Plants & factories exit Kenya over tax woes

Kenya's manufacturing sector is facing a significant challenge as over 30 manufacturing companies have closed their doors in under a decade. The CEO of Kenya Association Of Manufacturers, Antony Mwangi, expressed concerns over the crippling effects of taxes and cheaper imports that have led to this alarming trend. In a recent interview with CNBC Africa, Mwangi shed light on the exodus of these businesses and the potential impact on the country's economy. While some companies relocated to neighboring countries, others were forced to shut down due to unfavorable economic conditions. Mwangi highlighted that Kenya has been a key player in attracting manufacturing companies looking to shift their operations from China to Africa. However, the recent closures raise questions about what other markets are offering that Kenya may not be. Despite losing some companies, Kenya has also seen an influx of manufacturers from North America and Europe, indicating a complex landscape for the sector. One of the key concerns raised by Mwangi is the decline in manufacturing contribution to the GDP, which has dropped to 7.8% in 2022 from over 12% in the past. While this decline does not necessarily indicate a shrinking manufacturing sector, it does point to the faster growth of other industries like telecommunications, banking, and retail. The ripple effect of these closures extends to job losses and reduced economic output, emphasizing the crucial role of the manufacturing sector in Kenya's economy. The manufacturing industry serves as a significant source of wage employment in Kenya, employing an estimated 352,000 individuals and contributing approximately 18% to the country's tax revenue. The sector's interconnection with various other industries, such as retail and wholesale, underscores its importance in driving economic growth. Mwangi outlined a strategic plan to boost the manufacturing sector's contribution to GDP to 20% by 2030 through four key pillars: global competitiveness, export-led growth, SME development, and agriculture-industry focus. Addressing the challenges of a fluctuating fiscal climate and regulatory instability, Mwangi emphasized the need for a national taxation policy that offers stability to investors for at least five years. By creating a predictable fiscal environment, Kenya aims to attract and retain investments in the manufacturing sector, fostering long-term growth and sustainability. The upcoming 'Buy Kenya, Build Kenya' festival aims to showcase locally manufactured goods and promote the potential of Kenyan companies on a global stage. Despite the existing challenges, Mwangi remains optimistic about the opportunities that lie ahead for the manufacturing sector in Kenya. By leveraging the 'Buy Kenya, Build Kenya' initiative and collaborating with the government to address key issues like energy prices and taxation policies, the industry can overcome current obstacles and thrive in the evolving economic landscape. As Kenya navigates the complexities of global trade and economic dynamics, the resilience and innovation of its manufacturing sector will play a vital role in shaping the country's economic future.