NAIROBI, Kenya, Oct 19 – The government is losing about Sh21.36 billion in Value added tax and other taxes from illicit trade in the textiles and apparel market yearly, according to a report by Kenya Association of Manufacturers.
The Association’s Deep Dive report further indicates that Sh48 billion is lost through products that do not pass through customs, which is about 2 times the value of the local textiles and apparels manufacturing turnover.
The high cost of electricity is also another major challenge in the sector, with the report estimating that it accounts for as high as 40 percent of the unit cost of manufacture.
According to the report, this cost is too high as compared to other key textiles and apparels manufacturing companies.
The different taxation regimes, which include EPZ and non-EPZ manufacturers, has created uneven playing fields for textiles and apparel manufacturers.
“Hence, non-EPZ manufacturers cannot compete with the highly incentivized products from EPZ manufacturers,” says the report.
Other challenges highlighted in the report include a lower productive workforce as compared to global competitors and lack of fiscal and monetary interventions to drive the export market development.
Kenya’s annual turnover of the apparel subsector is about Sh38 billion, while the textile subsector is estimated to be Sh24 billion.