High and mul­ti­ple tax­a­tion, un­pre­dictable pol­icy, high cost of en­ergy and labour have ham­pered ex­pan­sion.”

The East African - - BUSINESS -

Phyl­lis Waki­aga, KAM in the do­mes­tic mar­ket, with Kenya for in­stance only manag­ing to ex­port 18 per cent of its man­u­fac­tured goods, with the EAC mar­ket ac­count­ing for six per cent and the rest of world 12 per cent.

More crit­i­cally, the struc­ture of the sec­tor has meant that it can­not with­stand shocks rang­ing from in­crease in elec­tric­ity tar­iffs, to high taxes, trans­porta­tion costs and more sig­nif­i­cantly im­ports from China.

The sit­u­a­tion of man­u­fac­tur­ers has not been made any bet­ter by the un­prece­dented surge in il­licit, sub­stan­dard and coun­ter­feit prod­ucts in the mar­ket, a men­ace that has hit some man­u­fac­tur­ers hard.

In Kenya, it is es­ti­mated that man­u­fac­tur­ers lose up to 40 per cent of mar­ket share, 50 per cent of rev­enue and 10 per cent of com­pany rep­u­ta­tion due to the pro­lif­er­a­tion of coun­ter­feits, with the gov­ern­ment los­ing about $80 mil­lion in tax rev­enue an­nu­ally.

In Kenya, the re­cent in­crease in elec­tric­ity tar­iffs by 30 per cent and in­tro­duc­tion of value added tax on petroleum prod­ucts is pos­ing real threats that could fur­ther crip­ple the strug­gling man­u­fac­tur­ing sec­tor.

“The busi­ness en­vi­ron­ment in Kenya is in­creas­ingly be­com­ing cost dis­ad­van­taged. To stay afloat, busi­ness will have to make very hard and dras­tic de­ci­sions of whether to shoul­der the ex­tra cost or pass the tax bur­den onto al­ready over­bur­dened con­sumers in or­der to meet their over­head costs,” noted Ms Waki­aga.

While do­mes­tic chal­lenges have been es­ca­lat­ing, the open­ing of the East Africa mar­kets to cheap im­ports has been the last straw on the camel’s back.

In­deed, a sur­vey by KAM early this year showed that 63 per cent of man­u­fac­tur­ers cited cheap im­ports as the big­gest threat to their com­pet­i­tive­ness.

Sta­tis­tics show the value of Kenya’s im­ports from China stood at $3.8 bil­lion last year with Tan­za­nia’s im­ports stand­ing at $1.5 bil­lion and Uganda $985 mil­lion.

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