KEMSA’s Local Manufacturing Preference: What the 15% Price Preference Really Delivers

A 15 percent price preference sounds like a guaranteed advantage for a local pharmaceutical manufacturer bidding into Kenya Medical Supplies Authority tenders. The legal basis for that preference is real, but what it actually delivers in practice is a more complicated picture than the headline figure suggests, and a manufacturer building a business case around it should understand both sides.

The Legal Basis: A General Procurement Preference, Not a Pharmaceutical-Specific Rule

The 15 percent margin comes from Regulation 14 of the Public Procurement and Disposal (Preference and Reservations) Regulations 2011, which provides that a fifteen percent margin of preference in the evaluated price of a tender shall be given to candidates offering goods manufactured, mined, extracted, or grown in Kenya. Its statutory foundation sits in the Public Procurement and Asset Disposal Act 2015, including the promotion of local industry as a guiding principle, the National Treasury’s authority to set preference and reservation policy, and the requirement that a tender document state which preferences apply. This is a general public procurement preference that a pharmaceutical manufacturer benefits from as a manufacturer of goods made in Kenya, not a pharmaceutical-specific or KEMSA-specific rule created for the health sector alone. A manufacturer should understand it in that context rather than assume the health sector has its own bespoke preference regime layered on top.

Not Automatically Applied

The preference is not a guaranteed feature of every KEMSA tender. A 2022 to 2024 KEMSA pharmaceutical prequalification tender document states plainly that a margin of preference shall not apply to that particular procurement. This is direct evidence, in KEMSA’s own tender documentation, that the 15 percent preference is disapplied in at least some pharmaceutical procurements rather than attaching automatically. A manufacturer relying on the preference as part of a bid strategy or an investment case needs to confirm its applicability in the specific tender document at hand, not assume it as a standing feature of doing business with KEMSA.

The Gap Between Target and Reality

In October 2023, President Ruto set a target of 50 percent local sourcing of pharmaceutical products by 2026. Reporting through mid-2026 indicates that target was missed: local manufacturers currently supply roughly 20 to 30 percent of Kenya’s pharmaceutical demand, with imports covering the remaining 70 to 80 percent, and WHO’s Africa regional office put the local share of Kenya’s Essential Medicines List at approximately 20 percent as of mid-2026. Local manufacturing plants are reported to be running at well under 50 percent of installed capacity. A price preference on paper has not, on its own, been sufficient to close this gap, which is a relevant fact for any investor treating the preference as the primary driver of a Kenyan manufacturing investment’s viability.

A New Strategy Aimed at Closing the Gap

Kenya has since introduced a Health Products and Technologies Local Manufacturing Strategy covering 2026 to 2030, which includes a Preferential Procurement Master Roll naming 347 products that KEMSA and other procuring agencies are directed to source locally, alongside a proposed escrow payment mechanism intended to address one of the recurring complaints about the existing system. This is a more targeted and specific mechanism than the general 15 percent regulation, naming actual products rather than leaving local preference to a general evaluated-price adjustment, and it is worth tracking as it moves from strategy to implementation.

Practical Cautions for an Investor

Beyond the preference’s inconsistent application, reporting on the current state of local pharmaceutical manufacturing surfaces several practical frictions worth weighing against the paper advantage. Manufacturers have reported waiting up to 18 months for KEMSA reimbursement on delivered orders. Of roughly 1,096 formulations Kenya’s public health system requires, only about 220 are currently made domestically. Most local manufacturers reportedly sell only around a quarter of their output to the public sector, preferring export or private markets where payment terms are more reliable, and capacity utilisation across local plants sits at roughly 40 to 60 percent. Electricity costs for Kenyan manufacturers are also reported at roughly nine times those in Ethiopia, a regional competitor for the same manufacturing investment. None of this means the local-manufacturing opportunity in Kenya is unviable, but it means the 15 percent preference should be modelled as one favourable factor among several real cost and payment-timing risks, not as a standalone reason to expect strong returns.