Kenya Offers Textile Firms Tax Incentives To Create Jobs

Nairobi  –   Kenya has started offering tax incentives to clothing companies to create jobs and provide affordable new clothes for shoppers, an executive in the industry said on Friday.

Jaswinder Bedi, head of Bedi Investments, a Kenyan firm, which exports clothes, said the changes included allowing them to sell 20 per cent of their annual production locally without sales taxes.

According to Bedi, it also included nonpayment of import duties on the materials and equipment used to produce the garments.

“The core essence of what the government is trying to do is trying to create a situation where you have affordable new clothes available to Kenyans,” he said.

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The Planning Minister, Mwangi Kiunjuri, had said, “The manufacturing sector is still facing some challenges with regards to cheap imports and the counterfeit goods.”

Kiunjuri said the government implemented new policies to encourage firms to boost production and hire more people.

The advent of cheap, second-hand clothes imports from the U.S. and Europe, locally known as mitumba, in the 1980s, put local apparel firms out of business and killed production of raw materials such as cotton.

The government has been paying more attention to the sector in recent years, offering cheaper electricity to textile firms in export processing zones.

The removal of sales taxes has resulted in thousands of consumers standing patiently in long queues for a chance to buy garments, which are normally exclusively exported to European and American retail chains.

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Kenya has the highest rate of youth joblessness in East Africa, the World Bank said, with 17 per cent of all young people eligible for work lacking jobs.

Neighbouring Tanzania and Uganda have comparable rates of 5.5 and 6.8 per cent respectively.

Formal manufacturing accounted for 9 per cent of Kenya’s $70 billion economic output last year, but it employed just 0.3 million people out of 45 million, official data showed this week.

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