That Kenya has offered a low power tariff of Sh5 per kilowatt-hour (kWh) in efforts to woo investors to set up factories in the Special Economic Zone (SEZ) in Olkaria, Naivasha is a step in the right direction.
In previous efforts, the government has offered generous tax packages to entice export-oriented firms into setting up base in Kenya. At the Export Processing Zones, for instance, firms enjoy a 10-year corporate tax holiday, a 10-year withholding tax holiday on dividends and remittances, exemption from Value Added Tax (VAT) and customs import duty on inputs in exchange for creating jobs, improving manufacturing and spurring economic empowerment of Kenyans.
That the government has expanded its array of incentives to include electricity, a key cost component in manufacturing, speaks to the high premium that Kenya has put on attracting foreign direct investments and to ensure that neighbouring countries do not take the thunder away from Nairobi.
It goes without saying that the firms eyeing investment in Naivasha are expected to reciprocate the low production costs by hiring more Kenyans while also generating a substantial pool of hard currency from their exports to support the shilling by ensuring dollar inflows from exports. That’s the only way they can justify the tax breaks and power tariffs that are half the Sh10.10-12/kWh charged on large-scale commercial consumers during peak hours.
However, there is need to ensure that foreign firms who take up the lucrative offer do not close shop as soon as the tax incentives period comes to an end. They must also be constantly checked so that they do not fall for the temptation of processing semi-finished items instead of using locally available raw materials. Each beneficiary, ought, therefore, to show how they are creating a value chain.
It is encouraging to note that more than 100 local and foreign investors have expressed interest in setting up shop at the planned Naivasha industrial park where 9,000 acres have been set aside for SEZ factories’ development. However, the State must make it a licensing conditions, and monitor the activities of these firms to ensure that the economy is able to reap adequate fruits from the tax and energy cost concessions.