Kenya: Does the Government Have a Moral Authority to Tax Jua Kali?

Published on 14th January 2020

In these hard times, the government has seen it necessary to extend the tax bracket to include Jua Kali operators. The Jua Kali sector comprises of self-reliant individuals who use their limited resources to create jobs to help themselves and their families.

Kenya’s perception that Micro and Small Enterprises do not pay tax has deep historical roots from racialialized and elitist economies of the colonial and postcolonial policies.

In 1928, the first bylaw that classified businesses in Nairobi labeled all African businesses as ‘hawkers’ while European and Asian business were regarded as normal and proper. The latter were accorded spaces in which to carry out their transactions. While Europeans and Asians were allocated spaces in which to operate, Africans were either allocated temporary spaces or condemned to walk as they peddled their goods. The underlying fact was that the Africans belonged to the rural areas where they would eventually return. Their form of economy was only to allow them to get by and help themselves. They were not the mainstream businesses that would generate revenue and employment. This created the base for a dual economy in the city. One was recognized as the formal and permanent while the other was informal and temporary.

In the 1950s, there were efforts to accommodate Africans in the formal businesses but it did not integrate the two models of business. While the bylaw has been revised, its spirit has not changed. 

The post-colonial state did not look at informal businesses as a solution for economic development. It created parastatals and invited foreign investors to engage in import substitution businesses. Parastatals and foreign investors were relied upon to create revenue and jobs for the population. The informal economy was a stop-gap measure where the reserve army of workers could subsist before the benefits of modernization were realized.

In the second phase of the post-colonial state in the 1980s and 1990s, the structural adjustments were introduced. This began the downfall of the import substituting industries and parastatals as their products could not survive competition from imported goods. The informal economy however got an impetus in its development because the UN viewed it as the safety net for those who were retrenched and for suffering communities. Prof Macharia Kinuthia observes that the new arrivals found home in the informal economy which had also entrenched itself in the city.

However, the ideological position of the informal economy as a community economy where individuals help themselves did not change. The government never considered it as mainstream. The government had hoped that the formal economy would recover and continue to generate revenue. This meant that the informal economy continued to entrench itself into the third phase of the post-colonial space.

The third phase of the postcolonial state did not even consider the informal economy as a strategy. It yielded vision 2030 with its flagship projects of export processing, superhighways, and highspeed railways and ports that were going to shape the evolution of the economy. The informal economy would sink into oblivion under this new developments and Kenya would become a digitized middle-income country.

What the government did not realize was that the local base for the revenue dwindled with de-industrialization. It had to rely on heavy borrowing which has diminished the country’s financial resources. However the informal economy which thrives on strategically managed finances and low debt has continued to thrive. Its self-reliance ensures that entrepreneurs take calculated risks in borrowing. Their self-sacrifice, perseverance and social networks ensure its survival and resilience. The informal economy has become a home for people neglected by the government in its elitist policies.

The informal economy evolved using its own dynamics and institutions to survive in the racialized and elitist economy. Some of these institutions are difficult to dismantle especially in places like Gikomba and Wakulima markets. So, does the government have a moral authority to tax Jua Kali? 

My interaction with Jua Kali clusters for over 20 years has revealed that exclusion and neglect have subjected people to Jua Kali jobs. Take for example John of Kamukunji Jua Kali cluster. After completing his secondary school course, he could not raise money to join university. He followed his uncle to Kamukunji where he started by panel beating metal sheets until he became an owner of his own Jua Kali enterprise.

Wanjiru went to a day school where she walked for 5 kilometers one way every morning. The school had no laboratories, library or well-motivated teachers. She managed a D minus grade. Determined to succeed, she moved to Nairobi where she first worked as a house maid. After raising some reasonable money, she rented a small room and became a helping hand in a salon. She learnt how to make hair and use different chemicals. This gesture earned her employment as a hair dresser in the same salon. She saved some money and moved to another less endowed part of the city and started her own salon. 

Mama Karura was retrenched as an account assistant during the structural adjustment programs with no golden handshake. With the little money she had, she started making table cloths. Her business was severely affected by cheap imports forcing it to close. Lacking in choice, she started selling vegetables. Now she owns a sizeable green grocery.

Mama Kamau could not raise primary school fees. She moved to Nairobi to work as a maid. In the evening she would do embroidery of baby cardigans. Her employer learnt of her interest and paid for dressmaking. She stopped being a maid and was employed in Uhuru market as a dressmaker. After many years of back-breaking jobs, she procured her own stall.

The stories above are examples of courage, sweat, personal sacrifice and perseverance. They are stories of individuals who have suffered historical injustices of neglect and abuse by the same state that is forcing them to pay tax.  They are stories of long hours of work in inhuman conditions. Imagine when it rains in Githurai market. Come rain or sunshine, women squat for hours selling foodstuffs. They make these sacrifices so that they can have employment and income to feed their families. The state ignores their plight every day. Imagine the furniture makers on Kamiti or Ngong roads. They endure the elements of weather and inhale car fumes every day.

Under these circumstances, I wonder whether the government has the moral authority to start taxing Jua Kali enterprises without first negotiating with them. The government failed Jua Kali in the first place. Jua kali could very well pay taxes just like they meet financial obligations in church if the government was fair and just in its policies.

By Dr Mary Njeri Kinyanjui

Senior Lecturer, Institute of Development Studies, The University of Nairobi


This article has been read 632 times
COMMENTS