Rise in mitumba import points to low-tax loophole - Daily Nation

Rise in mitumba import points to low-tax loophole

Sunday August 21 2016

Ms Irene Njeri (left), sells mitumba clothes at Kangemi Open Air Market. PHOTO | FILE

Ms Irene Njeri (left), sells mitumba clothes at Kangemi Open Air Market. PHOTO | FILE 

By KIPCHUMBA SOME

A marked increase in importation of second-hand clothes over the past three years has raised fears that some traders could be taking advantage of the low taxes charged to sneak in new apparel.

Kenyans spent more than Sh56 billion to import second-hand clothes and shoes last year, according to statistics from the International Trade Centre, an organisation that tracks and promotes businesses in developing countries.

The Geneva-based ITC is a joint agency of the United Nations and the World Trade Organisation and supports small and medium-sized businesses in developing countries.  

An official at the ministry of Industry, Trade and Investments said: “Some traders could be importing new clothes and shoes from abroad and declaring them to Customs as mitumba (second-hand) to evade paying higher taxes. Have you really seen mitumba from Pakistan or Korea?” he asked.

Information from ITC indicates that last year the country spent $275.8 million (Sh27.5 billion) mainly on second-hand items and other assorted clothing.

Mitumba alone cost slightly over $149 million (Sh14 billion). Bed, table, toilet and kitchen linens cost $29.3 million (Sh2.9 billion), while curtains, drapes and interior blinds cost $21.7 million (Sh2.1 billion).

This represents a steep rise in imports over the past three years, even as the government talks of eliminating the mitumba market to revive local manufacturing.

In 2013, the country imported second-hand clothes worth $96.7 million (Sh9.6 billion), but the figure jumped to $154.8 million (Sh15.8 billion) in 2014.

Traders say the figure could increase even more this year as demand for the items rise. This large appetite for imports has not been limited to clothes. Statistics from the agency indicate that importation of shoes grew by more than 200 per cent in the past three years.

Last year, the country imported shoes worth $290.4 million (Sh29 billion), striking a blow to the local leather industry. In 2013, the country spent only $13.1 million (Sh1.3 billion).

The figure grew a hundred-fold the following year (2014), with the country spending $134.7 million (Sh13.7 billion) on the footwear.

“We are not against competition, but the playing field must be fair,” said Mr James Mwaura Muiruri, chairman of the Association of Footwear Manufacturers.

Imported shoes

“Some imported shoes are atrociously substandard and sell at very low prices, which undermines local industries,” he said. Mr Muiruri owns a company that produces branded shoes.

The agency indicates that the top-five leading suppliers of mitumba to Kenya are the United Kingdom, the United States, Canada and Germany.

Others are Pakistan, Poland, South Korea, United Arab Emirates, China, Australia, Turkey and India. Mr Muiruri said most of the substandard imports are from China.

Last October, the government announced plans to shut down mitumba business to promote the “Buy Kenya, Build Kenya” initiative of boosting local manufacturing.

Mitumba sprung from a noble initiative by Western well-wishers to donate used clothes and shoes to the needy in developing countries, especially Africa. But today it is lucrative business worth billions of shillings annually and controlled by wealthy individuals.

These people, plus an estimated 65,000 mitumba traders across the country, are opposed to the government’s initiative to close the trade, saying it would disadvantage many Kenyans who cannot afford brand new clothes or shoes.

In March, the Association of Mitumba Importers in Kenya met President Uhuru Kenyatta in State House, Nairobi, to protest the proposed ban. 

He told them: “There is a need to provide competitive alternatives to mitumba traders... while ensuring adequate supply of good quality products”.

The sentiments were an about-turn by the President who, in 2010 when he was the finance minister, slashed import duty on mitumba from $0.3 per kilo (or 45 per cent, whichever is higher) to $0.20 per kilo (or 35 per cent, whichever is higher).

These rates prevail to date. At the time, Mr Kenyatta argued that the cut was necessary to allow low-income earners to afford clothes during the economic slowdown the country was experiencing.

President Kenyatta’s recent directive to ban mitumba is not the first one. Former Finance Minister Njeru Githae tried to do so through Sessional Paper Number 9 of 2012, without success.

Last week, Industry, Trade and Investments Cabinet Secretary Adan Mohammed launched the Sh17 billion Kenya Leather Park in Mavoko to promote the leather industry.

The park is set on 500 acres of land. Kenya is currently a mere exporter of raw materials and semi-processed hides and skins. Last year, it spent $2.6 million (Sh264 million) to import various forms of leather from abroad.