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Opinion
A VAT zero-rating would benefit the entire sector and in turn, enhance demand while creating more job opportunities.

It has been eight weeks now since the Kenyan government announced the national dusk to dawn curfew, and we’ve just passed close to 45 days of partial lockdown with the news that selected areas are going into harder lockdown.

This has affected a lot of businesses, including the clean cooking sector. As people are encouraged to isolate more and stay at home, this requires people to cook more often than they usually do, therefore, one might expect the demand for clean cooking technologies and fuels to increase.

Conversely, due to the strict measures and reduced incomes of households, the supply and demand for this have gone down, thus negatively affecting households and businesses in the sector.

Recently, the Kenyan government published the Finance bill 2020 that proposes a raft of changes including introducing VAT on clean cookstoves and LPG, which are currently VAT-exempt.

SEE ALSO: Consumers to pay more for goods as taxes take effect

This is in addition to the VAT earlier introduced on biogas systems. The introduction of VAT will have a significant negative implication on the clean cooking sector and will make –clean cookstoves out of reach of ordinary “mwananchi”.

A VAT zero-rating or exemption enables greater consumer adoption through enhanced affordability for energy-efficient and clean cooking technologies.

The proposed tax measures will greatly discourage further investments in the sector, deter potential investors, and hurt those who have already invested in the sector. This change will reverse immense gains already made by the government and the private sector to promote the adoption of these solutions and slow down the growth of the sector.

The vision of the Clean Cooking Association of Kenya (CCAK) is to see universal access and adoption of clean and efficient cooking solutions and practices in Kenya, through a sustainable market environment. We call on the government to amend the bill and further remove all taxes on cookstoves and fuels to ensure that customers have greater access to clean cooking solutions.

Clean cooking solutions create thousands of jobs and income opportunities to the manufacturers, distributors, retailers, sales, artisans among others. The renewed introduction of VAT on clean cooking products poses a huge threat and may lead to job losses in the sector.

SEE ALSO: Why proposed alternative minimum tax will sink most companies deeper

The East African member states might have maintained the import duty of solid biomass complete stoves at 25 percent, but inputs for local manufacture of stoves still attract VAT. This does not even constitute a significant portion of the cookstoves sold in the country.

A VAT zero-rating would benefit the entire sector and in turn, enhance demand while creating more job opportunities.
Exposure to air pollution, outdoors and indoors, is linked with approximately 4.9 million premature deaths worldwide. In Kenya, nearly 21,560 people die annually due to complications related to cooking with inefficient stoves and fuels like firewood and charcoal.

This is according to the statistics from the Kenya Cooking Sector Study 2019 commissioned by the Ministry of Energy and the Clean Cooking Association of Kenya in November 2019. The study also showed that 64.7 per cent (equivalent to 8.1 million) of households in Kenya still use wood as their primary cooking fuel.

These households are likely more at risk of diseases such as hypertension, chronic obstructive pulmonary disease, cardiovascular diseases, breathing trouble, diabetes, and acute respiratory infections in children, all of which increase complications once one is diagnosed with the coronavirus.

Cooking in the context of developing countries has commonly been framed as an environmental crisis linked to deforestation and forest degradation, due to the demand for the fuelwood and the charcoal. Up to 34 percent of wood fuel harvested is unsustainable, contributing to environmental degradation and climate change.

SEE ALSO: Proposed changes on VAT Act make it hard to claim input tax

Approximately 70 per cent of households in Kenya still use a type of woodstove as either their primary or secondary cookstove, with a greater prevalence of 92 per cent in rural areas.

The contribution of these fuels to land cover change depends on the rate of extraction and productivity of woody biomass in the affected regions.

While the focus is often on “natural forests”, affected areas include woodlands, shrubland, plantations, woodlots and other communally managed resources, as well as roadsides and riparian zones. This large percentage of the use of this fuel woods and charcoal has resulted in over 13 million tons of wood consumed by Kenyans annually.
Clean cooking is the key to an economically driven and healthy nation.

This is why CCAK is advocating for cleaner forms of cooking, especially now that huge percentages of people spend nearly their entire day at home.  Increasing consumer adoption of clean cooking technologies and fuels is good for people’s health and wellbeing, and the country’s economic development.

This will only be achieved through conducive public policies and regulations, constant government and sector engagements, technological improvements, and changes in behavior.
The writer is CEO, Clean Cooking Association of Kenya


Finance bill 2020

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