The Kenya Kwanza government has proposed to eliminate a contentious 25% excise duty on imported electrical transformers and parts to accelerate grid expansion and eliminate infrastructure bottlenecks.
The Excise Duty (Amendment) Bill, 2025 was introduced by Majority Leader Kimani Ichung’wah, three months after the levy was introduced in the Tax Laws (Amendment) Bill 2024, raising questions about the consistency and predictability of government policy.
The proposed U-turn reflects broader tensions between short-term affordability and long-term industrial policy. While the original duty aimed to support local assemblers like ABB and Schneider Electric, it inadvertently increased import costs for components, delaying Kenya Power’s (KP) efforts to tackle a transformer shortage that has hampered rural electrification and repairs.
“The excise duty was imposed in Tax Laws (Amendment) Bill, 2024, with the intention of supporting local assemblers. However, this amendment has negatively impacted the manufacture and supply of transformers by raising the cost of importing parts,” the Ichung’wah-sponsored Bill states in part, citing unintended disruptions to transformer supply chains crucial for KP’s Last Mile connectivity project, which aims to achieve 280,000 new connections by year-end.
With electricity prices already strained, the government hopes that cheaper imports will alleviate pressure on households and businesses.
Critics, however, warn that the reversal risks undermining local manufacturing. Stephen Mutoro, Secretary-General of the Consumers Federation of Kenya (COFEK), questioned the timing: “Who is planning to import transformers for Kenya Power? It must be a big man. In less than three months, the government is undoing a tax it introduced via Tax Laws (Amendment) in December 2024,” Mutoro remarked.
The debate highlights Kenya’s balancing act between affordability and industrial development. While cheaper transformers could expedite KP’s goal of exceeding 10 million grid connections in 2025, analysts caution that reliance on imports may deter investment in domestic assembly, a sector beset by past corruption scandals involving substandard equipment.
Kenya’s energy sector is under dual pressures from rising demand due to industrialization and aging infrastructure. The Last Mile Project, funded by a $10 million (about Sh1.29 billion) French loan, aims to densify rural grids, but transformer shortages have hindered progress.
While the amendment may reduce KP’s procurement costs, its long-term impact depends on whether cheaper imports lead to lower consumer tariffs. With inflation eroding purchasing power, the government faces scrutiny over whether the policy benefits KP’s suppliers or end users. Critics argue that this move could deepen dependency on foreign manufacturers, undermining Kenya’s goal of achieving self-sufficiency in critical infrastructure.
