Sh18.3 billion set aside to promote local manufacturing

National Youth Service (NYS) Textile and Garment Technology Institute at NYS headquarters in Nairobi tasked with the production of face masks distributed for free as a measure to prevent the spread of corona virus, in Nairobi, on Friday, May 29, 2020. [David Njaaga, Standard]

The Government has set aside Sh18.3 billion to promote investments and protect the manufacturing industry.

At the same, the State has set aside Sh600 million for the purchase of locally assembled vehicles to safeguard jobs.

Presenting his maiden 2020/2021 budget yesterday, Treasury Cabinet Secretary Ukur Yatani said the allocations would promote the “Build Kenya, Buy Kenya” initiative.

“We propose an initial investment of Sh600 million to purchase locally assembled vehicles. This will sustain the operations of local motor vehicle manufacturers, which is aimed at safeguarding jobs,” said the CS.

He, at the same time, allocated Sh712 million to provide Micro, Small and Medium Enterprises (MSMEs) in the manufacturing sector with credit.

Of the Sh18.3 billion, Sh1.4 billion will go to the Kenya Industry and Entrepreneurship Project, Sh3.6 billion to the development of Special Economic Zone Textile Park in Naivasha, the Kenanie Leather Industrial Park and the Athi River Textile Hub.

Textile manufacturer Rivatex will also benefit from a Sh843 million allocation to support the modernisation of its operations, while Sh500 million will go towards supporting dairy processing.

Another Sh3 billion has been allocated to the Dongo Kundu Special Economic Zone.

The coronavirus pandemic has given Kenya’s manufacturing sector a reality check, exposing the country’s high dependency on imports, especially from China. The sector has been performing poorly, with its contribution to the Gross Domestic Product (GDP) – the sum of goods and services produced by a country – standing at 7.6 per cent in 2019.

Lowering rates

The Central Bank of Kenya has been lowering its benchmark rate since January, this year, to encourage banks to lend to the private sector in order to aid local manufacturing.

Yatani noted that Kenya has the capacity to manufacture baby diapers, but the inputs used in manufacturing the products attract import duty.

“In order to support manufacturing of the products locally, all inputs for manufacture of baby diapers will be imported duty-free under East African Community Duty Remission Scheme,” he said.

He also said that local production of new clothing and apparels including fashion and design, inputs used in the textile and apparel sector will be imported duty-free under the scheme.

He further added that inputs for assembly or manufacture of mobile phones will be imported duty-free under the scheme.