Piracy, VAT cost Longhorn Sh900m in sales

Longhorn Publishers has lost Sh900 million in sales through a mix of piracy, increased taxes on books and a new government initiative to distribute free books directly to public schools.

The Nairobi Securities Exchange-listed firm lost Sh450 million to piracy, Sh250 million due to the introduction of valued added tax (VAT) on books and Sh200 million to the Tusome Literacy Programme.

The publisher’s net profit in the year ended June rose 45.1 per cent to Sh104.06 million.

Sales grew 77 per cent to Sh1.5 billion on product diversification, indicating that the firm’s turnover would have been higher in the absence of the three challenges cited.

The government introduced a 16 per cent VAT on textbooks in September 2013. This increased the cost of books and hurt publishers as parents opted to buy core and pirated books.

“The existing penalties for piracy are very lenient. Irrespective of the level, those found culpable are only fined Sh800,000,” Simon Ngigi, the Longhorn Publishers managing director told the Business Daily in an interview.

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The Ministry of Education, in collaboration with United Kingdom’s Department for International Development (DFiD), also distributed over 2.7 million English and Kiswahili textbooks to 23,000 public primary schools.

Publishers said the Sh5.4 billion initiative has further worsened their business. The programme targets 5.4 million children in Class One and Two, seeking to improve their competency in reading and writing.

“We were initially supportive of the initiative since it was to cover Standard One to Three in public schools. Now, it has been extended to private schools, dealing a major blow to the local publishing industry,” said Mr Ngigi.