Why Kenya exports will attract higher tax

What you need to know:

  • Kenyan products to the European Union will begin to attract General System of Preference tariff rates. With effect from Wednesday, products to the EU started attracting export duty of between 4 per cent and 24 per cent.
  • As a result, the competitiveness of local products in the EU market is at risk. Goods to Europe will now be subject to customs duties of about Sh7.64 billion annually in taxes, or about Sh637 million a month. It’ll leave a huge dent.
  • Though EPAs should be signed by the EAC trade bloc, Kenya’s position is particularly precarious since the other EAC states are classified as least developed countries and will continue enjoying duty-free and quota-free exports to Europe.

As I write this, I am saddened. October is here and with it the end of a trade arrangement between Kenya and Europe that has lasted more than 30 years.

This was made possible under a trade deal extended to Kenya in the context of the preferential trade arrangement the EU extended to the African Caribbean Countries, first under four successive Lome Conventions (Lome I to IV– 1975 to 1999) and under the Cotonou Agreement trade regime (2000–2007).

Kenya, with other EAC countries, secured the continuation of duty-free market access to the European Union after initialling the Framework for Establishment of Economic Partnership Agreement (FEPA) in 2007.

Kenya was included in the EU Market Access Regulation among other ACP countries that signed or initialled the interim Economic Partnership Agreements (EPAs).

This new arrangement was premised on the understanding that the ongoing negotiations of the EPAs would be concluded as envisaged in the FEPA. The reality of the delay in the signing of EPAs is here.

Kenyan products to the European Union will begin to attract General System of Preference tariff rates. With effect from Wednesday, products to the EU started attracting export duty of between 4 per cent and 24 per cent.

CUSTOMS DUTIES

As a result, the competitiveness of local products in the EU market is at risk. Goods to Europe will now be subject to customs duties of about Sh7.64 billion annually in taxes, or about Sh637 million a month. It’ll leave a huge dent.

Negotiating the EPAs has taken a long time as the talks started in 2004. It is unfortunate that we have had to do this in a context where not all partner states in EAC had the same incentives, which would have informed the pace and positions adopted.

Though EPAs should be signed by the EAC trade bloc, Kenya’s position is particularly precarious since the other EAC states are classified as least developed countries and will continue enjoying duty-free and quota-free exports to Europe. That is not the case for Kenya, which is considered to be a developing country.

While EPAs may appear to be an issue that solely concerns cut flowers, 24 per cent of all our exports are at stake because they are destined for European markets. In addition, 95 per cent of Kenya’s horticultural exports go to the same market.

Cut flowers will suddenly be subjected to tariffs of 8.5 per cent, Fish will attract 6 per cent, pineapple juice and other fruit juices from Kenya will cost 11.7 per cent more for European clients.

Processed vegetables and fruits will attract more than 15 per cent duty. In a nutshell, the competitiveness of our goods in the European markets will be eroded by around 5 to 20 per cent.

In 2009, Kenya earned Sh998,666,798 in fruit juices alone. If we are unable to sell these goods in Europe, we will be staring at a one-billion-shilling loss. Our job base is also threatened. More than two million people are employed, or are dependent on horticultural alone.

Ms Maina is the chief executive of the Kenya Association of Manufacturers ([email protected])