Spending on furniture ordered from foreign countries by Kenyan traders and households has continued to grow at double digit rates despite increased taxes and government directives requiring agencies to cut imports.
About Sh8.69 billion was spent on furniture, bedding, mattresses and furnishings in the nine months to March 2024 after a 45 per cent customs duty was imposed in July last year, according to the latest figures.
The spending represents a growth of 13.08 percent compared to Sh7.68 billion in the corresponding period of the previous year, according to data compiled by the Kenya National Bureau of Statistics (KNBS).
This comes despite furniture being among the imports targeted by President William Ruto’s administration in the 2023 Finance Act in a bid to boost the purchase of locally manufactured goods and create jobs for the growing number of unemployed youth with both skilled and unskilled skills.
“In this budget (for the financial year ending June 2024), we have imposed (higher) taxes… on imported fish, furniture, steel, cement (etc.) because we want to increase our manufacturing capacity. By increasing our manufacturing capacity, we increase employment,” Dr Ruto said after implementing the 2023 Finance Act. The law, the first for the Ruto administration which took office in September 2022 partly on a pledge to boost small informal businesses, raised the customs duty on imported furniture from 35 per cent to 45 per cent.
The administration imposed an additional 30% tax on imported furniture after attempts in previous years to obtain approval from the National Assembly failed.
“I am amazed that the furniture here is produced by our local manufacturers,” Dr Ruto said on April 25 when he inaugurated the Bong Tower, which houses lawmakers’ offices. “As members of Parliament, having passed the necessary legislation on matters that encourage local manufacturing, you have taken the lead in realising these ambitions yourselves.”
But lawmakers in June 2022 rejected a proposal to impose a 30% consumption tax on imported furniture.
Local manufacturing
In its report to the House of Representatives, the National Assembly’s Finance and Planning Committee, then chaired by Gladys Wanga (now Homa Bay County Governor), said: “In order to give local furniture manufacturers a competitive advantage, the furniture industry should be looked at holistically to identify the factors that increase the cost of production in the country.”
These imports exclude imports from the seven-nation East African trading bloc, which is considered a single market under the 2005 Customs Union Protocol.
Importers are also subject to a 16 percent value-added tax, a 2.25 percent import declaration fee and a 1.5 percent railway development fee.
Successive governments have in the past tried to make furniture imports expensive and less competitive in order to stimulate demand for locally made products.
For example, in 2020, the previous Uhuru Kenyatta administration directed all government ministries, departments and agencies to restrict furniture purchases to “locally manufactured products.”
Bidding process
However, manufacturers have complained over the years of manipulation, claiming that local suppliers often provide samples of local products during the bidding process, only to hop on a flight to India and China to source the same products when they secure huge deals with the country.