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Kenyan government to zero rate taxes on imported raw materials


Kenyan government to zero rate taxes on imported raw materials

Kenyan government to zero rate taxes on imported raw materials
Photo credit: KAM

The government plans to zero rate both the Import Declaration Tax and the Railway Development Levy on all imported raw materials to be used in manufacturing processes locally.

The revenue shortfall will then be recovered by increasing tax on imported finished products.

This according to Industry and Trade Cabinet Secretary Adan Mohammed will cushion locally produced goods from unfair competition posed by cheap imported goods.

Over the last few years, Kenya has made huge strides in creating a conducive business environment by among others cutting government red tape and enhancing the turnaround time in registering of businesses.

However, the contribution of the manufacturing sector to the GDP still remains low at an average of 13 percent.

With imported goods at times cheaper than similar locally produced goods, the government has moved in to correct this and plans to zero rate taxes on imported raw materials while increasing taxes on imported finished commodities.

To further protect local investors, the government is further looking into streamlining and fast-tracking VAT refunds to manufacturers as well as lowering charges at the port.

This is in addition to the on-going random container inspections at the ports and border entry points to curb cheap counterfeit goods.

Among other factors, little innovation in manufacturing has also been blamed for the slowed growth in the sector, with many large-scale industries still engaged in traditional businesses.

To further grow the sector, manufacturers are being urged to build local skills set on potential investment opportunities, diversify products as well as go beyond the local and regional market which is said to be already saturated.

In line with the government’s Big Four Plan where manufacturing is one of the priorities, the Kenya Association of Manufacturers (KAM) has launched the 2018 Manufacturing Priority Agenda which focuses on five pillars.

Manufacturers cite priority areas to spark industrial growth in 2018

Kenya Association of Manufacturers (KAM) has today launched the pdf Manufacturing Priority Agenda (MPA) 2018 (2.35 MB)  under the theme Sparking Kenya’s Industrial Transformation for Job Creation.

The agenda highlights the need to create a sector that has a multiplier effect in the economy resulting in job and wealth creation. It outlines immediate action that will yield tangible results in the short term, and work towards reigniting the economic development of the country.

Speaking at the launch, Cabinet Secretary, Ministry of  Industry, Trade and Cooperative, Mr. Adan Mohamed noted that the manufacturing sector is a key part of the big four government agenda because of its impact to the economy.

“The Government has prioritised manufacturing as one of its four main pillars in the next 5 years. The manufacturing sector is key as it is a link to the other three (health, housing and food security) pillars. The priority agenda that the manufacturers have put together is commendable. We therefore need to unpack the Agenda in order to transform the manufacturing sector going forward,” added Mr. Mohamed.

KAM Chairlady, Ms Flora Mutahi noted that the manufacturing sector is the muscle behind productive employment and opportunities for wealth generation with direct linkages to all sector of the economy.

“As industry, we applaud the Government’s renewed commitment to the sector. It is thus a year to give the manufacturing sector the much deserved attention in terms of policy direction and investments.

As industry, we aim to contribute 15 percent to the economy with the hope of creating more jobs for our youths. We are keen to see manufacturing centralized in our national vision towards creating an inclusive political economy. The sector should dominate discussions on nation building, equal distribution of resources and poverty alleviation,” added Ms. Mutahi.

Speaking during the launch, KAM Chief Executive, Ms. Phyllis Wakiaga noted that the Agenda is the Association’s contribution in shaping policies and regulatory frameworks that enable local businesses and trade partnerships thrive.

“The Manufacturing Priority Agenda outlines the immediate action that will yield tangible results in the short term, and work towards the aforementioned industry goals. This will catalyze the competitiveness of local industry that will be alluded to as well as enable our local manufacturers to compete on an international platform,” added Ms. Wakiaga.

The priority areas will be driven under five key pillars which, if strengthened, will lead to a more competitive environment and impactful economic gains for Kenya’s industrial sector. These are:

  1. Competitiveness and level playing field

  2. Export-driven manufacturing

  3. Pro-industry policy and institutional framework

  4. Government-driven SMEs development

  5. Securing the future of manufacturing industry


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