Cars are so ridiculously overpriced in kenya. Over here, the moment you drive a vehicle out of the dealership its value has already depreciated by 3%. In Kenya, you can use a Japan import for 5 years and later sell it for a profit. It defies logic!
The high taxes would only make sense if we had a motoring sector worth speaking of. However, what we have is a parasitic sector. Why would a Suzuki alto cost 650k?
In taxation theory, excise duty for example only makes sense if you have a sector or industry you want to protect from imports. It is absurd that we are levying excise duty on items we do t manufacture yourself.
A Subaru outback starts at high twenty thousands dollars in the US with a fully speced model going for an equivalent of kshs. 3.6 million. In Kenya, an eight year old outback starts at kshs. 3.5 million. Pale Subaru Kenya, bila 6m huwezi guza outback.
They need all the tax money so that they can steal most of it… They are improving tax collection efficiency but do nothing much on accountability of its usage and that is why they are so lethargic while recruiting the Auditor General… Most of these grandiose Government projects are simply avenues to divert the tax money into private pockets
Importer vehicles business chain employs far more people than the locally assembled ones.
And this is not sustainable. If done right manufacture is the cure for this import illness.
How is it not sustainable? Used cars are a big business everywhere not just Kenya. More money is to be made in used cars than overpriced, low quality new cars. Its not like the vast majority of Kenyans can actually afford the show room prices of vehicles to begin with!
As far as curing the import illness goes, the real target should be agriculture especially the importing of food. Excepting wheat, food crops should not be imported. Only raw materials for fertilizer manufacturing.
The country loses alot in importing such expensive goods like cars. The car manufacture chain will create more jobs than the import business. The same logic applies in establishing a working supply chain for apparel manufacture. The established value chain from the cotton farmers to the ginneries… To the designers… Manufacturers and associated activities will create more jobs and better paying jobs than the import of mitumba.
Used cars can be a secondary business… But the primary should be manufacture. One starts with commercial vehicles and as time passes graduates into passenger vehicles. The skills for such manufacture will have a, multiplier effect in the economy. Show me a rich non manufacturing nation? (City States do not count…) especially one with a coastline like Kenya and does not have oil/gold…
Wacha theories. Kenya is a country of poor people and will remain so in the foreseeable future. The policies ain’t right for manufacturing.
I guess we differ on the horizon called “foreseeable” clothes manufacture is coming. We shall compare notes when it does. You cannot satisfy the demand for jobs by a growing population with imports only.
You are a true revisionist. What you are saying is correct in theory. However, we have evidence on the ground that the intervening measures are not aimed at encouraging local production but rather provide funds to be stolen. There are people in charge of this country’s fiscal affairs who still believe they can tax their way out of any situation. I say this not as a theorist but as a man who has tried my hand in manufacturing nikaoneshwa moshi.
To your example, what is the govt doing to spur cotton growing for example? An honest answer to this question should settle this debate. We have a govt hellbent on taxing inputs to all the sectors. how does that promote local manufacturing and value addition?
There is a massive planting of cotton in the areas previously known for cotton. Keep in mind that there used to be Cotton and Lint seed board or something. SAPs from the west forced the local industry to die… “free trade” introduced the curse of mtumba and we have never recovered. The Govt has even allowed GMO cotton. Cotton was big in Ukambani and Luo Nyanza(ironically NASA strongholds. Maybe handshake is working).
The revitalization of the ginneries is underway. Rivatex etc. Allowing the Kitengela EPZs to sell locally is yet another step.
I also started a manufacturing company back in the day… Moi Days… And nilifunga pia baptism of fire. Hehehe… But a good adventure. In the new dispensation manufacturing is our future. Dare to dream my friend. Imports keep us enslaved. We need to chart our way. And when the younger folk grow up in a manufacturing environment they shall definitely exceed expectations and make it work.
About corruption… I have no solution. But we should not stop trying because kuna wezi. There was a time hata kuimagine the death of the president was treason. Who thought we would have the freedom to Diss him like we do here kila siku? That is why I know things change. And I shall be ready when this wave of manufacturing hits. It shall be very rewarding for those who will venture into it.
You see son, Kenyans are poor people so local consumption is somehow depressed. For perspective, when was the last time you bought a shirt or pair of shoes? It thus makes sense to produce both for local use as well as export but mainly for export. A problem thus arises in that your output will be least competitive as a result of the policies i alluded to earlier. Our is a case of putting the cart before the horse. Nowhere can you tax inputs and remain competitive.
