In 2023 alone, ten international companies announced their exit from Kenya, raising alarm about the severe implications of the Finance Bill 2024. Analysts predict that the economic landscape may worsen due to these new tax policies.
An election official marks the nail of a voter to indicate they have cast their ballots and completed voting at a polling station in the Mathare neighborhood of Nairobi. Photo Credit: Nickolai Hammar/NPR
In a recent tweet that has sparked significant discussion, Gabby Yego, a Kenyan citizen, expressed her distress over her vote for President William Samoei Ruto in the 2022 presidential elections.
Yego’s post on social media read, “I still can’t believe I voted for William Samoei Ruto. My job is at risk because our company is an international company and the owners are leaving because of taxes.”
This sentiment is not isolated, as many Kenyans have started voicing their worries about the economic repercussions of the current administration’s tax policies. The concerns primarily revolve around the impact of these policies on both local businesses and international companies operating in Kenya.
President William Ruto’s administration has introduced several tax reforms aimed at increasing government revenue. These measures include higher corporate taxes, changes in value-added tax (VAT) rates, and new levies on digital services. While the government argues that these reforms are necessary to fund infrastructure projects and public services, businesses and employees are feeling the strain.
The latest blow has been the Finance Bill 2024, which proposes a raft of more punitive taxes. Digital ride-hailing platforms like Bolt and Uber have warned they might shut down their operations in Kenya if Parliament approves a proposed six percent tax on gross turnover for non-resident firms. Addressing the National Assembly’s Finance and Planning Committee, both companies argued that the introduction of the Significant Economic Presence (SEP) Tax could lead to the industry’s collapse due to financial losses or narrow profit margins.
Private companies, which play a significant role in Kenya’s economy, contribute to job creation, technology transfer, and economic growth. The fear of businesses shutting down poses a serious threat to employment and economic stability. In Kenya, about 3.2 million people are employed in the formal sector, with the government employing 968,425 people. This means that the rest depend on the private sector.
Gabby Yego’s tweet highlights a growing anxiety among employees of many firms. The potential departure of these companies could lead to massive job losses, affecting thousands of families. Employees are concerned not just about losing their jobs but also about the broader implications for the economy. With fewer international businesses operating in Kenya, there would be a reduction in foreign investment, slowing economic growth and innovation.
Companies Exiting the Kenyan Market
In 2023, several prominent companies announced they were exiting Kenya:
- Procter & Gamble (P&G): Exiting by June 2024 due to high costs, currency shortages, and declining sales.
- Jumia Foods: Closed its food delivery business in December 2023 due to unfavorable conditions.
- GlaxoSmithKline (GSK): Exited due to low sales and a strategic shift towards prescription drugs and vaccines.
- Eastend Junior Academy: Closing permanently in December 2023 due to the challenging economic environment.
- Base Titanium: Ceasing mining activities in Kwale by the end of 2024 due to a lack of new mineral resources.
- Africa Oil Kenya BV: Exited the Turkana oil project in May 2023 after settling a tax dispute.
- Zumi: The B2B e-commerce startup shut down due to its inability to raise necessary funding.
- Sendy: The Kenyan logistics startup shut down operations and sold its assets.
- De la Rue: Suspended operations in Kenya due to reduced demand for banknotes.
- MarketForce: Shut down operations in three of its five African markets.
The government has defended its tax policies, stating that they are essential for national development. President Ruto has announced plans to increase the tax-to-GDP ratio from 14% to 22% by the end of his first term. However, critics argue that the government needs to strike a balance between raising revenue and creating a conducive environment for businesses. They suggest that instead of imposing heavy taxes, the government should focus on widening the tax base and improving tax compliance.
Social media platforms have become a battleground for this debate, with many Kenyans expressing their dissatisfaction and fear. Some support the government’s efforts to increase revenue but believe the implementation could be more strategic.
