Most people analysing the Kenyan economy don’t just realize how common sense so simple can have such a big impact. I will give an example with two illustrations.
When Kibaki was president, he authorized the finance minister to zero rate motorcycle and computer equipment. You see to import 100 computers and one hundred motorcycle you paid only 5,000 Kshs IDF. Prices fell with a thud. In particular, a motorcycle had a landing cost of only 35k. A desktop computer only 20k.
Motorcycle guys only paid a deposit of 10k and paid monthly installment of 6k or 200 per day. This single policy made sure bodaboda are available in every village in Kenya. Together with Mpesa and mobile telephone it sorted out last mile logistics instantly.
Computers massively increased computer literacy to stratospheric levels. The information and communication sector hit 10% of the economy.
Fast forward to Uhuru’s reign, motor cycle were saddled with 10k import taxes, 16% VAT and railway development levy. This pushed the landing cost easily north of 60k. Together with a weak shilling, the landing cost is now 80k and the masses are paying for this bad policy. As a boda boda guy, you pay 20k deposit and 500 bob daily. You are literally a slave. Last mile logistics costs are now double compared to Kibaki’s years.
The main culprit for this is the SGR, railway development levy is charged on all imports but the railway is loss making at a tune of Kshs 20bn a year. To make matters worse, china runs it but the taxpayer pays the loan. Such a stupid policy decision.
If you look at every single sector new taxes were introduced. To import a Probox tax was 160k in 2008 but now it is approaching 300k, pickup import taxes were 220k in 2008, right now they are 600k.
So you see the common person in the rural area is very squeezed and his production cost prohibitive. Taxes are levied on agricultural inputs like fertilizer, pesticides and seeds. You see, Uganda and Tanzania’s cost of production is less than half that of Kenya, taxes on their vehicles are also half of ours, fertilizer and seeds are zero rated. So farmers in Uganda and Tanzania when you add their favourable climates, are a happy lot. A Ugandan farmer can sell maize at 1500 per 90kg bag and still make 50% net profit.
So you see the problems in Kenya don’t need rocket science they just need economists to use common sense and implement policies that can help increase production, cut down on waste of public funds and spend money in priority areas. We should be investing a lot of money in growing our exports both agricultural, processing and skilled labour. Having cheap internet and affordable electronic gadgets can double our GDP in a little less than 5 years. Right now our neighbouring countries are working hard to reduce their production costs. Here in Kenya we are preoccupied with raising taxes and killing businesses. If you started a business in Kenya in 2013 with a million Kshs, right now there is over 90% chance you are in debt of one million Kshs and your business is closed. Government officials are at war with businesses, too many bad policies have been passed by parliament. Little thought is put into consideration of how laws negatively affect businesses. Most of these laws just need to be repealed. They don’t make business sense and are driving businessmen insane.
Credit: CN