Manufacturers welcome EAC plan to cut business costs

By Luke Anami

Kenyan Manufacturers have termed this year’s East Africa Community budgetary proposals as good for future business.

Chairman, Kenya Association of Manufacturers (KAM) Polycarp Igathe termed the budget as progressive, adding that majority of the proposals will be realised in the long-term.

“All the EAC budgets have made provisions for long-term plans that will definitely benefit manufacturers,” he said in an interview with The Standard.

“Take the issue of Sh78.5 billion for scaling up investment in reliable and affordable energy, of which Sh12.5 billion will be for geothermal development and Sh23.8 billion for enhancing power transmission.”

“These are long-term plans that will help reduce the cost of energy in the long run,” Igathe said in an interview with The Standard.”

 regional market

He also cited plans for more houses, whose construction will benefit  manufacturers. On the EAC front, Uganda’s reduction of industrial inputs list from 138 to 49 items was also viewed as a good gesture.

 “The move by Uganda to reduce the so called “Uganda list” from 138 to 49 is a move in the right direction. As our National Treasury Cabinet Secretary Henry Rotich said, we will be able to compete by marketing our products in Uganda,” said Igathe who is also the Managing Director, Vivo Energy Kenya, formerly Shell Kenya.

“The industry is relieved by the reduction of items on the Uganda list in as much as it would have been better if the list had been completely obliterated to allow all manufacturers in the region to compete on an even platform,” noted KAM Chief Executive Officer Betty Maina.

 She said the Uganda list was created to protect fledgling industries in the landlocked country when the EAC adopted the Common External tariff (CET). The list consists of duty concessions on items that required protection before they could compete in the EAC region.

Rwanda and Burundi have similar lists.  Industrialists also celebrated the increase of import duty on laminate tubes used for packaging toothpaste and cosmetics, welding electrodes and millstones and grindstones to 25 per cent. 

“An increase in duty on laminate tube imports will protect local manufacturers from cheap imports,” Ms Maina said. The State, with a total expenditure of Sh1.64 trillion plans to finance a deficit amounting to Sh356.9 billion by net foreign financing of Sh223 billion and Sh106.7 billion net borrowing from domestic market.  KAM chairman however cautioned that the Government against borrowing from the banks as the move will crowd them out of banks.

“I am worried how the Government will finance a deficit of almost Sh400 billion. We suggest it flouts bonds instead of borrowing from banks because we will not be able to compete against it,” Igathe explained.

Another bone of contention for manufacturers has been the elimination or reduction of tariffs on items such as carbonated soft drinks and juices.  KAM said before the adoption of the CET, synthetic concentrates used in the preparation of beverages were duty free but are now charged a 10 per cent import duty. 

“These concentrates are unavailable in the region and the duty imposed renders local juices uncompetitive, allowing juices from the Comesa region to flood our supermarkets ” Ms Maina opined. 

fiscal measures

Tanzania’s Minister for Finance and Economy Dr William Mgimwa in his budget announced the Government’s emphasis on infrastructure projects and pro growth fiscal measures, designed to drive economic growth to seven per cent during 2013. Other priorities include anti-inflationary and investor friendly policies.

Dr Mgimwa also proposed to VAT exemption on some tourism components like tourist guide, bird watching, tourist charter and goods produced through use of cotton.  The move is likely to benefit locals from Kenya who prefer Tanzania as a tourism destination.

 Rwanda’s Finance and Economic Planning Minister Amb Claver Gatete Budget focused on infrastructure and agriculture.

Local manufacturers believe Rwanda presents an opportunity to export material and expertise from Kenya to Rwanda.