Kenya’s solar industry appears split on the country’s recent move to eliminate value-added tax fees on imported solar equipment.
The East African country imposed a 16% VAT on imported solar products last year but a new VAT law that went into effect in May now makes a number of items, including PV products, exempt from the tax.
Non-profit group SunnyMoney, part of London-based charity SolarAid, welcomed the move, saying it has reduced costs for its small portable solar lights, which has led the organization to pass on the savings to customers.
"Removing VAT on solar products reduces the cost to consumers and aids access to everyone buying solar products. The benefits to Kenyans and the national economy will be substantia," said Linda Wamune, SunnyMoney’s operations director in Kenya. "We will be able to reach more customers in off-grid areas throughout Kenya with these price decreases."
SunnyMoneys solar light has already dropped from KES 1,000 ($11.40) to 850 KSH ($9.65), which SunnyMoney says is a significant price reduction for its customers, 90% of whom live below the poverty line.
SolarAid added that the move was "a significant example of how African governments can support renewable energy solutions. It is a story that can be told across the continent to inspire decision-makers about the importance of low-carbon technologies that could bring electricity to the millions currently living without power."
SolarAid points out that according to the United Nations Environment Programme (UNEP), Kenya could save as much as $896 million a year if the country switched to clean sources of off-grid lighting.
Wamune says customers who buy solar lights stop using kerosene-based lighting, which saves about 25% of their monthly earnings on average.
SolarAid has been installing its pico-solar lights in various parts of rural Africa to deliver a clean and safe alternative to traditional kerosene lamps. The lights have been able to extend many villagers’ working day and to improve and lengthen studying conditions for young Africans.
According to China’s Xinhua news service, however, Kenyan PV manufacturers have blasted the move to rescind the VAT on imported solar products.
Speaking at a recent press conference in Nairobi, solar manufacturers argued that the move gave importers an unfair advantage.
"The new tax exemption while being a very noble idea on the surface will have negative effects on local manufacturers," said Haijo Kuper, managing director of solar manufacturer UBBINK.