•There have been concerns over the high exits by multinationals blamed on high cost of doing business.
•The call by Kepsa comes as President William Ruto moves to embrace Presidential Round Tables, previously used by his predecessors to address industry concerns.
Image: PCS
Kenya’s private sector wants the government to adopt the National Taxation Policy to provide tax predictability.
This is in the wake of high investor exits, mainly multinationals, which is seeking “friendlier” business environments in other countries.
According to industry players, an unfriendly tax environment, the high cost of doing business and increased competition from cheaper imports, has mainly driven the closures or scaling down.
The Kenya Private Sector Alliance (Kepsa) further says their need for increased support and financing to SMEs, and “an overall supportive environment that incorporates stakeholder inputs into the process of policy and legal intervention across sectors.”
Formulated under the previous regime, in June 2022, the policy aims at expanding the tax base to enhance fairness and equity in tax system, as well as embrace international best practice in tax administration, is pending full adoption.
It is also aimed at creating certainty predictability of tax rates and tax bases, enhance tax compliance, and reduce tax expenditure, among others.
The call by Kepsa comes as President William Ruto moves to embrace Presidential Round Tables, previously used by his predecessors to address industry concerns.
Kepsa and the government held two mini roundtables at the State House Nairobi this week where fifteen private sector leaders were present to discuss global competitiveness in various sectors of manufacturing including ICT, agriculture, international investors, tourism, labour, and financial services.
According to Kepsa, the outcomes of the two roundtables address critical bottlenecks in each sector and proposed interventions.
“Recognising the businesses' vital role in driving innovation, creating jobs, and stimulating economic growth, the President has affirmed the administration’s unwavering commitment to engage the private sector,” Kepsa CEO Carole Kariuki said yesterday.
This includes adopting the recommendations, including negotiating access to strategic markets to open up for Kenya’s exports.
“Leveraging the African Continental Free Trade Area (AfCFTA) will further help expand market access within the continent, tapping into the growing demand for high-quality products and services,” Kariuki said.
The third Presidential Roundtable will take place in May, to go through the progress report and add two more sectors for discussion.
According to Kepsa, the roundtables mark a major milestone and are a culmination of the ongoing deliberations under the Ministry of Industry, Trade and Investment that seek to collate different private sector issues affecting business costs, including the cost of raw materials, cost of utilities, labour productivity, logistics, and cost and tenure of credit.
Both Kepsa and the Kenya Association of Manufacturers (KAM) are keen to grow local industries, increase exports and cut reliance on imports, which have taken a toll on the country’s foreign exchange reserves.
Kenya remains a net importer with a widening trade deficit, which hit Sh1.62 trillion in 2022, the Economic Survey 2023 shows.
The country’s import bill rose by 17.5 per cent to Sh2.5 trillion against Sh873.1 billion in export earnings.
The exit of multinational companies from Kenya has become a major concern for both the private sector and lawmakers in the country.
Last month, MPs concurred with the private sector that the high cost of electricity, coupled with rising taxes, is to blame for the high number of multinationals fleeing the country, which is posing a major threat to the economy and job security.
In past one year, several companies have either shut down and relocated, or scaled down operations due to high taxes and operating costs that have hit cash flows.
They are opting to import from China, which is cheaper, or re-locating to Tanzania and Ethiopia.
“The high cost of power and lack of incentives had led to the current crisis and we are asking the President to intervene before more people lose their jobs,” Committee chairman James Gakuya had said.
At least 30 companies have shut down production plants in Kenya in the last decade, with major multinationals opting to import products produced cheaply at other jurisdictions such as Egypt.
These include Procter & Gamble, Reckitt & Benckiser, Colgate Palmolive, Cadbury, Johnson & Johnson, Eveready and GlaxoSmithKline (GSK) and Bayer, which in January this year announced plans to outsource its distribution and customer support operations for pharmaceutical products.
Manufacturers say on average, they pay about Sh22.53 per kilowatt-hour, compared to markets such as Egypt and Ethiopia where electricity costs average Sh3.97 and South Africa’s Sh9.28.
The Federation of Kenya Employers (FKE) says more than 70,000 jobs in the formal private sector have been lost between October and early this year, with more on the line.
FKE president Habil Olaka said the cost of doing business has become “unsustainable” since the enactment and implementation of the Finance Act 2023.
They want VAT on petrol, PAYE and corporate tax reviewed.