The introduction of Excisable Goods Management System (EGMS) tax stamps on bottled water, juices, energy drinks, soda and other non-alcoholic beverages last month gave manufacturers a chance to ensure their businesses thrive as the ‘Big Four Agenda’ pillar of manufacturing draws near.
The digitisation, which is governed by the Excise Duty Act 2015, Section 28, and EGMS Regulations 2017, is good for the sector for several reasons.
One, the system will deal a blow to illicit traders in one fell swoop. A good example is the recent reports of genuine businesses making losses due to piracy, which is particularly rampant in the printing industry.
In a level playing field, where the same rules and regulations apply, demand will be the key determinant of prices for industrial products, making it possible for manufacturers to break even and make profit, which will, in turn, deliver growth.
Going by what has happened in the tobacco and wines and spirits sectors after the digital tax stamps were implemented, the manufacturing sector is bound to thrive when digitisation mechanisms are fully optimised.
Two, with the introduction of EGMS, the quality and safety of the foods and beverages we consume will be assured. Manufacturers have often decried the rampant counterfeits market, which makes it harder for the consumers to verify the safety of the products they consume and which ruin their health.
With the extension of the track and traceability system, there has never been a better time when manufacturers needed to come together to support the efforts by the Kenya Revenue Authority (KRA) to fight the black market. It will directly benefit manufacturers in terms of the improvement in quality and quantity of the goods they supply in the market which would then result in customer loyalty.
Three, the current economic situation in the country has seen most industries struggle to meet payroll expenses, with manufacturing being the most affected. Manufacturers should, therefore, come up with initiatives to jealously safeguard the industry by ensuring fair play by all.
They should also eliminate fake goods by ensuring that the products in the market meet the required standards. This will result in increased sales and higher profit margins, which will, in turn, secure jobs for their workers.
Many manufacturers understand what it means to send people home when trying to restructure or scale down. When people lose jobs, many generations are affected as this may translate to children missing school fees, poor living conditions for families and generally an unhealthy nation since providers have to balance between seeking proper medical care or buying food.
However, digital controls will make it easier to monitor and track illicit goods, which will have the multiplier effect of creating more job openings, thus turning Kenya from a “walking nation” (job hunting) to a working one.
Four, a key issue that is rarely talked about, but should be one of the manufacturers’ top priorities, is consumer protection. When a customer understands that profit is not the only driver for the industry, they are likely to consume local products.
When excise stamps are affixed on goods, consumers can easily distinguish genuine products from fake ones. That way, the industry can influence Kenyans to be loyal to the local brands. Only then will the ‘Buy Kenya, Build Kenya’ campaign truly bear fruit.
Five, it’s the dream of any manufacturer to achieve their expansion strategy and leverage seems like the main avenue to that. Debt can only be advanced to manufacturers with good customer base.
As part of their growth strategy, manufacturers can readily access both short- and long-term loans, which means that cash-flow problems will be a thing of the past.
When the manufacturer is doing well, then their growth becomes realistic as they can be in a position to meet their financial obligations, such as loan repayments.
Lastly, Kenya is struggling with corruption — trust, especially in the public service, has for years been eroded. However, the industry can lead the way and bring the change we have yearned for. By complying with measures like digital tax stamps, the corrupt officers will have no room to carry out the vice.
Let manufacturers give their unwavering support for such digitisation measures and the other sectors of the economy follow in their steps for a better Kenya.
Mr Nyagwoka, a certified public accountant (CPA) is a senior auditor at Khalid & Co. [email protected] @bagakamaurice
