Good signs as EPZs revenue hits Sh115 billion

Kenya is set to earn even more from export processing zones (EPZs) following the expansion and creation of five new zones, taking the number to 89 last year and 82 in 2021.

The projected growth comes as the 2023 Economic Survey shows that the total value of sales from EPZs rose to Sh115.3 billion in 2022, up from Sh98.9 billion in 2021.

The survey attributes the growth largely to increased exports of apparel, agro-processing, food processing, pharmaceuticals, medical supplies and edible oil, which recorded Sh106.1 billion, about 17.6 per cent.

Imports also increased by 31.7 per cent to record Sh63.6 billion during the same period.

Export Processing Zones Authority (EPZA) acting CEO Hussein Adan Mohamed says the expansion and creation of EPZs in Busia, Uasin Gishu, Kirinya, Kwale and Kilifi counties will further boost the country's industrialisation drive.

"EPZs are important to the economy because they provide an environment conducive to investment, manufacturing and export-oriented activities. I am here to ensure that this is realised," said Mr Mohamed.

Mr Mohamed further noted that, through the establishment of EPZs, the government has created an enabling environment that promotes economic growth, development and job creation all at the same time.

“EPZs have been instrumental in attracting foreign direct investment into the country, which has in turn led to the creation of new industries, new jobs and the transfer of technology,” he said.

EPZs are crucial for the economy as they promote exports that are critical to the country's balance of payments, thereby helping to reduce the trade deficit and improve foreign exchange earnings.

Therefore, the increased earnings from the EPZs is positive for Kenya, which largely depends on direct and indirect taxation to finance its expenditure plans - recurrent and development - as well as refinance its ever increasing public debt.

In the next financial year, the government intends to spend Sh3.6 trillion. The budget will be financed by Sh2.8 trillion in taxes leaving a deficit of Sh720 billion that will be bankrolled through domestic and foreign borrowing.

The government has also budgeted in excess of Sh1 trillion in public debt repayment. Currently, the country’s public debt stands at Sh9.4 trillion against the debt ceiling of Sh10 trillion enacted by Parliament in May last year.

This means that the government will either have to downscale its expenditure proposals or expand the debt ceiling to give it room to borrow more without blowing the ceiling.

The country’s gazetted EPZs as at December 2022 stood at 89 compared to 82 in 2021, out of which, 83 were privately owned and operated while six were public zones.

The distribution of EPZs in the country is such that Nairobi has seven, Mombasa 27, Kilifi 14, Kwale seven, Machakos six, Kiambu five, Nakuru and Bomet three, Embu, and Nandi and Meru two each. Murang’a Kajiado, Kirinyaga, Taita Taveta, Elgeyo-Marakwet, Uasin Gishu, Laikipia, Narok, Kitui, Kisumu, Busia and Homa bay have one EPZ facility each.

The Economic Survey shows that direct employment within the EPZs increased to 82,764 people, about 25.3 percent more than the 66,053 employees in 2021, while thevalue of capital investment in the EPZs increased by Sh134.3 billion, about 7.9 percent, in 2022.

This, according to the acting CEO, “is a clear indication of the significant role EPZs play in job creation” that is largely attributed to opportunities generated by new apparel firms and the expansion of the existing ones.”

The survey also shows that the performance of the EPZ firms under the US' African Growth and Opportunity Act (Agoa) program hit a four-year high of Sh54.1 billion in 2022 from the Sh48.8 billion recorded in 2021.

“This is a clear indication that EPZs are playing a vital role in the growth of the country's economy,” said Mr Mohamed.

This as the survey indicated that the value of capital investment increased by Sh24.9 billion, about 7.2 percent in 2022, while the number of direct jobs in the sub-sector grew significantly by 31.5 percent, to 66,300 workers in the same year.

Mr Mohamed acknowledged the “hard work and dedication” of all the stakeholders involved in making the sector a success.

“We will continue to push hard, work together with our partners to create an enabling environment for investment, innovation, and growth in the EPZ sector, and ensure it remains a key driver of our country's economic development.”

The acting CEO said this will help promote industrialisation by providing an environment that is conducive to the growth of new industries and the expansion of existing ones.

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