Metal Sector Biggest Winners in Industry from 2016 Budget

Iron, Steel and Aluminium Manufacturers Find Relief in Tax Measures and Incentives

The 2016/2017 Budget Proposals by CS Henry Rotich have provided a long awaited relief for the local metal sector through tax measures and incentives intended to safe guard local production.

To cushion the local manufacturers the National Treasury has proposed an introduction of an additional specific rate of 200 USD per metric tonne for Steel and Iron imports. This is bound to uplift the steel sector that has been embattled in recent years due to an increase in cheaper imports from other markets. Local Aluminium producers also stand to benefit from the proposal to raise import duty from 10% to 25% that seeks to protect locally produced goods.

Another big winner is the Pharmaceutical sector for which the budget proposes duty exemption on HVAC – Heating, Ventilation and Air-Conditioning System; a technical requirement by the WHO that should be installed on all businesses in this sector. The importation of these systems have been an additional cost on Pharmaceutical manufacturers owing to the duty that was imposed.

Further, the proposal to exempt all raw materials used in the manufacture of Animal Feeds from VAT is also an exciting win for industry. This is aimed at strengthening the government’s commitment of transforming the agricultural sector by encouraging local manufacturers to produce high quality feeds at low cost thereby making the business profitable.

Commenting on the Budget proposal from Copenhagen, Denmark, KAM CEO Phyllis Wakiaga said, “We are encouraged by the progressive steps that have been exhibited by the adoption of some industry recommendations into the budget for the fiscal year 2016/2017. We are hopeful that the finance bill has addressed the other key proposals that we made to Treasury – because promoting competitiveness and reducing the cost of doing business is hugely reliant on ensuring that local manufacturers enjoy, in part, fiscal incentives support from Government’. This is turn would revitalize the Kenya’s exports capability that is needed for the attainment of a double digit economic growth of our Country.”

All in all the budget has addressed pertinent industry issues that will have a positive impact on increasing the ease of doing business for local manufacturers. However, earlier pertinent issues highlighted by manufacturers such as VAT refunds, removal of Railway Development Levies and Import Declaration Fees as well Excise Duty on specific products, were not expressly addressed in the Cabinet Secretary’s Speech.