New taxation regimes could cripple Kenya’s energy sector

By Checky Abuje


Stakeholders in the energy sector cry foul to policies they term as “crippling” the sector following the 14% VAT imposed on energy products like LPG by the government.

They claim that the taxation, already effected in the Finance Bill 2020, will derail and could paralyze the operations of the sector to a damming level.

Elizabeth Wanja program’s officer at Kenya Climate Change Working Group (KCCWG) said the tax regime of 14 per cent on energy products will erode the gains the sector has achieved over time if status quo prevails.

“The move by the government of Kenya to slap the sector with huge taxation is in bad faith and in a way compounds pressure on the sector and puts on hold a number of activities the sector is offering to the public,” adds Elizabeth.

Some of the activities and services the energy sector offers to the public include Clean power generation, mitigation of carbon emissions as a measure to curb climate change among other initiatives in education and health sectors.

According to John Kioli, Chairperson Kenya Climate Change Working Group, the sector has set its focus on reducing carbon emissions up to 30 per cent by 2030. This, however, may remain a dream in futility if the government does not reconsider revising the Finance Bill. And achieving clean energy in Kenya will remain in limbo.

Speaking during a webinar session organised by KCCWG which brought together stakeholders drawn from Kenya Climate Change Working Group, civil society, private sector and the media, Kioli disclosed that there is the danger of sabotaging the fight against climate change where the cost of energy products and services will rise beyond the reach of consumers, especially in rural Kenya. Currently, more than 10m tonnes of wood is used on a monthly basis for cooking in the rural setup. The number is likely to surge.

Statistics have revealed that cases of respiratory complications are on an upward trend, with over 20,000 Kenyans (women and children) dying annually as a result of dirty fuel indoor cooking.

As a result of the heavy taxation, universal access to clean energy as enshrined in SDGs will remain just on papers, massive loss of employment and withdrawal of investors in the sector will be experienced to the detriment of the poor local Kenyans in rural and peri-urban areas.

It’s evident that unless the government withdraws or revises downward the VAT taxation, then the worst is expected in the sector. Felling of trees for firewood for home consumption will be inevitable and the government will bear the blame.

Maimuna Kabatesi, project coordinator at Hivos and a civil society activist on energy matters, however, challenged the government to ensure that energy policies are in tandem with the support to cutting down carbon emissions and grid connectivity even as a solution to the counterproductive bill is sought. 75% of Kenyans are today connected to electricity and further 14% can access clean cooking energy.