Kenya to impose tariffs on steel, paper and furniture imports in plan to lift local firms
Authorities in Kenya are set to slap certain key imports with a new tax dubbed Export and Investment Promotion Levy in the latest quest to revamp local manufacturing, whose contribution to the national Gross Domestic Product (GDP) has been tanking in recent years.
The new tariff will make imported goods such as steel, furniture and paper costlier, but the pain will be music to the ears of local manufacturers of similar products.
The government is banking on this step to significantly expand the contribution of manufacturing in Kenya’s economy from the current 7.2 percent.
Kenya’s manufacturing industry recorded 6.9 per cent growth in the 12 months to December 2021 compared to a 0.4 percent contraction in 2020 during the peak of the Covid-19 pandemic. In 2021, the share of the manufacturing sector to the country’s GDP was 7.2 percent and the industry employed roughly 338,000 workers according to the 2022 Economic Survey.
The new taxes are mainly target companies importing paper, steel, and textile, products which Kenya has considerable capacity to produce locally.
In 2021, the textiles sub sector expanded by 1.6 percent on account of an increase in woven fabrics, knitting yarn, sacks and bags. Further, wearing apparel sub sector grew by 5 percent supported by higher production of shirts, jersey, pullovers, and cardigans which surged by 17 percent and 4.1 percent, respectively.
In the same year, the paper products sub sector grew by 10.4 percent because of a jump in volumes of cartons, boxes, and cases by 4.8 percent and exercise books by 24.6 percent. Equally, the production of toilet papers, corrugated paper and paperboard each went up by 8.8 percent.
The volume of iron and steel imports into Kenya has been rising from 1.37 million tonnes in 2017 to 1.59 million tonnes in 2019; 1.74 million in 2020 and 1.71 million tonnes at the time of publishing the 2022 Economic Survey.
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Local steel manufacturers have been calling on the government to slap huge tariffs on imported steel in a bid to cushion Kenya-based firms as they move to make the product locally while supporting the government agenda on creating jobs.
Trade Cabinet Secretary Moses Kuria said the Cabinet has approved a tax for imports that can be sourced locally.
“Every time we import things for which we have the local capacity, we are frustrating ourselves because our children cannot get jobs in our industries. When you see high unemployment, it’s because we stopped producing. Our manufacturing has shrunk from 9 percent to 7 percent of the GDP,” Mr Kuria said.
Mr Kuria said his ministry plans to set up trade offices and warehouses in 50 cities worldwide this year to boost export volumes and coordinate the marketing and sale of Kenyan goods in overseas destinations.
To this end, the CS said the government is aiming at the actualization of the tripartite trade agreement involving the East African Community, the Southern African Development Community and the Common Market for Eastern and Southern Africa and the renewal of African Growth and Opportunity Act which will expire in 2025.
Kenya is among 35 sub-Saharan African countries that have benefitted from the Agoa framework, which grants duty-free access to the US market since it came into effect in 2000.
Mr Kuria was speaking after meeting with an American delegation led by US Ambassador to Kenya Meg Whitman to discuss the US-Kenya 2023 priorities for economic growth.
“Our key sectors for this year include agriculture, apparel and information and communication technology,” Mr Kuria tweeted.