BUDGET 2022-23

Uhuru’s team makes last attempt at job creation in final budget

Gives incentives to attract investments in manufacturing.

In Summary

• President had promised to create at least 1.3m jobs annually, even as he drove the Big 4 agenda of manufacturing, food security, universal health coverage and housing.  

• One of the best performances was in 2019 when at least 843,900 new jobs were created, according to the Economic Survey 2020.

National Treasury CS Ukur Yatani poses for a photo outside the Treasury before leaving for Parliament for Budget presentation on April 7, 2022.
National Treasury CS Ukur Yatani poses for a photo outside the Treasury before leaving for Parliament for Budget presentation on April 7, 2022.
Image: ENOS TECHE

Reduced investment and production costs such as electricity and taxes are expected to help reduce the cost of goods, easing the strain currently experienced by households.

In a last shot at creating jobs, albeit a little too late, President Uhuru Kenyatta’s administration has thrown its weight behind manufacturing by making it attractive to invest in the sector.

National Treasury CS Ukur Yatani on Thursday announced a raft of tax measures that are geared towards promoting the growth of industries and new investments, with Uhuru’s Big 4 agenda spilling into the next government’s tenure, for the financial year starting July 1.

In his 2022-23 budget speech at Parliament, CS Yatani kept off the usual exemptions on basic commodities that the common mwananchi had anticipated in the wake of skyrocketing cost of living.

He instead focused more on stimulating the economy and recovery from the Covid-19 pandemic. Most of his policies are anchored on the Medium-Term Plan III of Vision 2030 and creating an enabling environment for businesses and industrial recovery, job creation, and safeguarding livelihoods.

Manufacturers topped the list of big winners in the budget. Motor vehicle manufacturing, pharmaceutical industry, export processing zones, special economic zones, leather and textile industry, and fish processing were among the areas of focus by Yatani.

To promote manufacturing of pharmaceutical products, a sub-sector in health – one of the Big 4 pillars – Yatani has proposed to provide more incentives by exempting from VAT, plant and machinery for use by manufacturers.

He has also sought to exempt inputs and raw materials imported by manufacturers of pharmaceutical products from payment of Import Declaration Fees and Railway Development Levy, payable on all imports at 3.5 per cent of the customs value of the goods.

“This will encourage investment in the health sector and improve access to affordable healthcare services,” Yatani said.

To further reduce the healthcare cost, the CS has proposed to exempt from VAT medical oxygen supplied to registered hospitals, urine bags, adult diapers, artificial breasts, and colostomy or ileostomy bags for medical use.

“Government has been progressively addressing the cost of healthcare in the country so as to expand access to quality and affordable healthcare services,” Yatani noted.

Assembly of motor vehicles and manufacture of parts locally has also received a boost as Yatani moves to exempt from VAT inputs and raw materials used in the manufacture of passenger motor vehicles.

To promote industrial activities and create jobs in special economic zones, Yatani has proposed Sh2.6 billion for Dongo Kundu SEZ and Sh295 million for the development of the SEZ textile park in Naivasha, Kinanie Leather Industrial Park and Athi River textile hub.

Additionally, he has proposed to exempt locally manufactured passenger motor vehicles from VAT, which he says is a move to encourage more investment.

Yatani’s move answers part of manufacturers’ prayer who had hoped for the lowering of the cost of industrial inputs by reducing the rate of Import IDF and RDL levy to 1.5 per cent, respectively, for industrial machinery and spare parts.

According to the Kenya Association of Manufacturers, the levies increase the cost of imported spare parts and industrial machinery and other capital inputs, thus increasing the cost of investments and manufacturing in the country.

When spare parts and industrial machinery are imported into the EAC, IDF is waived for all manufacturers in the region except Kenya. This puts manufacturers in Kenya at a cost disadvantage,” KAM chief executive Phyllis Wakiaga noted.

Reduced investment and production costs such as electricity and taxes are expected to help reduce the cost of goods, easing the strain currently experienced by households.

Yatani’s Sh3.31 trillion budget, which heavily weighs on the Big 4 agenda—Manufacturing, Universal Healthcare, Food Security and Universal Health Coverage—also has significant allocations in key industries meant to create jobs, something the Jubilee administration has struggled with in the past nine years despite making big promises.

President Kenyatta had promised to create at least 1.3 million jobs annually, something that was never achieved.

One of the best performances was in 2019 when at least 843,900 new jobs were created, according to the Economic Survey 2020.

The Covid-19 pandemic wiped out these gains as more than 740,000 jobs were lost, according to the Economic Survey 2021.

According to Treasury, the number of employed people fell to 17.4 million from 18.1 million at the end of 2020.

Wage employment in the private sector declined by 10 per cent from 2,063,000 jobs in 2019 to stand at 1,856,000 jobs.

To promote industrial activities and create jobs in special economic zones, Yatani has proposed Sh2.6 billion for Dongo Kundu SEZ and Sh295 million for the development of the SEZ textile park in Naivasha, Kinanie Leather Industrial Park and Athi River textile hub.

Sh50 million will go to the Freeport and Industrial Park SEZ in Mombasa.

Other proposed allocations include Sh410.4 million for the modernisation of Rivatex and Sh3 billion for supporting access to finance and enterprise recovery.

Yatani has also proposed an allocation of Sh212.1 million for modernisation of cooperative cotton ginneries and a further Sh250.4 million for the cotton industry revitalisation.

The 2022-23 government spending plan includes Sh2.2 trillion in recurrent expenditure and Sh715.5 billion in development expenditures.

The total expenditure is however projected to range between Sh3.62 trillion (on the higher end) and Sh2.97 trillion at 95 per cent confidence interval, Treasury notes.

Edited by Josephine M. Mayuya

“WATCH: The latest videos from the Star”