TRADE

Comesa states urged to promote local content policy

In Summary

• Existing tax burdens hinder them from competing on a level playing field with neighbouring countries.

• Neighbouring states sell their products at relatively lower prices because they do not incur huge production costs.

Trade CS Peter Munya
Trade CS Peter Munya
Image: JACK OWUOR

Despite efforts to boost manufacturers’ contribution to Kenya’s GDP, a lot more still has to be done to improve the country’s competitiveness.

Speaking during the opening of the Joint Ministerial Meeting of Comesa Ministers, Industry and Trade CS Peter Munya said there is need for goodwill and commitment from political leadership, professionals, captains of industry as well as consumers.

“The region must develop and inculcate a preferential taste for its goods and services,” he said. Adding that appropriate policies would go a long way in supporting industrialisation, not only in Kenya but the entire Comesa bloc.

 
 

While manufacturers have been dubbed the biggest winners in the 2019/20 budget, existing tax burdens hinder them from competing on a level playing field with neighbouring countries.

According to Pwani Oil Products Limited commercial director Rajul Malde, the country’s manufacturers are currently being charged two per cent on raw material, while Tanzania, Uganda and Rwanda do not impose such tax on the local firms.

In his budget reading, CS Rotich announced plans to make our products more competitive while at the same time protecting local industries from unfair competition through improved customs measures under the EAC Gazette.

Some of them include cushioning local manufacturers by reducing the import declaration fee (IDF) on intermediate goods and raw materials used by manufacturers from two per cent to 1.5 per cent, while increasing the rate on finished goods from two per cent to 3.5 per cent.

While there is a 0.5 percentage point reduction in import duty on raw materials, it is still more costly to manufacture goods in Kenya as compared to her neighbours. 

“If the government removes these taxes, the cost of products will go down significantly. Currently, consumers have to pay more because of such charges,” he said.

Additionally, the government also charges 25 per cent duty to transport goods to other countries forcing manufacturers to price their finished products higher to meet their margins.

 
 

This, while competitors from neighbouring states sell their products at relatively lower prices because they do not incur huge production costs,” Malde said.

Rotich also proposed to raise the Railway Development Levy for finished products from 1.5 per cent to two per cent.

Munya told the ministers there was need to address local content policies and regulations.

This, he said, would appropriate economic instruments which could be employed to advance regional development by harnessing locally available resources.

“Comesa and Africa in general are endowed with vast resources- both material and human and it is time the region came up with strategies to harness these for their own development,” he said.