Manufacturers dealing in scrap metal have urged the Kenya Revenue Authority (KRA) to intensify the crackdown on unscrupulous dealers smuggling the materials to neighbouring Tanzania and Uganda.
Industry players said the illegal trade was depriving local manufacturers of critical raw materials while undermining legitimate businesses and government efforts to regulate the scrap metal sector.
They identified the Holili border point in Taveta, Taita Taveta County, and Busia as key routes allegedly being used to ferry scrap metal out of the country.
Peter Wafula, representing a battery manufacturer, cited the case of a truck carrying used lead-acid batteries that was intercepted at the Holili border but later released under circumstances he described as unclear.
Wafula said the truck left Ruiru last Thursday loaded with used lead-acid batteries and travelled along Mombasa Road towards the Taita Taveta border.
“It drove through Mombasa Road and headed towards the Taita Taveta border. Following an intelligence-based operation, KRA officials from Taveta were put on high alert in regard to the vehicle and the contraband goods it was carrying,” Wafula said.
He said the vehicle was tracked throughout the night before it was intercepted it at about 5am while it was attempting to cross into Tanzania.
“It was found with used lead-acid batteries weighing about 16 tonnes,” he said.
The truck was subsequently driven to the KRA yard at the Holili border and impounded.
Wafula, however, said the vehicle was later released, raising questions among industry players over the effectiveness of enforcement at the border.
KRA officials at the station said the truck was released after its owner secured a court order directing that it be freed.
Manufacturers say the alleged smuggling is taking place against the backdrop of growing scarcity of scrap, which is a critical raw material for industries including steel and battery manufacturing.
They argue that the shortage has pushed up the cost of production, with some products already estimated to be about 50 per cent more expensive, while local manufacturers increasingly struggle to compete with products from Tanzania and Uganda.
The industry has also raised concerns over changes introduced through the Finance Act in July, which removed the 16 per cent Value Added Tax on scrap metal and replaced it with a 1.5 per cent withholding tax.
The Treasury had argued that the change would help formalise the scrap metal trade while ensuring the government continued to collect revenue from the sector.
Manufacturers, however, say the tax change has had unintended consequences.
They argue that when scrap metal was subject to VAT, manufacturers could reclaim VAT paid on inputs such as electricity, fuel and transport. With scrap now exempt from VAT, that mechanism is no longer available.
Industry players further contend that the 1.5 per cent withholding tax is difficult to enforce because many small-scale scrap collectors do not have KRA PINs, making it difficult for dealers to deduct and remit the tax.
They say the government has effectively moved from a 16 per cent VAT regime to a system where collecting the replacement 1.5 per cent tax is more difficult.
