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High taxes force used clothes dealers to think Tanzania market

Nairobi: Second-hand clothes dealers in Kenya are considering importing their products from Tanzania amid a standoff with the Kenya Revenue Authority (KRA) over a 70 per cent increase in duty. The dealers have termed the  tax increase as “untenable for the Kenyan market” and most of them have abandoned their consignments at the Mombasa Port.

KRA officials in Mombasa have confirmed that consignments of used clothes, popular locally as mitumba, lying uncollected at the port after the importers failed to comply with the new duty requirements have contributed to congestion at the port.

“We have more than 200 containers lying at the port awaiting collection and more are on the high seas. The high taxes have kept owners away,” said Mr Cosmas Moka, the importers’ spokesman.

Grace period

KRA increased duty per container from about Sh 1.1 million to Sh1.9 million last November but extended the grace period to January 15 this year.

Enquiries by the Sunday Nation showed that due to the delays, shipping lines have already given the  traders notice of increased freight charges of up to $800 (Sh68,000). It means they will now pay $5,200 (Sh442,000) up from $4,600 (Sh391,000) to ship a container from the US and Canada.

KRA has stood  its ground  with the commissioner in charge of  customs services, Ms Wambui Namu, saying  the decision was arrived at after it was established that used clothes imports were undervalued.

“The used clothes are greatly undervalued in relation to prices prevailing at the source markets,” the commissioner said in statement to the Sunday Nation.

She insisted the taxman had consulted the Gikomba wholesalers in a meeting held on December 1 last year and that the new rates were formalised with their agreement.

Closed warehouses

But at the Gikomba market in Nairobi, traders cried foul that there was an attempt to drive them out of business. A spot check at the sprawling market showed some traders had already closed their warehouses as their stocks remain at the port.

Mr Samuel Njihia, an importer, showed the Sunday Nation seven warehouses that were closed because their owners were unable to clear the containers.

Tens of young men at the largest supplier of used clothes in East Africa waited impatiently for casual jobs as word spread that no more containers would be arriving at the market at  the weekend.

Mr Njihia said the traders had to grapple with high transport charges that rose to Sh95,000 from Mombasa to Nairobi.

Panic in the industry escalated due to the huge levies imposed on used clothes. The importers have to part with Sh350,000 as inspection fees to the Kenya Bureau of Standards charges   per container,  Sh25,000 to clearing agents and Sh27,000 as port charges.

Ms Wanjiru Mwangi, an importer, said  the grace period for goods to remain at the port is 10 days while delay charges are Sh6,000.

“What some us have done is just to look at things happen.  I have had to send 35 young men home as there is no work for them to do,” said Ms Wanjiru at her wholesale shop.

Traders at Mombasa’s Kongowea market said they were now buying a bale of children’s clothes at Sh18,000, up from Sh11,000 a few months ago.

“Kenyan traders have started to go to Tanzania and Uganda.,” said Mr Amos Mbugua, the chairman of the trader’s’ association.

Mr Rashit Shah, another importer, asked: “How can you explain such an increase? It is as if somebody wants us to close shop.”

To the common consumer, this means you may not be able to buy your usual shirt, blouse or trouser as cheaply as you may have been doing.

In some instances, you may also fail to get the designer selections that are common in markets, boutiques or on the streets.

This is not the only worry. Thousands of young people who depend on the mitumba business may be rendered jobless.

“Several young men have lost their daily jobs and that is why they are being killed by police for petty crimes. Some are going to Somalia in droves to join Al shabaab. It is happening so fast,” said Miss Wanjiru Njuguna, a trader.

“An increase of  more than Sh700,000 is too much for many traders. We are simply unable to pay up,” Mr Njihia said.

A container normally carries about 500 bales of clothes. In the past one month, importers have been forced to increase the sale of bales by more than Sh2,000, which the retailers and hawkers are unable to pay.

Ms Atieno Mwalo, a retailer, says she is unable to get the clothes on credit from the importers.

“I have to close when this stock is done. The prices are too high,” she said over the weekend.

However, the pressure is on the importers who are the main suppliers to markets in Kisumu, Eldoret, Kakamega , Nakuru and other outlets in Nairobi such as Ngara and Toi market.

This past week, Mr James Njoroge had to close his wholesale shop while his stock worth Sh2.4 million lay at the Mombasa port.

The blouse and trouser stockist expressed fear that of end of the road for his business. “It is a matter of weeks before  markets start running out of clothes,” he said.

The market is the biggest source of used clothes in East and Central Africa and solely depends on the port of Mombasa.

There were indications that the government was keen to increase the tax, according to a KRA official in Mombasa.

“The decision on tax has been made and there is a policy on what happens to uncollected goods. We auction them,” said the official who referred us to the KRA headquarters in Nairobi for clarifications on the matter.

Curiously, the tax was increased when the Kenya shilling exchanged at Sh107 to the US dollar, one of its lowest performances ever. Many traders say they experienced huge losses at the time as they bought their goods in dollars.

Provincial administration officials admitted security has deteriorated in the area but could not link it to diminishing fortunes in the mitumba industry. A local chief who identified himself as Mr Njoka declined to comment comprehensively on the security situation in the area.  “Please talk to my seniors. It is very serious,” he said on the telephone.

Reached for comment, Kamukunji MP Yusuf Hassan in whose constituency the Gikomba Market lies said he had worked with the business community to prepare a petition to be handed to the Finance Njeru minister Githae.

“Business sense shows a 70 per cent tax increase anywhere will cripple businesses. It is affecting the smallest of the traders and if we do not mitigate this problem, the area will experience a surge in insecurity and social deprivation,” the MP said.

Date: 
5 March 2012
Author: 
Billy Muiruri, Gitonga Marete
Source:
Daily Nation
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