Barely two years into the office—and after fierce battles with the Kenya Kwanza administration over two controversial Finance Bills—Anthony Mwangi’s fighting spirit had run thin.
Fearing that another fight over another Finance Bill would have a toll on his peace of mind, Mr Mwangi resolved to throw in the towel. Last week, he opted to step down as the CEO of the Kenya Association of Manufacturers (KAM).
So unexpected was Mr Mwangi’s resignation that it left speculation in its wake.
Mr Mwangi, serving a three-month notice, would not divulge the reasons for his sudden exit. However, those who have worked close to him told the Business Daily that he might have come under pressure to leave. We could not independently verify this.
Mr Mwangi might have made a name for himself before for building bridges between the public and private sectors.
However, his skills in government relations face a test when it came to the Kenya Kwanza administration. Rather than building new bridges, he was reduced to repairing the old ones.
If he was not trying to address the directive of importing edible oil, which made former Trade Cabinet secretary Moses Kuria christen KAM as the Kenya Association of Importers, he was lobbying for the removal of some punitive clauses from the Finance Bills of 2023 and 2024.
But it was his strong position against the condemned Finance Bill 2024 that turned out to be his proverbial poisoned chalice.
According to the Kenya Kwanza regime, his loud campaign against the revenue-raising Bill fuelled the violent anti-tax protests that would culminate in President William Ruto shelving the proposed law, sources say. While refusing to sign the Finance Bill 2024 into law, President Ruto cited its unpopularity among Kenyans.
Reeling in shock from this unexpected defeat by an army of young protesters, armed to the hilt with smartphones and hashtags, the government is said to have embarked on a witch-hunt. It descended on those individuals it suspected might have incited Generation Zs to take to the street.
Sometimes, the witch-hunt has taken the brazen form of abductions, but it has also been benign like pushing those suspected to be masterminds of the protests out of their influential positions.
“They (the government) don’t want to believe that the Gen Z protests were spontaneous. They have been going after those who were vocal against the Finance Bill 2024. And because KAM was one of them, they want after its CEO,” said a source who spoke on condition of anonymity, fearing reprisal.
Mr Mwangi might also have been the grass that suffers when two elephants fight. Sources say at the heart of his ouster is a fierce battle for control of multibillion in the industries of steel, cement, and paper.
Those fighting among each other are members of the lobby group, which left Mr Mwangi in a delicate position because any verdict from him earned him an enemy. Sometimes, they would even do business together privately while pushing for their respective positions with Mr Mwangi.
While two deep-pocketed industrialists who are said to have President Ruto’s ear have been pushing for higher tax rates on steel, clinker, and paper, other members were opposed to it. KAM sided with the latter, and would later move to court when MPs passed the Finance Bill 2023 with the introduction of the 17.5 percent export and investment promotion levy.
The Court of Appeal has since declared the Finance Act 2023 unconstitutional.
Tax environment
Perhaps Mr Mwangi, it appears, flew too close to the sun.
When he was appointed the CEO of KAM on September 15, 2022, just around the time when Kenya Kwanza came to power, he committed to continuing to steer the association in advocating an enabling business environment.
With a master’s degree in public policy and management from Strathmore Business School, he brought with him to the association a wealth of experience in public policy and government relations from various multinationals, including Bolt, Tullow Kenya B.V. and IBM.
“I’m excited to take up the new role. I shall work closely with all stakeholders to increase the efficiency and productivity of the local manufacturing sector, drive export-led growth, reduce the regulatory burden and ease the cost of doing business, and advocate for a stable and predictable tax environment and policy,” said Mr Mwangi.
Championing a stable tax environment was not new, as his predecessor, Phylis Wakiaga, had been on the same path. His aggressiveness, however, was unique, if not unprecedented.
Whereas the medium and long-term goals for both Mr Mwangi and the new Kenya Kwanza administration seemed congruent, they differed on how to achieve them in the short term.
Faced with the possibility of a liquidity crunch owing to high debt obligations, including the payment of the $ 2 billion debut Eurobond, the government reasoned that slightly higher taxes would not deal manufacturers a deathly blow. At least in the short term.
Manufacturers could feel the pain now but enjoy the gain later as the taxes raised would be used to build local capacity, besides helping the country to avert a financial disaster that comes from defaulting.
KAM, led by Mr Mwangi, might have pointed out some quick wins in the Finance Bill 2023—such as the removal of locally manufactured plastics from the list of goods subject to excise duty and the removal of section 10 of the Excise Duty Act that gave Kenya Revenue Authority powers to adjust the specific rate of excise duty once a year to consider inflation—but they generally opposed Kenya Kwanza’s first revenue-raising measure.
Specifically, KAM was concerned with imposing levies on imported raw materials and intermediate products ostensibly to promote exports, insisting that there was no economic relationship between imposing levies on the importation of clinker, metal products, and packaging paper products and exports.
It also opposed the introduction of a 10 percent levy on imported Kraft paper, used to make Kraft liner for packaging staple foods such as maize and wheat, arguing that it would push up the cost of unga.
Nonetheless, MPs went ahead and introduced the export and investment promotion levy, with KAM swiftly moving to the courts. MPs had not only approved the Treasury’s introduction of a 10 percent export and investment promotion levy, but they increased it to 17.5 percent.
The 17.5 percent is among the controversial clauses that three petitioners, led by Busia Senator Okiya Omtatah, told the Court of Appeal “were not in the Bill but were introduced on the floor of the National Assembly”.
One of the major beneficiaries of the new levy, who had been pushing for higher tariffs on imported clinker, was steel magnate Narendra Raval, arguably Kenya’s richest man whose interests span cement, steel and aviation industries.
Mr Raval had earlier attempted to push for higher import duty on clinker during the administration of former President Uhuru Kenyatta but failed.
Instead, the players in the cement industry agreed to allow other manufacturers without grinders to build their own clinker plants.
Mr Raval, also known as Guru due to his priestly background, reluctantly agreed. He saw an opportunity to revive his push for higher tariffs in the Ruto government, arguing that there was enough local capacity for the manufacture of clinker, the main raw material for the production of cement.
Mr Mwangi didn’t agree with him. They were to face each other in court when Narendra joined in the petition against the Finance Act 2023.
The stage was set with the Finance Act 2023. Finance Bill 2024, which introduced echo levy, a new environmental tax targeting manufacturers and importers of select products to set up waste management infrastructure, was going to be even bloodier for Mwangi.
The government also proposed to impose excise duty on various products including coal, plastic products, and cooking oil, the import of which would increase the burden on mwananchi.
They noted that there was a proposal to introduce a 25 percent excise duty on crude palm oil, a 25 percent excise duty on finished cooking oil, a 10 percent excise duty on plastic packaging materials, and eco levy on plastic packaging at Sh150 per kilogram.
This, Mwangi reckoned, will see the cost of 1 litre of cooking oil increase by Sh168 from Sh300 to Sh468.
“A stable and predictable tax policy environment is critical for driving investments,” added Mr Mwangi in a statement.
