The government plans to zero rate both the Import Declaration Tax and the Railway Development Levy on all imported raw materials to be used in manufacturing processes locally.
The revenue shortfall will then be recovered by increasing tax on imported finished products.
This according to Industry and Trade Cabinet Secretary Adan Mohammed will cushion locally produced goods from unfair competition posed by cheap imported goods.
Over the last few years, Kenya has made huge strides in creating a conducive business environment by among others cutting government red tape and enhancing the turnaround time in registering of businesses.
However, the contribution of the manufacturing sector to the GDP still remains low at an average of 13 percent.
With imported goods at times cheaper than similar locally produced goods, the government has moved in to correct this and plans to zero rate taxes on imported raw materials while increasing taxes on imported finished commodities.
To further protect local investors, the government is further looking into streamlining and fast-tracking VAT refunds to manufacturers as well as lowering charges at the port.
This is in addition to the on-going random container inspections at the ports and border entry points to curb cheap counterfeit goods.
Among other factors, little innovation in manufacturing has also been blamed for the slowed growth in the sector, with many large-scale industries still engaged in traditional businesses.
To further grow the sector, manufacturers are being urged to build local skills set on potential investment opportunities, diversify products as well as go beyond the local and regional market which is said to be already saturated.
In line with the government’s Big Four Plan where manufacturing is one of the priorities, the Kenya Association of Manufacturers (KAM) has launched the 2018 Manufacturing Priority Agenda which focuses on five pillars including Competitiveness and level playing field, Export driven manufacturing, Pro industry policy and institutional framework, Government driven SMEs development as well as Securing the future of the manufacturing industry.