Kenya to benefit from UK’s import tax policy
Kenya is among African countries set to reap maximum benefits from the move by Britain to cut import taxes on hundreds more products such as clothes and food from some of the world’s developing states.
The Developing Countries Trading Scheme comes into force in January and builds on a scheme the UK was first part of while a member of the European Union. The United Kingdom in renewed appetite to trade with its colonies will see select states to reap from continued bilateral ties through the elimination of some of the trade barriers.
Only eight nations from sub-Saharan Africa mostly former colonies count UK in their top 10 export destinations, including Rwanda, Mauritius, Seychelles, Sierra Leone, Ghana, Mozambique, Kenya and South Africa. The Department for International Trade said themove is part of a wider push by UK to use trade to “drive prosperity and help eradicate poverty”, as well as reduce dependency on aid.
Last month, countries under commonwealth established the Africa Recovery and Resilience Plan aimed at catalysing a natural resources-led transformation of Africa.
Kenya Export Promotion and Branding said the likely impact for Kenya is that the provisions of tax-free market access will create a stable and predictable market environment for Kenya and specific export products of interest. “Tariffs (Duty) and taxes contribute towards the final cost and hence country competition (price competitiveness) in specific markets,” said Wilfred Marube CEO, Kenya Export Promotion and Branding Agency.
Already Kenya and United Kingdom have an Economic Partnership Agreement (EPA) that confers Duty Free and Quota Free access for many products to the market and for most of the products exported by Kenya.
Tax free access
However, the agency noted that, if the tax free access brings in other economies that export similar products (same tariff-line products) and currently do not have preferential market access, the preferences are likely to usher in some elements of competition among the countries.
According to the 2022 Economic survey the overall exports to UK in 2021 accounted for Sh49.4 billion.
Alcoholic beverages, motor vehicles; and paper and paperboard were some of the commodities which recorded increased expenditure from the United Kingdom” says the 2022 economic Survey.
Top imports to the UK from Kenya includes tea, coffee, spices, vegetables and cut flowers. Players in the sector experts say the move will likely boost exports to the UK.
“It is a lucrative business and with a wider market, avocado farming alone will support more than the four million people that currently depend on it,” said Ernest Muthomi, chief executive of the Avocado Society of Kenya, a lobby for farmers and exporter.
“UK exports to the Kenyan horticultural sector including farm machinery have declined after competition from India, China, and Turkey.
This is made worse because competitive credit terms have not been available for Kenyan importers,” said Ken Ouko, an analyst at Money Matters.
Total exports to UK have been on an upward trajectory rising a 15.5 per cent to Sh490 billion compared to Sh424 billion recorded during the same period in 2020.