The government is banking on special economic zones (SEZs) to spur growth of industries in the counties in a move that could help the manufacturing sector recover from a difficult operating year.
According to the 2021-22 Budget presented by National Treasury Cabinet Secretary Ukur Yatani yesterday, the government has set aside Sh20.5 billion for the promotion of local industries through various ministries.
This includes Sh8.3 billion allocated to the Dongo Kundu SEZ, Sh1.4 billion to the Kenya Industry and Entrepreneurship Project and Sh448 million to the Kenya Industrial Research Laboratories.
Others that have received cash injections include the Naivasha Industrial Park, Kisumu SEZ in Miwani, Naivasha Textile Park and Athi River Textile Hub.
Mr Yatani said previous tax incentives for the automotive industry such as removal of excise duty on locally-assembled vehicles, duty-free importation of Completely Knocked Down kits and reduced corporate tax from 30 to 15 per cent have borne fruit.
“The industry has responded positively to these interventions and to date, we have approved 13 motor vehicle and 17 motorcycle assemblers,” he said.
“These local assemblers have created employment opportunities while also saving the country substantial foreign exchange.”
Yatani said the government is working on comprehensive policy and administrative reforms to grow local assembly, particularly in the passenger vehicle category where 70 per cent of the vehicles are used imports.
“The government is working on a framework to support the assembly of affordable passenger vehicles,” he said.
"In consultations with stakeholders, the government is in the final stages of instituting comprehensive policy and administrative reforms to fully entrench local assembly of motor vehicles and motorcycles.”
Other initiatives that are expected to spur local manufacturing include extension of the duty-free window for the importation of inputs for manufacturing roofing tiles under the East African Community (EAC) Duty Remission Scheme.
EAC partner states have also agreed to extend the duty-free importation window for raw materials and inputs for production of masks, sanitisers, ventilators and personal protective equipment for a further one year to help the ongoing fight against the Covid-19 pandemic.
Manufacturers of iron and steel products will also have a reason to smile after the government retained tax on imported products in tandem with the rest of the EAC region.
“We have developed sufficient capacity for local manufacturing in the metal and allied subsection but the local manufacturers in this sector continue to face stiff competition from cheaper imports,” Yatani said.
“In order to continue protecting this sub-sector, the EAC partner states agreed that imported iron and steel products shall continue attracting a duty rate of 25 per cent with the corresponding specific rates for a further one year.”
Additional allocations to State departments along the manufacturing value chain include Sh3billion for the Credit Guarantee Scheme.
Textile manufacturer Rivatex has also received a shot in the arm ofSh130 million for modernisation and another Sh50 million for the cotton development and subsidy programme under the Eldoret-based corporation.