EPZ companies push for bigger share of market

Export processing zone firms have kicked off fresh campaigns for a bigger pie of the regional market as East Africa’s 10-year old integration process evolves into a common market.

Kenya’s EPZ Authority charged with attracting and recruiting the export-oriented firms, say some of the firms set up operations as a gateway to the larger eastern African market.

“Some of these firms will not hesitate to migrate to neighbouring countries and export to us if you tell them all the five EAC countries have been condensed into a single custom territory,” Mathenge Wanderi, the EPZA chairman told an investment forum in Nairobi on Friday.

The campaigns are, however, likely to meet resistance from firms operating outside the export promotion schemes which say the highly subsidised products from the zones will distort the local market.

Under the EAC Custom Union Management Act, firms operating under the export promotion schemes in any of the five member states can only sell up 20 per cent of annual production within the territory.

This means that an EPZ firm that initially set up a base in Kenya to export exclusively to Uganda must now look for alternative market for 80 per cent of production because the two countries now share a custom territory.

The custom union protocol states also that the allowed sales portion must be treated as imports into the region, attracting applicable duties and levies.

The EPZ imports also have to comply with customs procedures facing non-member countries.

“We are working closely with other EPZ authorities and the EAC secretariat to ensure that the current threshold is increased to 70 per cent because we are ready to pay all the taxes,” said Mr Wanderi.

In an earlier interview, Mr Peter Kiguta, the EAC director in charge of trade and customs, said the EPZ request is being handled by a committee of ministers.

Firms outside the zones are, however, resisting the idea.

“It is not just a matter of paying import duties but we expect KRA to levy other countervailing charges to ensure that all the other incentives that these firms receive do not give them unfair advantage over other investors,” said a Nairobi based textile firm that requested not to be quoted.

In Kenya, the push for a bigger chunk of the domestic market comes at a time that the export zones are reinventing themselves to shed off the foreigner tag.

EPZA acting CEO Joseph Kosure says the zones are implementing new rules that now compel them to import only the raw materials not found locally.

“We are working with the ministries of Agriculture and Trade to ensure our agricultural produce get ready market in the zones so that Kenyans can drop the perception that EPZ is a foreign programme out to exploit them,” said Mr Kosure.

New firms

Policy-makers have called for the strengthening of the labour intensive firms under EPZ as way of tackling the growing unemployment.

In Kenya, the 98 firms operating in these zones have employed 30,600 workers.

This should increase beyond 40,000 after 17 new firms were licensed this year, officials say.

Under the Custom Union Management Act, EPZ enterprises are granted exemptions from all taxes and duties on imports like machinery, spare parts, tools, raw materials and intermediate goods.

The firms also enjoy 10-year tax holiday and other incentives.