New EAC tariff will catalyse manufacturing, says PS

Principal Secretary Kevit Desai during the inauguration of the Competence Based Education and Training (CBET) policy framework at Meru National Polytechnic on June 28, 2019. [File, Stanard]

Kenya expects the introduction of the 35 per cent Common External Tariff for the East African Community (EAC) partner states to catalyse its manufacturing sector.

Principal Secretary State Department of EAC Kevit Desai (pictured) said the tariff will see innovation and gains in the manufacturing sector including increased production and value addition.

He added that the Common External Tariff has access to 300 million consumers.

"That is equal to approximately Sh35.4 trillion ($300 billion) worth of Gross Domestic Product (GDP)," he said.

Dr Desai said this in itself is a remarkable opportunity as far as access to market is concerned. He said the tariff ensures there is a level playing field achieved and provides the region with the chance to nurture the entire industry.

The tariff, he says, will have an impact on 60 per cent of the existing manufacturing base.

The new tariff took effect July 1, 2022. The agreement is all member states of the EAC will cap their duty at 35 per cent for final or finished products.

There are 499 products that will be affected. It is however anticipated that while this may have a negative effect on the economy, it will not last long as more jobs will be created through increased trade and industrialisation.

The supply of the 499 products (tariff lines) affected is considered to be adequate within the region and can still be accessed either through EAC Free Trade Agreements(FTA) or other FTA between EAC member states that belong to another economic bloc like Common Market for Eastern and Southern Africa(Comesa).

Stakeholders have been in discussion for five years on the modalities of increasing the tariff from 25 per cent to either 30, 33 or 35 per cent.

"We listened to the needs of our growing industrialisation base," said Dr Desai. "The potential it has while it has not been significantly growing in the last couple of years, this effort by way of introducing the Common External Tariff increases its full potential."

The PS said the tariff will transform the manufacturing sector at all levels including textile, leather and finished products such as ketchup, steel and cement.

"This is one of the most important moments within the context of industrial development in the region," he said.

"The total net effect will be across the value chain. It will be in the services, trade, as well as the manufacturers and will put a strong foundation within the context of our export-led intervention."

Dr Desai said while this tariff is a huge shift in trade, it paves way for a brighter future.