Finance Bill to kill local industries, lobby warns

Kenya Association of Manufacturers (KAM)Chief Executive Officer Anthony Mwangi. [Wilberforce Okwiri, Standard]

Local manufacturers have warned that some of the proposals in the Finance Bill, 2023 could force them out of business.

They say proposals such as the 10 per cent export and investment promotion levy on imports would hit many industries such as cement, steel and paper hard.

Giving their input on the Bill under the aegis of the Kenya Association of Manufacturers (KAM) to the National Assembly's Committee on Finance and Planning on Wednesday, they noted that if it is passed in its current state, it would significantly weaken local manufacturing.

They warned that the proposed tax measures could also result in an influx of imports from neighbouring countries.

"One of the key concerns in the Finance Bill, 2023 for manufacturers is levying imports to support exports. The products that will be subjected to this levy are critical to manufacturing processes," KAM Chief Executive Officer Anthony Mwangi told the Kimani Kuria-chaired committee. KAM said the proposed tax measures go against the government's commitment to supporting local manufacturing.

The lobby said raising the cost of raw materials would make locally manufactured products more expensive.

"If you look at cement manufacturing, for instance, one of the things earmarked for 10 per cent levy is clinker, which accounts for 70 per cent of what goes into making cement. Our cement will be 14 per cent higher than cement from other EAC countries," said Mwangi, adding that the move would open the door for cement from Uganda and Tanzania.

The Finance Bill seeks to grow tax revenues to fund the Kenya Kwanza administration's first budget of Sh3.6 trillion.

Chairman of the Budget and Appropriations Committee Dindi Nyoro said the government had reduced the budget deficit to Sh663 million from last year's Sh860 billion.

He, however, noted much as Parliament has tried striking a balance, it has been bogged down by the country's public debt, which stood at Sh9.39 trillion as of March, according to Central Bank of Kenya's data.

This resulted in a higher allocation to the Consolidated Fund Service (CFS), which is used to service debt, to Sh970 billion for the 2023/24 financial year.

Mr Nyoro said Parliament would tame the government's appetite for debt, even as it considers whether to raise the debt ceiling with the borrowing already nearing the limit of Sh10 trillion.

"We are not going to drown this country in debt," he said, adding that the government would increasingly borrow locally and avoid the costly international debt market.

Out of the Sh660 billion that the government is expected to borrow, Sh530 billion will be borrowed locally, which usually carries the risk of banks increasingly lending to the government at the expense of the private sector.