EPZs allowed to sell all products locally as exports hit

All goods manufactured in the country’s special economic zones (EPZs) can now be sold locally in a bid to cushion the industry from losses inflicted by the coronavirus.

This is after Treasury temporarily lifted the restriction that compelled EPZs to sell only 20 percent of the annual production in the local market to 100 percent effective last week.

Major export markets for EPZ-made products, including the US and large parts of Europe, have shut down airports and sealed off their borders in efforts to curb the spread of the virus, effectively cutting off EPZs’ exports.

Treasury Cabinet Secretary Ukur Yatani lifted the restriction saying that it has been occasioned by travel restrictions that has made it difficult for EPZs to export their products.

“The declaration of the Covid-19 as a pandemic by World Health Organisation has affected the global supply chain and caused a global economic meltdown. Because of this export processing zones have faced difficulties in exporting goods to the said zones,” Mr Yatani said in a letter to Kenya Revenue Authority commissioner-general Githii Mburu.

“In order to alleviate the problem and forestall further losses, the government hereby lifts the restriction of the 20 per cent of the total annual production of the EPZs for sale into the domestic market to 100 percent.”

Official data shows that EPZ -based companies raked in Sh77.2 billion in sales in 2018, a 14.7 percent growth, compared to Sh67.3 billion in 2017.

A total of 56,945 Kenyans were employed by the firms in 2018 but the fall in exports has raised fears of job cuts similar to what is happening across the other sectors of the economy.

A majority of the clothes made in Kenya’s EPZ are exported to international retail chains, largely in the US that has for now closed its borders.

Mr Yatani further directed the taxman to release all EPZ goods that were awaiting clearance, adding that the State will pay the duties and taxes up to June 20, 2020.

“The government undertakes to pay duties and taxes to KRA. Towards this end, the goods will be released pending payment of the applicable duty and taxes by the National Treasury and Planning,” he said.

The EPZs will, however, have to contend with a restrained local market with Kenyans grappling with reduced cash in their pockets on stagnated salaries and layoffs occasioned by coronavirus.