Kajiado.

The county government has contested the land rates and argues that it should be paying Sh14,000 per acre. Since 2013, when the national government started asking for higher rates as well as higher royalties and penalties for default, the total bill has ballooned to Sh17 billion, a matter that is still in court.

Tata Chemicals of India, the parent firm for Tata Magadi, had not been oblivious to the growing hostility in Kenya. In its annual report for the 2025/26 year, the firm cited the conflict with Kajiado as a key risk.

“The dispute between the County Government and TCML (Tata Chemicals Magadi Limited) remains an external risk,” said Tata Chemicals.

Tata itself has been running a fairly large and profitable operation in Kenya. The company, on its website, says it “has over 600 people on its payroll” in Kenya.

In its disclosures in the annual report, the firm said that the revenues for its Magadi operation stood at 5.86 billion rupees (Sh8 billion) for the 2025/26 financial year. Net profit for its Magadi operation was 480 million rupees, or Sh657 million.