Manufacturers have suffered a setback in their push to have the Treasury remove key import levies on raw materials and machinery starting July.
The Kenya Association of Manufacturers (KAM) has been lobbying for zero-rating of the Import Declaration Fee (IDF) and Railway Development Levy (RDL) on raw materials, with the resultant revenue hole in the exchequer covered by an increase in levies on finished goods. The Treasury has however rejected proposals to scrap the levies.
Industry secretary Adan Mohamed, who had earlier promised to lobby for industrialists, said the government will start by increasing import levies on finished goods before it considers a lower rate on raw materials.
“The CS, Ministry of Industry, Trade and Cooperatives emphasised that the government will begin with the increase in the IDL and RDL rates, and then later they would consider lowering the rates for raw mate,” KAM says in its brief to members.
In their quest to have the levies removed, local manufacturers had argued that the move would improve Kenya’s competitiveness in producing goods which stands at about 12 per cent higher than global standards.
“We are in a global world and if I am making a product here, you have the option to import and I am competing with everybody else out there,” said KAM chair Flora Mutahi. The lobby had proposed that the IDF on finished goods be increased to 3.5 per cent from 2.5 per cent, while RDL — introduced in 2013 to support heavy investments in the railway network — be doubled to three per cent.
“Adding RDL and IDF will disincentivise importation of finished goods but priority should have been on incentivising the industry to drive competitiveness.
They are saying raw materials will not be affected, but the minute you start having that differentiation, it brings complexity whereas we were looking for a simple solution,” said Ms Mutahi.
The lobby was keen to have the proposal included in the Finance Bill 2018 which will be presented to the National Assembly for approval next month.
KAM argued that the changes will improve the competitiveness of Kenyan-made goods in international markets.
Kenya’s imports stood at Sh1.725 trillion last year compared to exports of Sh530 billion.