Kenya is a pace-setter in off-grid solar solutions.
In 2019, it was estimated that there were some five million pico solar products and 700,000 solar home systems in use by Kenyan households.
Kenya has been lauded internationally for progress made towards the 2022 universal energy access target with a reported 75 percent energy access rate today.
Underlying these numbers is a fact well-known by industry practitioners: the national grid only reaches about 50 percent of Kenyan households. Twenty-five percent of households are served by solar energy.
A 34-year-old mother of five who runs a grocery business in a village in western Kenya recently acquired a solar home system to boost her day to day activities both in the house and for her trade.
Initially, she would rely on kerosene which she could barely afford and was no good for sustaining her hard-earned vegetables stock. The solar home system, which was purchased, now allows her to work for longer evening hours, boosting her sales and giving her more room to provide for her family.
An overwhelming majority of Kenyans living off the national grid access their energy needs through such renewable solutions and over the years, the VAT exemption on solar products played a critical role in increasing affordability making people like the grocery woman and their families lead a more dignified life.
Beyond this, off-grid solutions have been adopted in remotely located hospitals and schools far flung from the main grid. The solar-powered emergency obstetric and neonatal care unit at the Lorugumu Sub-County Hospital in Turkana is a testament to how solar energy has had a direct hand in the reduction of the mortality rate from preventable deaths.
PACE-SETTER
Kenya is a pace-setter in off-grid solar solutions. In 2019, it was estimated that there were some five million pico solar products and 700,000 solar home systems in use by Kenyan households. This did not happen by chance.
Kenya has been lauded internationally for progress made towards the 2022 universal energy access target with a reported 75 percent energy access rate today.
Underlying these numbers is a fact well-known by industry practitioners: the national grid only reaches about 50 percent of Kenyan households. Twenty-five percent of households are served by solar energy.
The government should be applauded for adopting an integrated energy mix, leveraging every appropriate solution to deliver energy access for all her citizens.
Additionally, the country’s ratification of the United Nations Framework Convention on Climate Change, the Kyoto Protocol and the Paris Agreement shows Kenya is committed to realising universal energy access while protecting the environment.
However, the Finance Act 2020 signed by President Uhuru Kenyatta in June removed the long-standing tax exemptions on various clean energy and cooking-related products heavily relied on by rural off-grid communities
With the introduction of a 14 percent VAT on the products, we are undoing our progress and jeopardising these efforts that other nations in Africa seek to follow.
Covid-19 has put an economic strain on individuals and on the country as a whole. This strain necessitates that any legislative decisions taken cushions suppliers and consumers from further devastation while optimising every industry’s contribution to the economy. Currently, there is a significant disparity between Kenyans with access to the main grid and those who must opt for alternative sources. This disparity is seen in the quality of life, access to economic opportunities and in the realisation of fundamental rights such as health and education.
Discrimination is also seen in the fiscal treatment of Kenyans on-grid vis-à-vis those who are off-grid. Furthering this disparity is public support offered for Kenyans living in grid areas that lowers their costs such as the low connection fees.
A fundamental question that we as a society must ask ourselves is how to best support those amongst us living outside the reach of public services, such as those Kenyans who are forced to find other solutions to access electricity, that now come laden with additional costs and taxes.
COST AND AFFORDABILITY
This societal inequality calls for and obligates the National Assembly to come up with corrective fiscal measures to afford all Kenyans fair and equitable access to energy. Cost and affordability are the biggest constraints rural communities face in accessing these energy solar products.
A survey conducted in August this year after the introduction of the VAT and duties on solar products indicated that costs had gone up from between 14-40 percent on the price to end users — a very unfortunate situation.
A study by Duke University showed that a 15 percent price increase in Kenya would result in about 40,000 fewer households accessing these products every year.
COUNTERPRODUCTIVE TAX
Kenya Renewable Energy Association (KEREA) found in another study that the revenue to be realised through the VAT introduction will be insignificant because the subsequent cost increase on solar, wind and clean cooking products will drive down their demand. The tax will therefore be counterproductive.
The changes adopted in the Finance Bill, 2020 removed the only viable option for electrifying Kenya’s vulnerable and marginalised people and counties.
It is our hope that in the upcoming sitting of the legislature, members of Parliament will reconsider this VAT for the greater good of all Kenyans.
Tonui is GOGLA’s head of policy and regional strategy
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