Why Kenyan President is Chasing Away Illegal Foreign Traders

Kenyan president William Ruto has ordered a crackdown on foreigners operating small businesses in Kenya, escalating a long-running dispute over competition between Kenyan traders and foreign nationals in one of the country’s most important sources of jobs.

Ruto’s intervention comes days after hundreds of small-scale traders protested in Nairobi against higher customs valuation rules, underscoring the pressure on the government from a politically important constituency whose businesses are vulnerable to taxes, imports and rising operating costs.

The president said on Wednesday that the government would enforce existing laws against foreigners engaged in businesses reserved for Kenyans, while Parliament considers legislation that would restrict foreign participation in certain trades.

“Kuna biashara ambayo mgeni hawezi kufanya hapa Kenya. Tayari tuko na mswada bunge. We have a bill in parliament ya mambo ya biashara. Katika hiyo bill tumependekeza ya kwamba kuna biashara ambayo mgeni hawezi kufanya hapa Kenya,” Ruto said. (There are businesses that a foreigner cannot do here in Kenya. We already have a bill in Parliament on matters of business. In that bill, we have proposed that there are businesses that a foreigner cannot do here in Kenya.”

He added:

“…….waangalie kabisa kwa sababu hatujapitisha so that we seal all the loopholes. Isitokee ati mtu ametoka sijui China na wapi na wapi anakuja kuwa hawker. Kuja kufanya biashara ya kuuza sijui kwa duka kidogo hapo.” (They should look at this very carefully because we have not yet passed [the bill], so that we seal all the loopholes. It should not happen that someone comes from China or from wherever and comes to be a hawker, coming to sell things in a small shop.)

The comments reflect a broader economic and political calculation: Kenya’s informal economy is enormous, and the government has made small businesses central to its economic strategy.

A fight over Kenya’s biggest job market

Kenya’s informal economy employed about 18.1 million people in 2025, according to the Kenya National Bureau of Statistics (KNBS), up from about 17.4 million a year earlier. Of 822,100 jobs created in the economy last year, 87.2% were in the informal sector.

That makes small-scale trade more than a political issue. It is a crucial part of Kenya’s labour market.

Kenya’s total recorded employment, excluding small-scale agriculture, reached 21.6 million in 2025. Modern-sector wage employment was only about 3.3 million, meaning the overwhelming majority of recorded employment outside small-scale agriculture was generated outside conventional formal employment.

Wholesale and retail trade are among the largest components of this informal economy, along with hospitality and other services. For millions of Kenyans, selling clothes, household goods, food, electronics and other consumer products provides a livelihood when formal employment is scarce.

That makes competition in markets such as Nairobi’s Gikomba, Kamukunji, Nyamakima and Eastleigh particularly sensitive.

Ruto’s political programme, the Bottom-Up Economic Transformation Agenda (BETA), explicitly places the micro, small and medium-sized enterprise sector at the centre of economic policy. The programme seeks to lower the cost of living, create jobs and increase incomes by directing resources towards businesses at the lower end of the economy.

The government has also launched the Kenya Jobs and Economic Transformation project, backed by the World Bank, to improve private investment, market access and finance for MSMEs. The five-year programme targets at least 45,000 Kenyans, including 6,800 women, through new or improved employment opportunities.

Ruto therefore feels he has an incentive to demonstrate that the government is protecting the market space of local entrepreneurs.

Why foreigners have become a flashpoint

The dispute is not new. Kenyan traders have for years complained that foreign nationals, particularly Chinese traders as well as traders from neighbouring African countries such as Uganda, Tanzania, Somalia, Burundi, Rwanda and the DRC, have moved beyond wholesale and import businesses into retail, hawking and other small-scale activities.

The argument is that foreign operators can have advantages that ordinary Kenyan traders do not, including greater access to capital, direct links to overseas manufacturers, economies of scale and established import networks.

Kenyan lawmakers were already raising similar concerns in 2024. During parliamentary debate, lawmakers said Chinese traders had increasingly moved from wholesale and dealership into retail and hawking, arguing that this had made it harder for Kenyan traders to compete.

The issue became particularly visible after China Square opened its first Kenyan outlet in 2023. This was followed by other Chinese retail chain stores such as Pandamart and China Village.

Kenyan traders in Kamukunji, Nyamakima and Gikomba complained that large foreign-owned retailers were selling inexpensive imported goods directly to consumers. The dispute prompted calls from politicians, including then Trade Cabinet Secretary Moses Kuria, for greater protection of local traders.

The economic argument is straightforward: if a foreign trader enters Kenya to operate a small retail business, local entrepreneurs may lose customers and income. But the issue is complicated because foreign traders can also generate demand for commercial property, logistics, imports and Kenyan labour.

The government’s challenge remains to distinguish between foreign investment that expands the economy and foreign participation in small businesses that directly competes with vulnerable local entrepreneurs.