Appreciate that steps are being taken. Nothing that major happens overnight. There are complexities to be overcome. And taxing of inputs is a myth. All manufacturers want zero taxes. We all do. But let us be honest if your profit margin is the tax rate boss wewe funga kazi. There is profit to be made. All we need is patient capital and it exists. Profits shall be made. My shopping habits do not figure in this debate. The billions that are spent importing from Turkey etc shall be the seed to get us going. If those articles of clothing find it hard to enter the country then a change will happen. Look at the local sourcing of uniforms. Its a start. It seals some corruption loopholes in procurement. (Likely the reason folk like imports…) The political and economic elite are also getting on the bandwagon. Meaning this will happen. And it will change the country for generations.
I think you are oversimplifying a very complex problem. You are making the assumptions that we will be competing with no one, consumers dont mind the cost and costs of production does not matter in the eventual pricing at least per your comment. There are reasons why someone would go for a suit from Turkey. Where are the profits to be made from?
Take sugar for example. Why would one buy Kenyan produced sugar for 130 per kg while Ugandan sugar is going for 70 bob? They are both produced from sugarcane. Unless you address the real reasons as to why Kenyan sugar is expensive, people will still import sugar. Another good example is milk and eggs from Uganda. Whereas farmers in Uganda are able to produce and sell at a fair price to their neighbours, Wakenya yao ni nduru tuu vile hawawezi pata soko. Why?
I am not familiar with the specifics of the UG situation. But what I know is that with the banning of mtumba our people will get jobs via making of clothes. The full chain will develop. Changing a society is far more than taxes. The Asian community that does alot of manufacture has never for a day failed to complain about taxes. But surprisingly they do not close their factories. They are expanding. Bidco is investing 2bn USD Kevian got investment of 5bn Kshs. The coconut oil processor got billions from Danish investors. Patient capital is the key. Not bank loans. Equity and managerial expertise. The sector will flourish. Sugarcane in Kenya is a political activity not an economic one. Once the brutal decision to close the inefficient ones and merge others I am sure sanity will prevail and prices will fall. Right now those factories are rent seeking opportunities for the political elite. Their failure is deliberate so that every 5yrs they are “revived”
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Uganda and Kenyans are technically in the same boat. The biggest reason you buy from Uganda is that their currency is weaker. It’s the same reason a European will come to Kenya to vacation.
What I’ve never been able to figure out is the suit from Turkey, Sugar from Brazil, some items from China(tyres?). Due to labor, currency, costs of inputs etc, production should be cheaper in Kenya. Then there is transportation, which can even take up to 30% of the value of the goods. And it’s cheaper than Kenyan products? How? Like we imported 8.9Billion of tissue paper in 2018. We import mpaka Dettol.
We can say taxes but I think with a smart accountant you can reduce your tax liability as a manufacturer. Kuna vitu kama rebates setting up in EPZ(or basically outside nai), rebates on capital goods, rebates on electricity, land etc. And it’s not like those other countries dont have taxes.
Inflation is the reason why. Using an avg inflation rate ya 5% p.a, 1M today would technically be worth 600K in 10 years. So let’s say you buy a car ya 1M today and sell it for 1.2M in 10 years. Without inflation, you would have made a profit of 2M. But if you factor in inflation, then you would have made a loss of 400K because 1M car 10 yrs later would be 1.6M(equivalent car). Or the 1.2M 10 years ago would be around 850K.
Get that smart accountant then invest halafu ukuje utwambie. By the way, some of us are speaking from experience after kunyoroshwa because of the structural problems. Anytime a country sets out to tax inputs rather than outputs, an environment is created where the cost of production is damn to high to kill competitiveness. Consider Kenyan farmers; they pays high taxes on fertilizer, seeds, pesticides etc na bado income tax inawangoja after harvesting. Worse, let them try to set up a cottage industry to add value. Upfront charges kwanza ziko juu then all manner of govt busybodies will line up to collect fees and levies without offering anything in return.
Explain to me why two importers; one from Kenya and another from Uganda would import clothes from China through the port of Mombasa but kenyan businessmen would rather follow the Ugandan to Kampala, buy stock and ship it back to Kenya and sell at prices lower than the Kenyan importer who trucks the same straight from Mombasa.