Manufacturers on winning side in 2019/20 Budget proposals

June 21, 2019
Launch of the KAM-EY Budget Newsletter/ Courtesy

, NAIROBI, Kenya, Jun 21 – Noteworthy strides have been made to support critical policies to drive the economy and improve the competitiveness of the manufacturing sector.

The government, through the budget, made efforts to address issues affecting the sector including unfair competition from imports, the illicit economy and unpredictability in the policy and regulatory environment, with the objective to spur industry productivity and achieve the intended 15% GDP contribution by 2022.

Speaking at the Kenya Association of Manufacturers (KAM) Budget Seminar 2019, CEO Phyllis Wakiaga said the commitment by the National Treasury to adjust the VAT refund formula which has been a deterrent to exports to ensure full recovery of the portion of input tax relating to zero-rated supplies will incentivize Kenya’s exports and improve liquidity for manufacturers.

“‘The 2019/2020 Budget Statement proposes policies that are geared towards reigniting the manufacturing sector’s growth and development. The reduction of Import Development Fee (IDF) on raw materials and intermediate goods from 2% to 1.5% and increase IDF on finished goods from 2% to 3.5% will reduce the cost of imported raw materials, thus improving the competitiveness of local manufacturers against finished imports,” noted Wakiaga.

“The increment of Railway Development Levy (RDL) for finished products from 1.5% to 2% will also cushion manufacturers against imported finished goods,” said the KAM CEO.

She further stated, “The commitment by the National Treasury to adjust the VAT refund formula which has been a deterrent to exports to ensure full recovery of the portion of input tax relating to zero-rated supplies will incentivize Kenya’s exports and improve liquidity for manufacturers.”

Also at the seminar, Lawrence Lelei, Ministry of Industry, Trade and Cooperatives Representative said that the government remains committed to boosting Industry’s competitiveness.

“In order to achieve rapid and inclusive economic growth and expand job opportunities, the government continues to implement prudent fiscal and monetary policies to achieve a low rate of inflation, low but sustainable interest rate and a competitive exchange rate to further improve the business climate for the private sector to thrive,” said Lelei.

‘The amendment of the Income Tax Act to provide for a deduction of 30% of the total electricity by manufacturers as rebate will reduce the cost of electricity to manufacturers by about 20% to make our products competitive in the region,’ he said.

The Seminar reviewed manufacturers’ gains in the 2019/2020 National Budget Proposals and brought together industry stakeholders, economists and tax advisory experts.

KAM and Ernest and Young – East Africa also launched the Manufacturing Sector 2019/2020 Budget Newsletter, that seeks to outline the economic outlook of the National Budget proposals.

Francis Kamau EY Tax Leader & Partner noted that the newsletter will provide an opportunity for manufacturers to proactively review the budget proposals and the expected impact to the manufacturing sector.

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