What the law already says

Ruto’s proposed legislation would build on an existing immigration and work-permit framework rather than create the principle from scratch.

Under Kenya’s Citizenship and Immigration Act, a foreign national may not engage in employment, occupation, trade, business or a profession without appropriate authorisation. Violating those requirements is an offence.

Kenya also has a Class G permit for foreigners intending to engage in specific trade, business or consultancy activities. Applicants must have the necessary licences and sufficient capital and must demonstrate that their activity will be beneficial to Kenya.

Ruto is not necessarily saying Kenya should prohibit foreigners from doing business altogether. His argument is that certain activities should be reserved for Kenyans and that foreigners should not use immigration or business rules to enter the lowest levels of the retail economy.

That is why he referred specifically to hawking and small shops.

In 2024, authorities arrested foreign nationals at Nairobi’s Gikomba market over alleged violations of their work permits. The episode highlighted a recurring problem: some foreigners may possess valid immigration status but engage in activities outside the terms of their permits.

The government’s planned crackdown is likely to focus not simply on nationality but on whether foreign nationals have the correct immigration, business and trading authorisations.

The China factor

The debate also comes against the backdrop of Kenya’s rapidly expanding trade relationship with China.

China has become Kenya’s largest source of imports. KNBS data shows Kenyan imports from China rose to about 671.2 billion shillings ($5.2 billion) in 2025 from 361.4 billion shillings in 2020. Kenyan exports to China, meanwhile, were only about 16.9 billion shillings in 2025.

That produced a record bilateral trade deficit of about 654.3 billion shillings in 2025, according to KNBS data.

Chinese imports include machinery, electronics, construction materials, textiles and manufactured goods. Kenyan traders often depend on the same supply chains to stock their businesses.

Local traders argue that when foreign companies or individuals move further down the supply chain and sell directly to consumers, Kenyan retailers can be squeezed between international suppliers and foreign competitors.

But there is another side to the equation. Restricting foreign traders does not automatically create Kenyan manufacturing capacity or lower import dependence.

Kenya’s underlying problem is that it imports substantially more manufactured goods than it exports. If policymakers want local businesses to capture more value, they will need to move beyond protecting retailers and expand domestic manufacturing, distribution and value addition.

A difficult moment for small businesses

The crackdown also comes at a particularly sensitive time for Kenyan traders.

On Aug. 28, police used tear gas to disperse small-scale traders protesting new customs valuation rules. The Kenya Revenue Authority had raised the minimum customs benchmark for a consolidated 40-foot container carrying general cargo to 3.2 million shillings from 2.5 million, an increase of about 28%.

Traders said the measure would raise their costs because many small businesses rely on consolidated shipments to import relatively small quantities of goods.

Ruto subsequently ordered a reduction of the 3.2 million-shilling benchmark to 2 million shillings after meeting traders, while maintaining that businesses must pay the taxes they owe.

The juxtaposition is significant. On one side, the government wants to ensure traders pay taxes and comply with customs rules. On the other, it wants to protect them from foreign competition.

For Kenyan traders, both issues affect the same calculation: how much it costs to bring goods into the country and how much can be charged when those goods reach consumers.

Protection versus regional integration

There is also a regional dimension.

Kenya is a member of the East African Community, whose integration agenda seeks to facilitate the movement of goods, services, capital and people across member states.

A policy that reserves parts of the retail economy for Kenyan citizens could therefore create tensions with the broader objective of regional integration, particularly if enforcement affects citizens of other EAC countries.

Tanzania provided a recent example of how politically sensitive this issue can become. In 2025, Tanzania restricted foreign nationals from operating in 15 small-business sectors, including mobile-money services, tour guiding, small-scale mining, crop buying and beauty salons. The government said the sectors were better suited to Tanzanians.

Kenya’s move comes in that wider regional context.

There is also a potential distinction between illegal activity and legitimate foreign investment. Kenya relies heavily on foreign capital, international trade and migrant workers with valid permits. A crackdown perceived as targeting foreigners generally rather than unlawful trading could deter investment or create diplomatic friction.

The government’s language so far has focused on illegal traders and activities reserved for Kenyans, rather than a blanket ban on foreign businesses.

Why Ruto is doing this now

For Ruto, the immediate political logic is strong.

His administration has built much of its economic narrative around the “hustler” economy: informal traders, small manufacturers, farmers, boda-boda operators and other entrepreneurs who operate outside the formal corporate sector.

Those workers are also confronting high living costs, taxation, expensive credit and weak purchasing power.

Kenya’s economy grew 4.6% in 2025, down slightly from 4.7% in 2024, while wholesale and retail trade expanded 3.6%. Nominal GDP reached 17.58 trillion shillings in 2025, according to KNBS.

That is respectable growth, but it has not eliminated the structural problem facing millions of workers: economic growth is not necessarily translating into enough secure, formal jobs.

Against that backdrop, protecting the existing pool of small-business opportunities becomes politically attractive.

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