Ruto’s financial incentives for manufacturers and farmers

Prof. Njuguna Ndung’u, the Treasury Cabinet Secretary, has outlined a variety of initiatives to revive Kenya’s struggling manufacturing sector and encourage farmers to increase their output.

President William Ruto’s administration has targeted manufacturing and agriculture as industries for reforms that might spur economic growth and the creation of jobs for the young since taking office in September of last year.

According to the Economic Survey 2023, the agricultural sector in Kenya continues to be the foundation of the nation’s economy, contributing an average of 21.4 percent of GDP directly and up to 33.0 percent indirectly.

However, due to a lack of government action and problems brought on by climate change, the nation’s agricultural productivity has started to decline.

In order to increase agricultural productivity in the medium term, Prof. Ndung’u has suggested a range of initiatives, including giving farmers access to loans for working capital through cooperatives.

The government will also use contemporary risk management tools for agriculture that provide input financing and assistance with agricultural extension while also guaranteeing minimal returns.

The national agricultural value chain development project will receive Kes8.6 billion, and the fertilizer subsidy program and priority projects for the blue economy would receive Kes4.5 billion each in Prof Ndungu’s FY2023/24 allocations.

Read also: Specter of climate change pushes 55 million to hunger on the Horn of Africa

Kenya’s grain enhancement program will receive a total of Kes2.1 billion, while the national agricultural and rural inclusion initiative will receive Kes2.7 billion.

The emergency locust response, without which farmers’ efforts may be in vain, as well as programs aimed at enhancing animal productivity, will each receive Kes4.5 billion.

Under manufacturing, Kenyan manufacturers will gain an advantage over rivals by imposing higher excise duties on imports of goods that are otherwise made in Kenya.

Prof. Ndung’u stated that Kenya will postpone for one year the implementation of the EAC Common External Tariff (CET) import tariff rates in his budget statement on Thursday, June 15.

Importers will now be required to pay import duties on rice (35 percent), imported iron and steel (35 percent), and vegetable items (35 percent).

In addition, importers of baby diapers will be required to pay 35 percent in duty, as well as 35 percent for leather and footwear products, 35 percent for paper and paper products, 35 percent for wood products like plywood and particleboard, which cost between $120 and $200 per metric tonne, 45 percent for furniture, 35 percent for plastic and rubber products, 25 percent for smartphones, and 10 percent for billets.

Additionally, the CS National Treasury has recommended amending the EPZ Act and the SEZ Act to exempt goods sold in the local market by EPZs and SEZs from import duties to the extent that those commodities use raw materials or inputs from the EAC.

However, according to advisory services firm PwC, “exempting their supplies within the customs union from import duty may result in an uneven playing field for manufacturers outside the preferential economic zones.”

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