Buyers to pay more for goods under proposed duty on paper

Industrialization cabinet Secretary Adan Mohammed addresses during the EPZ Investor's forum at Nyali International Hotel in Mombasa on March 26, 2014. Consumers could soon be forced to pay more for products if the government implements a proposed increment of duty on packaging materials imported from outside East Africa--a move mooted by the ministries of National Treasury and Industrialisation. FILE PHOTO | KEVIN ODIT | NATION MEDIA GROUP 

In Summary

• Manufacturers have, however, sounded the alarm that the move could do more harm than good to consumers who will be forced to shoulder the extra cost by paying higher prices for goods.
• Goods likely to be affected, according to manufacturers, include maize and wheat flour, bread, food and beverage, books, pharmaceuticals and tea.

By CHARLES WOKABI
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Consumers could soon be forced to pay more for products if the government implements a proposed increment of duty on packaging materials imported from outside East Africa.

The move, mooted by the ministries of National Treasury and Industrialisation, is intended to support revival of the defunct Pan African Paper Mills which was the region’s biggest supplier of the products before it went under several years ago.

Manufacturers have, however, sounded the alarm that the move could do more harm than good to consumers who will be forced to shoulder the extra cost by paying higher prices for goods.

In a statement on its website, the Kenya Association of Manufacturers said implementation of the proposed charge would trigger an increase of between five per cent and seven per cent on the final cost of products.

“Protectionism is not the way forward as the sector has many other industries which would be negatively affected such as paper converters who are equally important and must not be hurt inadvertently in efforts to save a fellow member,” KAM chief executive Betty Maina said.

Goods likely to be affected, according to manufacturers, include maize and wheat flour, bread, food and beverage, books, pharmaceuticals and tea.

PROTECTING PRODUCTS
The rationale used by the government in its decision to revive Pan Paper by protecting its products - instead of first rebuilding the company’s structure and assessing its capacity - has also been questioned.

Traders said introduction of high duty on imported paper puts Kenyan products at a disadvantage compared with other East African countries.  

It means that the country would be importing the product at 25 per cent duty, while her counterparts charge 10 per cent.

“Spare a thought for any company in the sector which had raised its competitiveness hopes based on the duty rate which had come down. Most companies had also reduced the price of packaging based on the reduction in duty,” Mr Mohan Krishnaswami, the chairman of the KAM Paper & Paper Board Sector, said.

The move also contradicts a recent decision by the EAC governments to restructure taxation on paper imports with a view to reflect the correct value chain position.

Stakeholders have also taken the position that those paper grades have never been produced locally, even when Pan Paper Mills was in operation, and should not be subjected to higher duty since they do not compete with the factory’s products.

They have organised a meeting with government officials tomorrow in a bid to try to reverse the proposal.