KNCCI warns of mass layoff over proposed eco-levy, excise duty

Head of policy research at the KNCCI Kiplimo Kigen. [Courtesy]

Industries have warned of mass job cuts should MPs pass the Finance Bill, 2024 without amendments to the proposed eco-levy and excise duty.

Kiplimo Kigen, the head of policy research at the Kenya National Chamber of Commerce and Industry (KNCCI) said members would either shut down, remodel their businesses to import finished goods or relocate to other East Africa Community (EAC) member states.

In an interview with The Standard, Kigen was categorical that this would lead to mass layoff.

“All KNCCI members are wondering whether to shut down, import finished products, or relocate to another EAC member state to access Kenya through the common tariffs,” he said.

He said KNCCI members do not expect major changes to the Bill in the National Assembly because the UDA administration is desperate to raise revenue to honour its foreign debt obligation.

After he swept to power in 2022, President William Ruto promised to create jobs by growing the manufacturing sector, which contributed 7.8 per cent to the GDP in 2022. In his first tour of the Coast as the Head of State to open the Sh30 billion Devki Steel Limited in Samburu, Kwale county, Ruto declared that by 2024, the sector would grow by 25 per cent.

KNCCI’s scenarios paint a picture of manufacturers ready to “accept and move on” over a Bill that has sparked hue and cry from most professionals, religious leaders, lobby groups, and Kenyans.

In the remote villages at the Coast, mothers also appear to have resigned to fate over the proposal to raise diapers’ prices by 30 per cent.

We meet Dama Charo, a mother from Dzikunze village, at Kilifi County Hospital, wrapping her two-month-old boy in a piece of cloth cut to fit him locally called “Kibinda” instead of diapers.

“A piece of diaper goes for Sh35, which is out of reach for most of us. If it is increased to Sh60 or Sh70, how do they expect us to afford it with this economy, it is back to our roots,” she said.

On Wednesday, a healthcare service provider said prices of disposable diapers have shot up by 300 per cent due to increased demand as Kenyans shun orthodox ways to wrap their babies.

“The demand for diapers by the middle class is high due to water shortage, and infections caused by wet towels and cloths in hot areas like the Coast,” said Mwanaisha Kheri, a nurse at Bamburi Homecare.

County governments have expressed concern over the use of 800 million diapers a year by Kenyans.

Battery manufacturers stare at an eco-levy of Sh750 per kilo of battery weight.

A small lead acid battery for a vehicle is 12 kilos, retailing at Sh8,500, and players in the sector say with the eco-levy of Sh9,000 and VAT, the price will shoot up to Sh17,500.

In a press release, Managing Director Association of Battery Manufacturers Guy Jack said that there would be a 120 per cent increase directly to the cost due to the proposed eco-levy. The eco-levy would increase the price of a 60kg solar battery by Sh45,000.

Jack warned that if the proposal passes in Parliament, the entire sector will be ruined.
“.. this is completely unsustainable and will result in the immediate destruction of the industry and subsequent closure of the entire Association Manufactures Group,” he said.

KNCCI and ABM challenged the government to explain how the tax would benefit the paying sectors.

Trendsetters Tyres Ltd opposed the proposed Sh1000 eco-levy for each imported rubber tyre, arguing that consumers will bear the additional cost.

Trendsetters Tyres Ltd Managing Director, Bharat Doshi, in a letter to the National Assembly, noted that tyre importers pay 25 per cent for passengers and 4x4 tyres and 10 per cent for truck and bus tyres.

In the letter to the National Assembly Clerk, Doshi said that they also pay 16 per cent VAT and warned that the eco-levy would increase landing costs, leading to higher prices of goods and transport costs.

“Please note that due to such policies and lack of support in taxes for local manufacturers, Sameer Africa had to close business. The same will result in many closing businesses…,” he said.