Kenya's President Uhuru Kenyatta and Deputy President William Ruto at
the Lake Region Economic Bloc conference in Bomet, in teh Rift Valley,
on October 22, 2018. Analysts say the 2019/2020 budget did not factor
the needs of smallholder farmers. President Uhuru Kenyatta’s Big Four
agenda informed many of the proposals in the budget. PHOTO | FILE |
NATION MEDIA GROUP
The Kenya government’s pet projects under the Big Four Agenda —
critical to President Uhuru Kenyatta’s legacy — were allocated $4.3
billion from the $28 billion 2019/2020 budget.
In
his speech in parliament this past week on Thursday, National Treasury
Cabinet Secretary Henry Rotich said this year’s budget “lays a strong
foundation for achieving the president’s Big Four agenda.” The
allocation represents less than 14 per cent of the total budget.
The
projects are supposed to ensure universal health coverage, affordable
and decent housing, to increase the manufacturing contribution to the
economy from 9.8 per cent to 15 per cent and guarantee food and
nutrition security by 2022. However, the majority of these projects are
behind schedule.
Universal health
coverage got $906 million; manufacturing $40.8 million; affordable
housing $183 million; and food and nutrition security $177 million. Despite
the increase in allocation, analysts say the amount substantially falls
short of the resources required for successful implementation.
In
a statement, Layla Liebetrau of the Route to Food Initiative project
lead, said Mr Rotich’s budget was not responsive to the needs of Kenya’s
smallholder farmers, who despite consistently producing over 70 per
cent of its food, are worst affected by poverty.
MORE TAX
The
government introduced tax measures projected to generate an additional
$360 million for the exchequer, but with far-reaching ramifications for
poor Kenyans.
These include
increasing corporate gains tax from five per cent to 12.5 per cent,
expansion of the withholding tax scope targeting people like security
guards and those offering cleaning and fumigation services, catering and
sales promotion.
The government also
once again imposed punitive sin taxes, such as excise duty on betting
activities at the rate of 10 per cent of the amount staked and 15 per
cent on cigarettes, wines and spirits.
However,
in efforts to ease the burden on manufacturers and enable the country
to regain some competitiveness, Mr Rotich reduced the rate of value
added tax withholding from six per cent to two per cent to help reduce
the build-up of VAT refunds, which have badly affected cash flow in
businesses.
“The large accumulation
of VAT refunds has impacted negatively on the cash flow and liquidity of
our manufacturers and the business community at large,” said the
minister.
Other notable measures
include the retention of Customs duty for metal products at 25 per cent
to protect local companies; extending the 25 per cent duty on paper and
paper board products for another year; reducing import duty on raw
timber from 10 per cent to zero and retaining import duty for finished
timber products at 25 per cent.
BIG FOUR
Small
businesses and traders got an assurance that Treasury would settle
verified pending bills of $97.3 million owed by the national government
within a fortnight, that inspections of imports will only be done at the
point of export and suppliers of goods and services will be paid within
a maximum of 60 days.
It was clear that the government is keen to accelerate the implementation of the Big Four projects.
Being
critical enablers of the Big Four, the Cabinet Secretary allocated a
whopping $3.2 billion to infrastructure projects like roads, railway,
ports and energy and $3.1 billion to security agencies.
A
major challenge for Kenya will be raising the required funds given its
ballooning recurrent expenditure, shortfalls in revenue collections, a
huge deficit and widespread corruption.
Mr
Rotich said the government will effect austerity measures including
rooting out ghost workers, standardised fleet management and
renegotiating office leasing contracts. In
the coming financial year, the government projects revenues to the tune
of $20.4 billion and expenditures of $27.2 billion, leaving a deficit
of $5.9 billion, which it anticipates to finance through external and
domestic borrowing.
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