The National Treasury has defended its choice to grant tax exemptions to certain companies operating under the Special Operating Framework Arrangements (SOFA), which aim to foster industrial growth by addressing the specific needs of the manufacturing sector.
National Treasury Principal Secretary Chris Kiptoo, in a document presented to MPs, stated that the law allows the government to offer such waivers to create a favorable environment for manufacturers looking to set up operations in Kenya.
Currently, three companies are benefiting from the SOFA arrangement: Positive Human Vaccine Manufacturing Company, Moderna Human Vaccine Manufacturing Company (which has yet to commence operations in Kenya), and Blue Nile Rolling Mills Limited, a manufacturer of galvanized wire.
Kiptoo made these comments during a session with the Delegated Legislation Committee, which is investigating the tax exemption granted to Blue Nile Rolling Mills Limited, based in Thika.
The exemptions were awarded because the company was the first in Kenya to establish a galvanized iron wire manufacturing project, which had previously relied on imports from countries such as China, India, Egypt, and South Africa.
The inquiry was initiated by Kiambaa MP John Njuguna, who sought clarification on whether the tax exemption process followed legal protocols. Kiptoo reassured the committee, stating, “The requirements of the law in granting the tax exemptions under SOFA were fully complied with.
The officials involved, including the Cabinet Secretary for the National Treasury and Planning and the Cabinet Secretary for the Ministry of Industry, Trade, and Cooperatives, both signed the SOFA agreement.”
In his briefing, Kiptoo explained that Blue Nile Rolling Mills Limited signed the SOFA agreement with the government in 2022, which included various tax waivers such as VAT exemptions, waivers for the Railway Development Levy (RDL), and waivers for the Import Declaration Fee (IDF) on imports used for manufacturing galvanized iron.
These incentives are intended to encourage the expansion of existing manufacturing operations and the establishment of new ones, ultimately leading to job creation.
The agreement, which is set to last for ten years from January 21, 2020, to 2030, granted the company these exemptions. Kiptoo further noted that at the time of signing the SOFA, there were no other manufacturers of galvanized wire in Kenya, although other companies have since entered the market.
“In 2022, Blue Nile Rolling Mills entered into a Special Operating Framework Agreement, where the government committed to providing various tax waivers.”
