Protect local industries, traders from unfair competition

Trade Cabinet Secretary call to ensure importation of what is being produced locally is taxed will not only spur growth in the sectors but help retain and create jobs locally.

Despite resistance from Europe and other quarters calling the move protectionism, there is no way some of the local manufacturers can survive without being cushioned.

That is not to say that we stop importation, but there is need to put in place policies to protect  domestic industries against foreign competition by means of tariffs, subsidies, import quotas and some restrictions to ensure we support growth.

The government wants to first target steel, paper, furniture, wire rods, billet products and later pharmaceuticals. The intent is it to help ease pressure on forex and force suppliers to either source them locally or face the tax-laden importation costs.

It has taken a bit of time since Trade CS Moses Kuria threatened last year to initiate the changes in January. It is yet to take effect since it needs Cabinet nod.

While most look at it as an avenue for the taxman to introduce new taxes, this will help the national Treasury get more resources to help meet targets to fund the ambitious Sh3.64 trillion 2023/24 budget.

If it will require public participation, this should not stop us from supporting the move because it is mainly meant to cushion Kenya’s domestic market, where most industries are at infancy and the economy having suffered from an influx of cheap products and abuse from competition.

It is important to note that supplies to industry account for a huge part of Kenya’s import bill with government data showing that compared to 2020, it had widened by 30.7 per cent to a whopping Sh2.15 trillion by December 2021, on account of high importation value under iron, steel, and industrial materials.

Hopefully, such a move will bring the much-needed relief to local steel millers so that the cost of these products which are key in the construction and manufacturing industries also goes down.

It, therefore, makes a lot of economic sense if these costs go down and spur activity in many other sectors of the economy. For example, steel is used to make beams and columns, reinforcement bars and windows and doors in the construction sector. It is also used to manufacture items for cooking and packaging, among others.

Though this move may attract some problems from other countries including Europe, China and in the East African Community (EAC) because we already have laws guiding us as a region, this is good for the economy in the long run.

While at it, the ministry which has hinted at the need to rejig the business of second hand clothes reveals shocking developments that need to be looked into to safeguard local traders.

That the trade in clothes popularly known as mitumba has since morphed, and most items being sold in Kenya are now from China. Granted, it is all about demand and supply issues in a free market economy. Chinese imports are also less costly.

However, some Chinese traders have decided to become importers, brokers and retailers of second hand clothes, taking over roles that can easily be carried out by Kenyans.

As the government considers sorting out the mitumba sector by setting up manufacturing plants and ensuring there is enough raw material to sustain the business and spur agriculture and manufacturing, it should protect local traders.

The same way the ministry of Trade wants to impose taxes and levies on imported products manufactured in Kenya to protect industries and increase revenue collection in the country, the Chinese retailers that dot most estates in Nairobi and beyond must be contained.

Kenyan traders cannot compete with them at all levels of the value chain, which is anti-competitive in many levels.

Even as we call for foreign direct investment, this is a case that should interest the Competition Authority of Kenya.

—The writer is the Business Editor, People Daily