This archive report was first published on 12 July 2021.
Kenyan manufacturers are struggling to stay afloat amidst the Covid-19 pandemic, with new tax increments and high power costs adding to their woes.
According to a report by the Kenya Association of Manufacturers (KAM) and KPMG, the pandemic has had a devastating impact on the manufacturing sector, with many businesses experiencing reduced demand, depressed production capacity, cash flow constraints, logistics challenges, and in some cases, downsized workforces.
The survey, conducted between May 2020 and June 2021, revealed that 66% of firms negotiated payment plans with their suppliers in 2020, but only 27% did so in 2021. Similarly, the number of firms that reached out to commercial banks to restructure their loans more than halved in 2021.
"In comparison to 2020, enterprises are currently operating without the economic reliefs that cushioned them last year against the adverse effects the pandemic visited on businesses," said Mucai Kunyiha, chairman of KAM.
"While the factors increasing costs of manufacturing are largely external, the Government can alleviate the pain by reducing the cost of electricity to Ksh9/KwH for manufacturers," Kunyiha added.
He also called for zero-rate Import Declaration Fee and Railway Development Levy for raw materials and intermediate inputs for processing, including for industrial machinery and spare parts.
However, the government has introduced new taxes, including a 20% excise duty on airtime and data, which will raise at least Ksh8 billion from Safaricom, Airtel, and Telkom Kenya.
Julius Kirima, Director for Industries at the Ministry of Industrialisation, Trade and Enterprise Development, defended the government's decision, citing reduced revenues and pressure to slow down or halt development projects.
