POWER BILLS

BIZ - Energy rebates to take longer amid Treasury changes

The programme allows industries to deduct 30 per cent of their electricity expenses from their taxable income

In Summary

 

  • A recent study revealed over 50 per cent of Kenyan manufacturers feel the sector is struggling to compete with cost of energy being a major concern 
  • Industrialization CS Peter Munya had set May as the commencement of the programme which is however yet to be gazetted
An aerial view of the industrial area in Nairobi/FILE
An aerial view of the industrial area in Nairobi/FILE

Manufacturers will have to wait longer before they start enjoying the much anticipated relief on power bills under the planned rebate programme, in the wake of changes at the National Treasury.

The document(regulation) that allows industries to deduct 30 per cent of their electricity bill from earnings, that is subject to taxation, is now sitting at the National Treasury Cabinet Secretary's table awaiting gazzetement.

However with the latest development at Treasury, which saw the arraigning in Court of CS Henry Rotich and PS Kamau Thugge, the document is likely to gather dust for the next few weeks or months before gazzetement.

President Uhuru Kenyatta on Wednesday named Labour CS Ukur Yattani as Rotich's replacement, on an acting capacity, with Dr Julius Monzi Muia as the Principal Secretary to replace Thugge.

The taking over is however likely to take time as they seek to pick from where Rotich and his team left, meaning majority of the processes will delay as key monetary issues including salaries and funds to county governments will being prioritized.

Industry, Trade and Cooperatives CS Peter Munya had in April, during the official opening of the Sh7 billion Mars Wrigley Confectionery factory in Athi River, said the programme would come into place in May.

Close to three months later, the initiative is yet to be effected even as high power prices continue to be blamed for making the local industries uncompetitive amid cheap imports and competition from neighbouring countries.

“We finalized the rebate programme and was approved a month ago by the committee. However, Treasury has to gazette it before it comes into use. Probably the CS was busy with budget issues,” Munya told the Star in an interview.

“Only Treasury can gazette the programme. WE have done our part now it is the mandate of the CS Treasury to gazzette,” Munya said, even as he called for patience while assuring of government's commitment in bringing the cost of power down.

The proposal was first announced in the Finance Bill 2018, allowing industries to deduct 30 per cent of their electricity expenses from their taxable income.

This is an initaive by the government to help cushion factories from higher costs, cut consumer goods prices and grow demand, as it remains supportive on manufacturers whom it is counting on in its Big Four-Manufacturing plan.

A recent study by global firm-SYSPRO and Strathmore University revealed over 50 per cent of Kenyan manufacturers feel the sector is struggling to compete with developed countries, with equal pressure coming from the East African Community (EAC).

About 54 per cent of manufacturers feel the cost of power affects them most, the report launched in Nairobi on July 3, revaled.

Kenya has the highest power tarrifs compared to neighbouring Ethiopia which has tariffs as low as $0.03(Sh3) per Kilowatt hour, with recent trends showing manufacturing have been or have considered ditching Kenya for Ethiopia.

Tarrifs in Kenya range between $0.15(Sh15) and $0.21(Sh21) per kWh, making local industries uncompetitive.

In Uganda, manufacturers pay $0.10(Sh10) per kWh while in Tanzania the cost of electricity stands at $0.14 (Sh14)per kWh.

Industrialization PS Betty Maina on Wednesday said with continued investment in renewable energy, including wind and geothermal, energy prices are likely to come down to between Sh10 and Sh12 per kWh.

“We are working on the prices. With more renewable energy in the mix we would see the prices coming down,” Maina said during a Kenya-India investment forum.

The Kenya Association of Manufacturers (KAM) has expressed optimism the rebate initiative would being down the cost of energy.

“We are hopeful the cost of energy will come down to make us competitive with other markets,” CEO Phyllis Wakiaga told the Star.