Local manufacturers have been handed a reprieve as Treasury introduces new policies to promote procurement of locally manufactured goods and reduce the cost of production.
In his Budget speech on Thursday, National Treasury Cabinet Secretary Henry Rotich presented a raft of proposals aimed at stimulating growth in the sector that has stagnated in recent years.
This is in accordance with the Government’s Big Four development agenda that has identified manufacturing as a key intervention sector to boost job creation and economic growth.
“We plan to increase manufacturing sector’s contribution to GDP to 15 per cent by 2022 by adding between Sh200 billion and Sh300 billion to our GDP and this is estimated to increase the sector’s jobs by over 800,000,” stated Mr Rotich.
Key among the beneficiaries are the special economic zones, with Government setting aside Sh400 million for leather industries and Sh400 million for textile development.
The revival of cotton processing plant Rivatex has also received a boost, with Treasury allocating Sh1.4 billion for modern equipment. Another Sh200 million was allocated to the New Kenya Co-operative Creameries.
In addition, Treasury has proposed energy incentives for investors subject to set conditions that will see the cost of production reduce considerably.
“We have cut the cost of off-peak power by half and we plan to implement modalities of bringing the cost of energy to about US cents nine per kilowatt hour for selected investors,” said Rotich.
Manufacturers will also benefit from amendments to the Income Tax Act that will provide opportunities for local producers to apply for a deduction of up to 30 per cent of the total electricity bill from the corporate profit in addition to normal deductions.
Manufacturers currently pay an average of US cents 15 per kilowatt hour, which has been cited as prohibitive to investment.
Local computer assemblers have also been handed a much-needed reprieve with a proposal to scrap VAT on parts imported or purchased for the assembly of laptops to be used in the free laptops programme for schools.
At the same time, the Government has introduced new levies on certain raw materials and products in a bid to provide incentives to local manufacturers.
This includes a 20 per cent levy on the export duty of copper waste and scrap metal, and a 10 per cent increase on import duty of paper and paper boards produced in the region from 20 per cent to 30 per cent.
Manufacturers of pesticides and clean energy cooking stoves will also be allowed to import raw materials duty-free, with developers putting up more than 100 housing units liable for a 15 per cent deduction on corporate tax.