BUDGET 2020/21

Manufacturers laud Yatani's 2020/21 budget

Welcomes measures to protect local industries.

In Summary

• KAM is pleased with the allocation of Sh128.3 billion to enablers and drivers of the agenda and specifically Sh18.3 billion to the manufacturing sector.

• Manufacturers are, however, concerned over tax measures that will negatively impact liquidity and financial sustainability of the private sector, a time when they are struggling with Covid-19.

Treasury CS Ukur Yatani outside Parliament Buildings on June 11, 2020.
BUDGET: Treasury CS Ukur Yatani outside Parliament Buildings on June 11, 2020.
Image: /FREDERICK OMONDI

Manufacturers have lauded part of government’s spending plan in the next financial year starting July 1, albeit poking holes on some tax measures in the 2020-21 budget.

The sector’s lobby group Kenya Association of Manufacturers is pleased with prioritisation of the Big Four agenda in the Sh2.79 trillion budget read by Treasury CS Ukur Yatani on Thursday.

KAM is pleased with the allocation of approximately Sh128.3 billion to enablers and drivers of the agenda and specifically Sh18.3 billion to the manufacturing sector.

 

KAM would like to commend the government, even in a fiscally constrained environment, for instituting measures to contain the economic fallout, as a result of the Covid-19 Pandemic,” it said in a post-budget statement.

Specifically, bail out tax incentives (Sh172 billion) and the economic stimulus programme of about Sh53.7 billion has gone down well with industry players.

We also welcome the government’s move to prefer concessional loans as they are cheaper in terms of interest cost, compared to non-concessional loans,” KAM notes.

The sector is among the biggest winners in Yatani’s budget in which Treasury has announced a raft of measures to protect local industries mainly steel, textile and leather sectors.

To promote local production of new clothing and apparels, including fashion and design, inputs used in the textile sector will be imported duty free, the CS announced.

Inputs for manufacture of mobile phones will also be imported duty free under the East African Community Duty Remission Scheme.

Some sectors will benefit from the move to lower cost of imported raw materials,” KAM says.

 

To protect the leather and footwear sector, imports of such products will be slapped with a specific rates of duty in addition to 25 per cent duty rate, which were granted last year.

This will also safeguard government revenues by curbing under valuation on such imported products,” Yatani said.

Treasury also plans to protect the local metal and allied sector which according g to the CS, it continues to face stiff competition from imported iron and steel products.

In order to protect the sector, the rate of import duty of 35 per cent with the corresponding specific rates on a wide range of these products have been maintained for another year.

The paper and paperboard production has also been cushioned from external competition with Treasury maintaining the import duty rate at 25 per cent for another one-year.

Kenya has sufficient capacity to produce paper and paper board products,” Yatani said.

KAM chief executive Phyllis Wakiaga yesterday said the move will “enhance the protection of local industries from unfair competition, from subsidised, dumped and sub-standard imports.

Yatani is also keen to protect local producers of electrical parts and accessories. In this regard, he has raised duty on imports to 35 per cent from 25 per cent on such products for one year.

KAM is, however, concerned the proposal to introduce a minimum alternative tax of one per cent will spell doom for loss-making businesses that are struggling to remain afloat during this difficult period.

The Sh3 billion support to micro, small and macro and an allocation of Sh712 million in the manufacturing sector has been welcomed.

However,it may only guarantee for a small percentage of those in dire need of financial support for rebound, according to manufacturers.

Over 80 per cent of private sector players are in micro, small and medium levels.

The proposed measures to reduce tax incentives, which the National Treasury estimates to amount to Sh535 billion (six per cent of GDP) has also not gone well with manufacturers.

"Introduction of these measures will negatively impact the liquidity position and financial sustainability of the private sector at a time when they are struggling with the impact of Covid-19, KAM said.

Meanwhile, manufacturers have welcomed the government's plan in preparation of the nation’s post-Covid- 19 economic rebound strategy.

“The Association is keen and ready to work with the government in the development of the strategy and its actualisation,” Wakiaga said.