Kenya’s push to grow its industrial sector and attract new investors is being slowed down by delayed payment of Value Added Tax (VAT) refunds running into billions of shillings, Trade Cabinet Secretary Lee Kinyanjui has said.
Kinyanjui said the delays are eroding investor confidence and affecting expansion plans by companies, warning that the problem must be fixed urgently if the country is to remain competitive as an investment destination.
“We have come to identify VAT refunds as one of the biggest challenges currently facing companies and we are keen to resolve this while reviewing VAT for exports,” he said.
The CS said the Ministry of Investments, Trade and Industry is engaging the Kenya Revenue Authority (KRA) to fast-track the settlement of pending refunds, noting that many firms are struggling with cash flow as they wait for money owed by the government.
He added that the ministry will play a central role in accelerating economic growth, saying a stronger industrial sector would lead to more jobs and increased revenue collection for the government.
Kinyanjui was speaking at Sawela Lodge in Naivasha during a two-day workshop for senior ministry officials organised by the Kenya Bureau of Standards (KEBS).
He challenged senior officers to help the government deliver on its economic agenda by supporting local manufacturing and expanding employment opportunities, especially in key export sectors.
The CS identified tea and flowers as major products with the potential to drive economic growth, citing rising global demand and the opening of new markets.
“For many years, we relied on traditional tea markets such as Iran, India and Iraq, but this is changing. With political changes in countries like Iran, we are now looking at new markets such as China, where demand for tea is growing,” he said.
In the floriculture sector, Kinyanjui said Kenya is increasingly attracting international flower companies that are relocating from countries such as Colombia due to high labour costs.
“Many flower companies are now eyeing land in Kenya, and this is a blessing in disguise for our economy,” he said.
He also pointed out the lack of a single, reliable source of industrial data as a major weakness in the sector, saying the issue needs urgent attention to support planning and policy decisions.
“One of the biggest challenges facing the country is the absence of one source of data, especially in the industrial sector, and this must be addressed,” he said.
On trade relations with the United States, Kinyanjui expressed confidence that ongoing negotiations would secure an extension of the African Growth and Opportunity Act (AGOA), giving Kenya an additional three years of duty-free access to the US market.
Industry Principal Secretary Juma Mukhwana said there is an urgent need to spread manufacturing investments beyond a few counties, noting that Nairobi, Mombasa, Kiambu, Nakuru, Machakos and Kisumu currently host about 90 per cent of manufacturing companies.
“There is a need to devolve manufacturing so that more counties can benefit from industrial growth,” he said.
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