Mr. Kimunya has made history as the first Kenyan Finance Minister to put youth development affairs at the core of the nation’s economic agenda. A whooping initial allocation of 1 billion Kenyan shillings has been channeled to a newly created Youth Enterprise Fund. In his maiden budgetary speech, Mr. Kimunya said that 50% of the Youth Enterprise Fund would be apportioned towards women’s development issues. Another 50 million Kenyan shillings has been set aside for direct funding of other innovative youth projects across the country.
At the same time, Mr. Kimunya gave out 100 million shillings to the Kenya Youth Council, an organ body in which the country’s youth will be involved in articulating policy issues that affect the nation. The results from such deliberations, which will be expected to be fully representative of the country’s youth both at the rural and urban levels, will go a long way in giving the youth a participatory role in the formulation of vital policy issues in the nation as the youth form at least 75% of Kenya’s 30 million plus population.
The entertainment industry, in which at least ninety percent is made up by youth, has also been relieved of tax burdens whereby the youthful minister removed any form of taxation on all entertainment services rendered by local artists. As well, Mr. Kimunya indicated that the government would itself fund the entertainment industry to boost local artists, many of whom are struggling youth. This signifies that the government has finally realized the importance of the role played by the Kenyan youth entertainers in not only economic development but also in bolstering the image of Kenya regionally and abroad.
The Minister allocated a further 105 million shillings towards the rehabilitation of at least one youth polytechnic in every constituency in the country. Such a move will highly benefit the poor rural youth who find mainstream college costs too high. Correspondingly, the measures will also introduce a new angle in rural youth development dynamics in the nation. The rural Arid and Semi Arid areas (ASALS) of Kenya, most of which are located in the northern part of the country were not left out either with 1.5 Billion Kenya shillings being doled out towards the water projects in the said constituencies.
The debonair Minister demonstrated his agility with figures as he proportionately removed taxes and added more on other areas of the economy that have been previously ignored. As well, the ICT sector, which employs a large number of youth, has also had its field day in the just concluded budget. All Value Added Tax (VAT) on computer equipment, parts and accessories has been removed. The increase in the VAT threshold to 5 million Kenyan shillings is also a welcome move as many of the young entrepreneurs fall within the under 5 million category.
The local lending limit was also put at 29.5 million shillings, probably in an effort to decrease the level of bad debts and non-performing loans in the lending sub-sector. The capital gains tax was reintroduced into the monetary regime of the government. This means that trade in capital goods will also attract taxation bringing in a new group into the country’s tax pouch. The classification of avocadoes and mangoes as permanent crops means that they will from now on enjoy tax incentives. Importers of tractors, their tyres, and semi-trailers for agricultural purposes have also been left with a permanent smile lingering all over their faces as all duty on these have been zero-rated.
The informal sector, which is also known as ‘Jua Kali’, employs many youth more or so from less academically and financially privileged backgrounds. The decrease in duty on aluminum foil from 25% to 10% is thus a welcome economic shift as it will spur increased investment in the sector and created more employment opportunities for these underprivileged youth. Kenyan mothers too have not been left out in the well-balanced duty equation with tax on diapers, napkins, and feeding bottles being zero-rated.
In another twist possibly directed towards the Millennium Development Goals, the Minister zero-rated tax on water supply services provided by local authorities. Now solar energy buffs and dealers such as Graham Knight of the UK-based DIY Solar Pvt. can smile all the way to their banks. Duty has officially been removed on energy saving bulbs. At the same time, duty on solar equipment and accessories has also been waived. This focus on energy generation is laudable as the entire globe is now working towards ways for the creation of sustainable energy generation means and this was witnessed during the recently concluded G8 Summit in Russia.
While the Kenyan economy grew by 5.8% in the last fiscal year, the current growth is projected at 7% on the average for the 2006-2007 financial years. The Minister put the country’s Gross Recurrent Expenditure target for the 2006-2007 financial years at 412.5 billion shillings. Similarly, the Gross Development Expenditure for 2006-2007 was set at 137.6 billion with target tax and the overall fiscal deficits for the same years being 375.4 and 57 billion respectively.
Martin Kisuu, a Senior Tax Expert from the management firm Delloitte and Touché’s Kenya Country Office, in a post budget analysis on Kenya’s KTN television expressed optimism with the budget. However, he pointed out that the government left out fiscal angles towards the management and conservation of the environment. This, he stated, should have encompassed consideration for health hazards such as smoke from cigarettes, un-road worthy vehicles and industries. The fiscal policy, he noted, should also have looked at the issue of packaging materials much of which is polythene derived and has thus been causing pollution and health hazards.
Nonetheless, all planned and said, the implementation of the budget now remains with the government and the Kenyan public, whose goodwill and cooperation will be needed for its final success. With the hope that it has generated, the “Framework for the future: Laying the Building Blocks” will indeed herald the next new cost-effective beginning for Kenya, arguably one of the top economic giants in Africa.
*1 US $=KShs. 72.
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