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Barbed wire makers seek tax cuts on raw materials

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There was an expectation that there would be no need for imports, with the higher tax rate further meant to protect local firms and encourage additional investments. FILE PHOTO | NMG

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Summary

  • Players in the industry agreed with the National Treasury to have the tax hiked effective June on the understanding that Thika-based Blue Nile Rolling Mills has developed enough capacity to supply the raw material.
  • There was, therefore, an expectation that there would be no need for imports, with the higher tax rate further meant to protect local firms and encourage additional investments.

Manufacturers of barbed wire and other fencing products are seeking to have import duty on raw materials — galvanised wire — dropped from 25 percent to 10 percent to avert a shutdown of production.

Players in the industry agreed with the National Treasury to have the tax hiked effective June on the understanding that Thika-based Blue Nile Rolling Mills has developed enough capacity to supply the raw material.

There was, therefore, an expectation that there would be no need for imports, with the higher tax rate further meant to protect local firms and encourage additional investments.

Blue Nile has, however, been unable to supply the industry as expected, leaving it to grapple with disrupted supply chains and higher costs if they choose to import galvanised wire from overseas.

“The tax increase was good but the plan has not worked out,” a chief executive of one of the country’s largest steel manufactures told Business Daily.

“We want the tax to revert to the previous 10 per cent temporarily until we can reliably source the raw material from the domestic market.”

The manufacturers of barbed wires, chain link fences, gabion boxes and razor wires are lobbying for the tax cut through the Kenya Association of Manufacturers.

There are about 30 large firms besides a cottage industry manufacturing the products used by farmers, households and Kenya Wildlife Service. The sector is estimated to employ 8,000 people.

“Some of the factories have ceased production and the prices of the products are rising significantly,” the CEO of another steel firm said, adding that the price of barbed wire has increased by more than 40 per cent.

Increased production by Blue Nile and other upcoming players is expected to result in adequate supply of the raw material in the coming years.