NAIROBI, Kenya – Households in Kenya are bracing for a significant rise in commodity prices following the implementation of a new Railway Development Levy (RDL), which increased from 1.5% to 2%.
The new levy, effective December 27, 2024, was part of the recently signed Tax Laws (Amendment) Bill, 2024, by President William Ruto.
The Railway Development Levy, introduced in 2013 to fund the construction of the Standard Gauge Railway (SGR), is charged on all goods imported for domestic use.
With the latest hike, the Kenya Revenue Authority (KRA) aims to surpass the Sh31.7 billion raised in the 2023-24 financial year, which fell short of its Sh34.7 billion target.
The higher levy is expected to hit consumers hard as businesses pass on the additional costs.
Kenya remains a net importer, and traders warn the levy will exacerbate the cost of living, which is already strained by global economic pressures.
Agayo Ogambi, Chief Executive of the Shippers Council of Eastern Africa (SCEA), criticized the move, highlighting its potential to stifle business growth and employment.
“While infrastructure development is crucial, the government must address industry concerns over escalating costs,” Ogambi stated.
He urged authorities to reduce levies such as the Import Declaration Fee (IDF) and corporate taxes, emphasizing the need for fiscal prudence to ease the tax burden on businesses.
Adding to the strain is congestion at the Port of Mombasa, which has prompted shipping lines to introduce surcharges.
Mediterranean Shipping Company (MSC), a major player handling 18.9% of the port’s container volumes, announced a $500 surcharge per container from January 13, 2025.
This translates to an additional Sh64,650 per 20-foot or 40-foot container, further driving up costs for traders.
The SCEA has urged MSC to reconsider the surcharge, arguing that shippers should not bear the brunt of port inefficiencies.
The Kenya Ports Authority (KPA) has yet to address the congestion issues comprehensively.
The levy hike comes against the backdrop of global shipping disruptions.
Attacks by Iran-backed Houthi rebels in the Red Sea have led to rerouted shipping routes, with vessels avoiding the Suez Canal and opting for the longer Cape of Good Hope route.
This shift has increased freight costs to East Africa by over 20%, further straining traders and exporters.
The SCEA warns that longer transit times, higher freight charges, and increased insurance costs will not only impact imports but also hinder Kenya’s export competitiveness.
As traders and consumers grapple with the combined effects of the RDL increase, port inefficiencies, and global shipping disruptions, industry stakeholders are urging the government to implement measures that balance revenue generation with economic growth.
“The government needs to engage stakeholders and adopt a more consultative approach to taxation and port management,” Ogambi said. “This is essential to safeguard Kenya’s position as a trade hub and ensure the cost of living remains manageable for ordinary citizens.”
The new levy, effective December 27, 2024, was part of the recently signed Tax Laws (Amendment) Bill, 2024, by President William Ruto.
The Railway Development Levy, introduced in 2013 to fund the construction of the Standard Gauge Railway (SGR), is charged on all goods imported for domestic use.
With the latest hike, the Kenya Revenue Authority (KRA) aims to surpass the Sh31.7 billion raised in the 2023-24 financial year, which fell short of its Sh34.7 billion target.
The higher levy is expected to hit consumers hard as businesses pass on the additional costs.
Kenya remains a net importer, and traders warn the levy will exacerbate the cost of living, which is already strained by global economic pressures.
Agayo Ogambi, Chief Executive of the Shippers Council of Eastern Africa (SCEA), criticized the move, highlighting its potential to stifle business growth and employment.
“While infrastructure development is crucial, the government must address industry concerns over escalating costs,” Ogambi stated.
He urged authorities to reduce levies such as the Import Declaration Fee (IDF) and corporate taxes, emphasizing the need for fiscal prudence to ease the tax burden on businesses.
Adding to the strain is congestion at the Port of Mombasa, which has prompted shipping lines to introduce surcharges.
Mediterranean Shipping Company (MSC), a major player handling 18.9% of the port’s container volumes, announced a $500 surcharge per container from January 13, 2025.
This translates to an additional Sh64,650 per 20-foot or 40-foot container, further driving up costs for traders.
The SCEA has urged MSC to reconsider the surcharge, arguing that shippers should not bear the brunt of port inefficiencies.
The Kenya Ports Authority (KPA) has yet to address the congestion issues comprehensively.
The levy hike comes against the backdrop of global shipping disruptions.
Attacks by Iran-backed Houthi rebels in the Red Sea have led to rerouted shipping routes, with vessels avoiding the Suez Canal and opting for the longer Cape of Good Hope route.
This shift has increased freight costs to East Africa by over 20%, further straining traders and exporters.
The SCEA warns that longer transit times, higher freight charges, and increased insurance costs will not only impact imports but also hinder Kenya’s export competitiveness.
As traders and consumers grapple with the combined effects of the RDL increase, port inefficiencies, and global shipping disruptions, industry stakeholders are urging the government to implement measures that balance revenue generation with economic growth.
“The government needs to engage stakeholders and adopt a more consultative approach to taxation and port management,” Ogambi said. “This is essential to safeguard Kenya’s position as a trade hub and ensure the cost of living remains manageable for ordinary citizens.”
