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Economy

KRA crackdown stirs Nairobi’s grey economy

Anne Nyokabi, like many other downtown Nairobi traders, has in recent months been feeling the pinch after her goods were held at the Mombasa port in the wake of an ongoing crackdown on contraband goods and trade in illegal imports.

Ms Nyokabi, the chairlady of the Nairobi Importers and Traders Association, an industry lobby, estimates that the inter-agency crackdown has seen imported goods worth Sh10 billion blocked at the Mombasa port.

Some of the goods, belonging to thousands of small traders, have remained stuck at the port for months, slowing down the circulation of cash in Nairobi’s grey economy.

“We’re really suffering, yet we need to pay our loans,” Ms Nyokabi said, adding that her wholesale shop relies on imports from China and employs five people. Last week the businesswoman led a group of small traders in street protests demanding the release of the held cargo.

Ms Nyokabi’s shop, which deals in electrical products such as bulb holders, switches and cables, is slowly grounding to a halt.

She dismissed the common notion that most backstreet shops are trading in fakes.

“Our products could be pocket-friendly but that doesn’t mean they’re bad for use,” she said.

A visit to Duruma Road, where Ms Nyokabi’s shop is located, quickly reveals its kaleidoscopic economy, a composition of wholesale shops, bars, bus booking offices, eateries and even brothels.

Here, most merchants know each other by name and are quick to refer a buyer to the next shop down street should their shelves lack what the customer wants.

Yet among the majority smalltime traders and budget rental house developers, Duruma Road is largely known for cheap imported electrical appliances.

It pulls traders from as far as western Kenya, some 500 kilometres away, who buy wholesale stock for sale in retail shops back in their hometowns.

“We serve low-budget developers building low-cost rental units such as tin houses. Our products are reasonable in quality and price but some people would want to call them substandard or counterfeits,” Ms Nyokabi said.

Because of fair pricing, she said, the products serve the bottom of the pyramid market, without which rental prices would be out of reach for many poor urban dwellers since tenants often absorb building costs. She insisted that she promptly pays duty at the ports of entry and shouldn’t be expected to pay any further taxes.

Because hundreds of traders from across the country source their goods from these city backstreets, any paralysis of business could have a huge knock-on effect on towns outside Nairobi.

That was the case last Wednesday when the downtown city traders closed their shops to stage protests.

KRA boss John Njiraini

KRA boss John Njiraini. FILE PHOTO | NMG

Ms Nyokabi said that, like many traders, she had stopped making orders for new shipments fearing a repeat seizure of her goods.

“We honestly no longer know what is original and what is fake because all our products are targeted,” she said. The taxman has recently tightened the noose on suspected illegal traders and has adopted a multiagency approach to tackling market malpractices, including the sale of contraband goods.

The list of agencies involved in the campaign includes the Kenya Revenue Authority (KRA), the Kenya Bureau of Standards (Kebs) and the Anti-Counterfeit Agency.

“Non-intrusive scanners at key border points have helped detect suspicious items while the regional Electronic Cargo Tracking System that monitors transit cargo from the point of entry to the exit has eliminated offloading of undeclared goods in the local market,” the KRA said.

In May, the taxman and Kebs rejected applications for import licences from 33 firms citing non-compliance, further tightening the screws on suspect traders.

The taxman argues that unscrupulous traders have consistently sneaked in counterfeits and contrabands through cargo containers as they sought to lighten their tax burden for bigger margins.

Importers, exporters and clearing & forwarding agents are cautioned that if any counterfeit or concealed goods are found in a container or any package, the entire consignment shall be condemned and forfeited to the State for destruction,” the KRA said in a notice last month.

The small enterprises have faulted the taxman’s decision to destroy all goods in a container found with a few contraband items, arguing that only the illicit goods should be seized and the rest spared.

This is because a single container could carry goods for up to 10 different traders, giving them little control over what sits in the container.

Destroying all the goods simply because a few items were fakes amounts to punishing honest traders in the pool, they argue.

Besides custom duties, downtown merchants have for long evaded the taxman’s dragnet on their earnings because the informal sector is hard to police.

“Why should we pay taxes when the environment we’re working in is so poor?” Ms Nyokabi posed.

“Should I give my cash so that we have another NYS (National Youth Service) theft?”

To a not-so curious eye, Ms Nyokabi and her army could pass as smalltime traders whose financial struggles know no end, except they are not.

Their earnings are anything but modest, with a majority of the stall operators driving top-of-the range cars and living in posh city estates.

Perhaps as a pointer to their financial muscle and handsome returns, the goodwill fee payable when moving into the stalls, which acts as deposit, runs into millions of shillings, depending on shop size, besides monthly rent.

Despite the steep fees, hardly an outlet is vacant for long when an occupant leaves.

“We move the Nairobi economy. The money exchanging hands here is massive, besides the jobs we create,” Ms Nyokabi said.

The Nairobi Importers and Traders Association, which Ms Nyokabi heads alongside one Ben Mutahi, the chairman, has more than 150,000 members.

Their territory covers large areas of downtown Nairobi, including River Road, Nyamakima, Dubois Road, Kamukunji, Accra Road and the famous Gikomba market.

A 10-minute walk from Ms Nyokabi’s shop uptown lands you on yet another bustling street, popular with women. This one is well-known for beauty products, ranging from human hair, jewellery, wedding decorations, hair weaves and skin bleaching cosmetics. This is the territory of Beauty Emotions Cosmetics, a retail outfit housed in Perida Business Centre. Outside on the street are scores of sales representatives who make customer referrals.

“I have been affected a great deal. My goods have been lying at the port for months now,” says the shop owner, who does not wish to disclose her identity.

Next to Dubois Road stretches River Road, where again all sorts of beauty products, electronics, motorbikes and spare parts are found.

Treasury secretary Henry Rotich recently demanded that informal traders such as Ms Nyokabi pay upfront a presumptive tax of 15 per cent based on a single business permit fee when renewing their permits at county government offices.

The previous turnover tax made by small enterprises was a flop as most traders failed to make revenue disclosures.

Ms Nyokabi reckons that small traders like her need representation on the boards of the KRA, Kebs and the Anti-Counterfeit Agency to better explain that sector of the economy. It remains to be seen whether that is a wish authorities may find worth granting.

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