Increasing charges in the counties will stifle trade

Tomatoes on sale

Tomatoes on display at Muthurwa Market Nairobi on November 09, 2020. Tomatoes are among agricultural produce which could soon be subjected to offloading fees if the Nairobi City County Finance Bill, 2020 becomes law.

Photo credit: Dennis Onsongo | Nation Media Group

What you need to know:

  • Before the coronavirus broke out, businesses were struggling under the weight of increased cost of operation.
  • The new proposals are set to cause additional strain to an already grim situation in the aftermath of the pandemic.

Devolution heralded a new era for the economy as some government functions were decentralised. As a result, many parts of the country opened up, leading to increased trade, job creation and wealth.

These benefits have, however, come at a cost to many businesses. Understandably, since counties could not entirely depend on budgetary allocation from the national government, they had to create their own sources of revenue.

Enter county fees, levies and charges. Each unit set its own charges, some of which hindered the ease of doing business, through increased costs and overall unpredictability.

Recently, Nairobi County made proposals that are set to increase the cost of living as well as the cost of doing business. The Nairobi City County Finance Bill, 2020 proposes a raft of charges, to enable the county government to reach its revenue targets, for the financial year ending June 2021.

Some of the proposals include charging offloading fee for various agricultural produce, including tomatoes, flowers, macadamia nuts, French beans and avocado. Properties have not been left behind, with proposals to impose charges on transporting construction materials. 

The costs vary, for various materials, depending on their weight. Additional charges have also been put forward for the storage and sale of liquified petroleum gas (LPG), business premises including cafes, bars, chemists and shops based on size; and hazardous and non-hazardous waste management, for both homes and businesses which varies according to the amount.

Before the coronavirus broke out, businesses were struggling under the weight of increased cost of operation brought on by various permits and licenses.

The new proposals are set to cause additional strain to an already grim situation in the aftermath of the pandemic.

Let us take an example of the tomato, from farm to factory. The major tomato-growing areas in Kenya are Kirinyaga, Kajiado, Taita Taveta, Laikipia and Bungoma accounting for 51 per cent of the total tomatoes production in terms of value (KSh7,031 billion) and 41 per cent of production in terms of volumes (KAM Tomato Value Chain Report, 2018). 

High cost of production

With majority of factories located in Nairobi, this means that a farmer from, say, Kirinyaga, shall pay county fees from the source, right up to when it reaches the factory. This, coupled with the high cost of production - that is, high cost of inputs, traditional growing techniques, broker fees, high transport costs - makes our products more expensive. 

Eventually, farmers are forced to increase the price of their produce, without necessarily adding value to it, hence making our products less competitive in the local and regional markets.

This is the same case for manufacturers involved in value addition, to produce goods such as tomato sauce and paste. This is just one example among many.

We recognise both national and county governments’ need to raise revenue. However, the country is facing a pandemic, which has severely affected the economy.

Businesses faced severe cashflow problems and struggled to meet their day-to-day financial obligations. Imposing additional costs on them shall only rub salt on an open wound.

This might even force them to completely shut down and go out of business, leading to loss of jobs, and sources of revenue for government. We should recognise that this is a year of survival, it is business unusual. 

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