Uproar as State slaps 25pc duty on imported paper

Kenya: In what is seen as a rare policy shift, Treasury has slapped a 25 per cent duty on imported paper to protect the ailing Pan Paper Mills that collapsed more than five years ago.

The Government is upbeat the decision is critical for the survival of the local paper manufacturer that is currently under receivership.

However, experts warn that the duty will have a knock-on effect on key sectors that will see commodities prices shoot through the roof.

Treasury Cabinet Secretary Henry Rotich on Thursday said the decision was agreed upon between East African Community member states as a temporary measure to breathe new life into the paper manufacturer.

"We asked for a temporary arrangement to protect Pan Paper but if the firm does not have the capacity to produce paper while operational then we shall revert to the previous tariff (10 per cent)," Rotich told The Standard in a telephone interview.

Kenya has been a net importer of paper (95 per cent), the biggest input for printed books since the collapse of the Paper miller in 2009.

PRINT OFFSHORE

The Kenya Publishers Association (KPA) reckons that the move by the Government will see an increase in the prices of goods while local publishers will be tempted to print offshore where they don't pay taxes in countries such as India, Malaysia and China.

"The business of local publishers is coming to a halt. We are likely to see a lot of publishers print offshore to avoid taxes," KPA Chairman Lawrence Njagi said.

"We are looking at the prices of books increasing by about 40 per cent. We should tell parents to be ready because this decision is going to affect them. It is unfortunate that the Government is making the lives of Kenyans more difficult," he said.

East African Packaging Industries Limited Sales and Marketing Manager Meshack Dwallow said the new rates should be implemented after Pan Paper is revived.

"We are not convinced that the 25 per cent duty is to protect Pan Paper Mills. It is more to do with politics and profiteering by some unscrupulous individuals," said Dwallow.

Pan Paper has been moribund for the last five years. It remains unclear why duty on imported paper should be raised to protect a stalled firm.

"Why not revive the mill first and then impose duty on products that it deals with," he said.

Trouble for local paper manufacturers and converters began when Kenya imposed a 25 per cent duty on imported paper, making the country more expensive compared to Uganda and Tanzania, which all had a duty of 10 per cent.

Following pressure from Kenya Association of Manufacturers (KAM) and stakeholders in the industry, the three countries agreed to harmonise the duty on imported paper at 10 per cent.

However, Kenya has reverted to 25 per cent for a year to protect Pan Paper Mills.

"This decision will hurt local paper converters who will experience an increase in cost of production. It will also make Kenyan manufacturers noncompetitive in the East Africa region," said KAM  Chief Executive Officer Betty Maina.

This is especially so for those firms that use material that is not available within East Africa.