Pharmaceutical Manufacturing Licensing and EPZ Incentives are converging into a genuine policy moment for Kenya’s pharmaceutical manufacturing sector. The Ministry of Health launched a five-year Local Manufacturing Strategy this year, national digital platforms to combat counterfeit medicines went live on 1 July 2026, and the Pharmacy and Poisons Board is actively pursuing an international regulatory maturity benchmark specifically to attract manufacturing investment. For investors and manufacturers evaluating Kenya as a production base rather than purely an import market, this is the moment the pieces are lining up, licensing, incentives, and government demand-side support arriving together rather than in isolation.

Pharmaceutical Manufacturing Licensing: The Manufacturing Licence Itself

Manufacturing medicinal substances in Kenya requires a licence under section 35A of the Pharmacy and Poisons Act (Cap. 244), Part IIIA of the Act. Section 35B requires every licence holder to comply with Good Manufacturing Practice standards prescribed by PPB. This manufacturing licence is a distinct prerequisite that feeds into other PPB processes, it is required, for example, before a locally manufactured health product can be registered under the Pharmacy and Poisons (Registration of Health Products and Technologies) Rules, 2022, and locally manufactured products benefit from materially lower registration fees under those Rules (USD 500 versus USD 1,000 for products not manufactured in Kenya).

Quality control sits alongside the manufacturing licence through the National Quality Control Laboratory, established under Part IIIB of the Act (sections 35C to 35K), which examines and tests drugs and the materials and processes used to manufacture them, and issues certificates of analysis.

Pharmaceutical Manufacturing Licensing and EPZ Incentives: The 2026-2030 Strategy

Pharmaceutical Manufacturing Licensing and EPZ Incentives together explain why Kenya’s medical device market has itself been growing at an estimated 10-11% compound annual growth rate over the 2025-2026 period, driven substantially by import demand under Universal Health Coverage expansion, a market signal that also supports the case for building local manufacturing capacity rather than relying indefinitely on imports. The Ministry of Health launched the Health Products and Technologies Local Manufacturing Strategy 2026-2030 on 28 June 2026, a five-year roadmap to strengthen domestic production of medicines, vaccines, diagnostics, and other essential health products. The strategy is built around three priorities: accelerating regulatory and policy reforms, expanding and diversifying local manufacturing capacity, and strengthening demand generation through market assurance, meaning coordinated government procurement designed to give manufacturers predictable purchasing volumes rather than leaving them to compete for ad hoc contracts.

Three national digital platforms, the National Track and Trace System, Practice360, and Facility360, became operational on 1 July 2026, intended to improve medicine traceability, strengthen supply chain transparency, and curb counterfeit health products. In parallel, PPB is pursuing WHO Maturity Level 3 status under the WHO Global Benchmarking Tool, a formal international benchmark the Ministry has explicitly linked to enhancing Kenya’s regulatory credibility and attracting greater pharmaceutical manufacturing investment.

Kenya is also one of six African countries selected into the WHO-Medicines Patent Pool mRNA Technology Transfer Programme, with advanced mRNA manufacturing capability being established at the government-owned Kenya BioVax Institute, a concrete signal of where technology transfer and licensing work in this sector is heading.

EPZ and SEZ Fiscal Incentives

Pharmaceutical manufacturing is explicitly listed among the sectors targeted for Kenya’s Export Processing Zones, established under the Export Processing Zones Act (Cap. 517) and administered by the Export Processing Zones Authority (EPZA), one of seven current EPZ sites across the country including Athi River, Mombasa, Kilifi, and Malindi. Licensed EPZ enterprises are entitled to:

• A 10-year corporate income tax holiday, followed by a reduced 25% rate for a further 10 years (commercial-licence EPZ enterprises are excluded from this benefit).
• A 10-year withholding tax holiday on dividends and other remittances to non-resident parties.
• Perpetual exemption from VAT and customs import duty on raw materials, machinery, office equipment, and other production inputs.
• Perpetual exemption from stamp duty on legal instruments.
• A 100% investment deduction on new investment in EPZ buildings and machinery, claimable over 20 years.

Applying involves incorporating under the Companies Act, submitting a business plan and export strategy to EPZA, securing approval of factory premises, obtaining a NEMA Environmental Impact Assessment compliance certificate, and paying a USD 250 application fee. An EPZ licence is initially issued for one year. A separate but complementary regime, Special Economic Zones (SEZs), offers overlapping physical and fiscal incentives and is worth comparing against EPZ status depending on whether the manufacturer intends to sell into the domestic market as well as export, since EPZ status is oriented toward export production specifically.

One current compliance point worth flagging to any manufacturer already operating or about to apply: from 2026, KRA requires all EPZ-related expenses, imported inputs, and local purchases to be supported by eTIMS-compliant invoices and reconciled monthly. Exemptions and deductions can be disallowed on audit without that documentation trail, so EPZ tax reporting is no longer a matter of simply qualifying for the incentive, ongoing invoicing discipline is now part of keeping it.

Export Market Access

EPZ status is specifically oriented toward export production, so market access for the finished product matters as much as the manufacturing incentive itself. Kenya’s regional position gives EPZ-based pharmaceutical manufacturers a natural route into the East African Community common market and the wider Common Market for Eastern and Southern Africa, while duty-free access to the United States market under the African Growth and Opportunity Act has historically driven EPZ investment in other sectors and remains relevant for manufacturers weighing where in the region to locate production. A manufacturer’s export strategy submission to EPZA at application stage should reflect this from the outset, since it forms part of what the Authority evaluates in granting the licence.

What This Means for Structuring a Kenyan Manufacturing Entry

A pharmaceutical manufacturer evaluating Kenya needs to sequence at least three separate regulatory relationships: the section 35A manufacturing licence and GMP compliance with PPB, EPZ or SEZ registration for the fiscal incentive structure, and product-level registration under the 2022 Registration Rules once the manufacturing licence is in place. These are not simultaneous applications with a single point of contact, they involve PPB, EPZA (or the SEZ Authority), and separately KRA for the ongoing tax compliance layer. Sequencing matters: securing the manufacturing licence before applying for product registration is not optional, since the Registration Rules require proof of a valid section 35A licence as a condition of the product registration certificate itself.

The regulatory sequencing described above is not merely procedural convenience, it reflects three genuinely separate legal relationships that a manufacturer must maintain concurrently once operational: ongoing GMP compliance and inspection readiness with PPB, annual reporting to EPZA to retain zone status, and monthly eTIMS reconciliation with KRA. A gap in any one of these can jeopardise the others, a lapsed manufacturing licence undermines product registrations that depend on it, and a compliance failure with EPZA can put the fiscal incentives that made the investment viable at risk.

Related Reading

This is the third article in our Life Sciences and Healthcare series. See our companion guides to medical device and health product registration with PPB and digital health and telemedicine regulation.

Structuring a pharmaceutical manufacturing entry into Kenya? Clay & Associates Advocates advises on PPB manufacturing licensing, EPZ and SEZ structuring, and product registration strategy. Contact us to discuss your investment.

This article is for general information and does not constitute legal advice or tax advice. EPZ and SEZ incentive eligibility, and their interaction with the 2026 Finance Act and eTIMS requirements, should be confirmed with counsel and a tax advisor before an investment decision is finalised.