In July of 2015, the World Bank confirmed Kenya’s lower-middle income status following the change in the way the size of its economy is calculated.
Since it achieved the lower-middle income status, Kenya has been exploring ways of attaining a higher economic status through investing in different key sectors.
Following the freshly released 2019-20 Financial Year Budget, it is clear that the government of Kenya will place a heavy reliance on the manufacturing industry among other key sectors as it attempts to further grow the economy.
In the 2019/20 financial year budget, the government has allocated USD 11 Mn for the development of textile and leather industrial park, Naivasha Industrial Park and Cotton Development subsidy. In addition, the government has allotted USD 17 Mn to support the growth of SMEs in the manufacturing sector; USD 4 Mn to Constituency Industrial Development Centers; and USD 10 Mn to modernize facilities in Kenya Industrial Research and Development Institute (KIRDI).
Treasury Cabinet secretary while delivering the budget in Parliament yesterday revealed that, “Government has completed the revival of one of the oldest textile company in Kenya based in Eldoret (RIVATEX) and it is expected to be launched in the coming weeks.”
Notably, the treasury CS also declared that the government has lifted VAT for Motherboards that have been assembled locally. The move, he said will transform Kenya into a major manufacturer and supplier of electronics and computers in the East Africa Community. The initiative is also expected to encourage positive competition which is healthy for the economy.
For a long time, a number of taxes have been imposed on tech companies in addition to the import duties normally imposed on all types of digital equipment. The new development will, however, go a long way in offloading the financial burden on local firms that specialize in the assembly of computer devices.
Rotich pointed out in his speech that the country is “positioning herself as a leading assembler of electronics and computers within the region.”
In a move to encourage investment in plastic recycling, the CS proposed to lower corporation tax to 15 percent for the first five years for any investor operating a plastic recycling plant.
Kenya has made tremendous efforts in protecting the environment. As it continues with its ambitious plan to curb extensive marine plastic pollution as well as land pollution, Rotich proposed to exempt from VAT all services offered to plastic recycling plants and supply of machinery and equipment used in the construction of these plants.
Over the past ten years, Kenya’s manufacturing base has remained static at 11 percent of the country’s GDP, and its industrial exports have decreased in absolute terms. The key changes made in the sector, however are expected to increase formal manufacturing sector jobs, boost exports as well as encourage more private investment which will then spur economic growth.
Industrial development remains inextricably linked to generating impetus in stimulating growth in Kenya’s economy. The country has previously placed a heavy reliance on agriculture and experts warn that if the case remains the same, the gains from industrialisation will be a long time coming for Kenya.
Featured Image Courtesy: Wamira Associates