Wamuzi News Ke
In a sudden and dramatic turn in Kenya’s fiscal policy, the National Treasury has reported that excise duty waivers surged to KSh 16.9 billion in 2024 — a startling 37 percent jump from KSh 12.3 billion the previous year.
According to the newly released Tax Expenditure Report 2024, the lion’s share of this increase stems from import excise duty, which nearly tripled to KSh 6.2 billion from KSh 2.1 billion. This rise comes as the government seeks aggressively to incentivise domestic manufacturing, especially vehicle assembly and locally-brewed beverages.
What’s behind the spike?
Officials say the bulk of the duty relief is linked to a deliberate Government push to grow the industrial base:Domestic vehicle assembly now enjoys full excise-exemption, while imported cars continue to face duties ranging from 10 to 35 percent depending on engine size — a clear signal to shift manufacturing on-shore.
Exemptions to the Defence Forces Canteen Organisation (DEFCO) rose — duty relief on goods supplied to military personnel climbed to KSh 711.8 million from KSh 680.9 million in 2023. Locally brewed beverages, particularly keg drinks, enjoyed duty remissions of up to 80 percent; the duty forgone in this segment rose to KSh 9.97 billion from KSh 9.48 billion.
But alarm bells are ringing.While the government frames the waivers as part of a broader industrial strategy — bolstering local farmers, creating jobs and driving rural growth — the numbers underscore a considerable fiscal cost amid ongoing tax-reform efforts.
Overall tax expenditures dropped 22.2 percent to KSh 286.5 billion from KSh 368.4 billion in 2023. Critics warn that such sweeping exemptions risk undermining revenue mobilisation when Kenya is already grappling with debt pressures and budget constraints.
They argue that incentives must be tightly targeted and monitored to ensure value for money.
The Treasury now faces a delicate balancing act: maintaining incentives that drive domestic industry while preserving fiscal stability. Key questions remain:Can the local manufacturing sector scale rapidly enough to justify the cost of the waivers?
Will the incentives deliver sustainable job creation and value-added production, rather than simply benefiting importers or assembly operations without meaningful local content?
How will the government guard against abuse of the exemptions and ensure transparency in who receives these waivers and for what purpose?
Analysts say the next few months will be crucial. If local vehicle assembly and home-grown beverage production take off, the waivers may be vindicated. If not, Kenya may be left with soaring subsidy costs and minimal industrial transformation.
