The Battle of Taxes:Cooking Oil Tycoon’s Kenya Departure Threat

Foreign investors in Kenya’s edible oils manufacturing sector voiced significant concerns before Members of Parliament on Wednesday, May 29, highlighting the harsh business environment due to the government’s persistent increase in taxes. Among them was an investor who has been operating in Kenya since 2012 and expressed frustration over the government’s tendency to annually hike taxes through various laws and the Finance Bill. This investor hinted at the possibility of exiting the Kenyan market due to the escalating costs of local production.

“One of the key factors that attract me to a country as an investor is stability. Unfortunately, as a foreign investor in this country, I no longer find Kenya attractive,” he remarked.

This investor’s company has a long history, operating for over 86 years in 14 countries, yet it has never faced such instability as in Kenya. Recently, they expanded into West Africa, finding more favorable conditions there compared to Kenya. The investor underscored that despite challenges like currency devaluation in Egypt, the business environment remained stable without frequent tax increases, enabling sustainable operations.

“When we came here, I had a plan to expand the business but at the moment I am only looking to survive. I love this country but the taxes keep changing,” he emphasized.

Another investor in the manufacturing sector echoed these concerns, arguing that the rising taxes diminish Kenya’s competitiveness relative to other countries. This investor urged the government to refrain from taxing raw materials and instead tax finished products to lower manufacturing costs, which ultimately burden consumers.

“Go tax at the end of the value chain but if you tax raw products, you are destroying local production,” he added.

These investors are not alone in their grievances. Anthony Mwangi, the CEO of the Kenya Association of Manufacturers (KAM), also raised alarms over the Finance Bill 2024, suggesting that if enacted, it would lead to higher costs for various commodities for Kenyans.

In response to these concerns, President William Ruto defended the tax increases, asserting they are essential to reducing Kenya’s debt. “My drive is to push Kenya, this year will be at 16 per cent. I want in my term, God willing to leave it at between 20 and 22 per cent,” he stated on May 14.

The situation raises a crucial debate about balancing fiscal policy and creating a conducive environment for business growth. For Kenya to attract and retain foreign investors, it must address the stability and predictability of its tax policies. While reducing national debt is a legitimate goal, it must be weighed against the potential negative impact on local and foreign businesses, which are vital to the country’s economic health and job creation.

Foreign investors’ discontent suggests a need for a strategic review of Kenya’s tax policies to foster a stable and attractive business environment. Implementing predictable and fair tax regulations could help maintain and grow the investor base, thereby supporting sustainable economic growth. Additionally, considering alternative approaches, such as taxing end products rather than raw materials, might provide a balanced solution that alleviates the burden on manufacturers while still achieving fiscal objectives.

In summary, while addressing the national debt is crucial, it is equally important for Kenya to ensure that its economic policies do not stifle business growth and deter investment. Balancing these priorities will be key to securing a prosperous future for the country.