Industry Wins from 2016 Budget

By Phyllis Wakiaga

The Kenyan economy has been growing robustly at an average of 6 per cent amid global economic slowdown, according to the Budget statement delivered by the Cabinet Secretary, Henry Rotich yesterday.

We had set out to enhance our economic growth by double digits by the year 2030 to attain higher middle income status. Our quest for this transformation prioritised key industries in the manufacturing sector as the vehicles to deliver these goals. The budget has in part attempted to catalyse this by offering fiscal incentives for some of the above mentioned industries to stimulate the growth, enhance wealth and create jobs.

The Kshs.2.3 trillion proposed budget had a number of key benefits for Industry but particularly the Metal sub sector. Steel imports have led to the closure of plants and the loss of jobs in the sector and the imposition of a specific duty rate of 200 US dollars per metric tonne in addition to the 25% ad valorem duty will ease the pressure on manufacturers. Further, the Government sought to safeguard the sector by increasing duty on imported aluminium cans from 10% to 25% and to promote their manufacture locally; access to raw materials will be enhanced through a removal of duties on plates and sheets of aluminium alloys.

The government also assured through the budget a full implementation of the Buy Kenya Build Kenya policy to support industry with, in part, the 40% local content participation in capital intensive projects including in infrastructure and energy development. Such policy incentives would go a long way to strengthen the industrial development of Kenya.

The Pharmaceutical sector is another winner through the duty exemption on importation of the Heating, Ventilation and Air-Conditioning System technologies expected to enhance competitiveness in the within the healthcare sector.
The budget also made a step forward on the area of Value Added Tax (VAT) tax specifically to promote access to competitive raw materials for the manufacture of agricultural products. The Government has zero rated the raw materials used in the production of animal feeds to reduce the cost of feeds to farmers with a view to spur agricultural productivity.

In a move towards consolidation, the secretary eliminated certain levies which have been cumbersome for the sector such as the sugar development levy, the ad valorem levy on tea as well as levies charged by the National Environmental Management Authority (NEMA) and the National Construction Authority (NCA). This is a key development at a time when the harmonization of fees and levies have been an acute challenge for all businesses country-wide. We hope that the county governments take their cue from this and begin to urgently create legal frameworks to curtail multiple levies and charges.

We also applaud the move to cushion minimum wage workers from the high cost of living through elimination of taxes on their bonuses, overtime and retirement benefits.

I would still like to point out that some four key critical issues for manufacturers which we proposed to government were not addressed in the budget statement. These issues are; the annual allocation of funds for VAT refunds, complete elimination of the Import Declaration Fee (IDF) and Railway Development Levy (RDL) and the reduction of excise tax for excisable goods. For Kenya to transform into a higher middle income economy there is need for more deliberate action to promote industrialization in the country. Deliberate efforts such as actioning these four issues will catapult our economy to double digit growth and keep us on the right track towards achieving Vision 2030.

The writer is the CEO of the Kenya Association of Manufacturers and the UN Global Compact Network Representative for Kenya. She can be reached on ceo@kam.co.ke