(Nairobi) – Consumers in Kenya could face a rise in the cost of goods as the government pushes to increase the Railway Development Levy (RDL) on imports from 1.5% to 2.5%. This proposal is part of amendments to the Finance Bill 2024 and is aimed at supporting the development of the Standard Gauge Railway (SGR) and other infrastructure projects. However, the Shippers Council of Eastern Africa (SCEA) has expressed concern over the potential impact on consumer prices, urging the government to reconsider the proposed increase.
The Railway Development Levy is a fee collected on all imported goods to fund railway infrastructure projects. While SCEA acknowledges the importance of developing and maintaining such infrastructure, it argues that a 67% increase in the levy could lead to higher consumer prices, reduce business expansion, and potentially result in job losses. SCEA’s Chief Executive, Agayo Ogambi, called for a delay in the implementation of the increase, suggesting that a more gradual approach over time could be more appropriate.
This proposal comes at a time when traders are already struggling with high international freight costs due to disruptions in the global shipping industry. Recent attacks on ships in the Red Sea, particularly by Iran-backed Houthi rebels, have forced shipping lines to reroute vessels, increasing transit times and shipping costs. The re-routing of vessels around the Cape of Good Hope and away from the Suez Canal has added up to 16 days to the transit time between Kenya and Europe, pushing up freight charges and insurance premiums. This has had a knock-on effect on Kenyan exports, particularly for time-sensitive products like avocados, which risk spoiling due to delayed shipments.
In addition to the proposed Railway Development Levy increase, there has been the introduction of a new transport disruption fee of $450 (Sh58,063) on containers. This fee, combined with the already high shipping costs, is further increasing the burden on importers. For example, the cost of shipping a 40-foot refrigerated container has risen from $10,000 (Sh1.2 million) to Sh1.3 million. The increased costs are also being driven by congestion at major ports in Asia, particularly in China, which is Kenya’s largest source of imports. Shortages of empty containers in some regions and backlogs in others are pushing up prices, with leasing costs in China peaking at $1,750 in December 2023.
According to the Container xChange platform, which tracks global container leasing prices, this congestion has led to delays and schedule disruptions, exacerbating the cost of shipping goods. In Kenya, these factors are expected to push up the cost of imports even further, affecting both businesses and consumers.
The impact of these rising costs is already being felt. In 2023, Kenya’s total merchandise trade amounted to Sh3.6 trillion, a 7.6% increase from the previous year. However, the growth was partly driven by higher international prices for key imports, including petroleum products, and the depreciation of the Kenyan shilling. The proposed increase in the Railway Development Levy could add to the financial strain faced by Kenyan consumers, who are already dealing with higher costs of living and inflation.