WHO proposes tobacco tax hike in Kenya to curb smoking

The World Health Organization's recent proposal to increase cigarette taxes by 42% in Kenya has sparked a heated debate among policymakers, public health experts, and the general public. The aim of the tax hike is to reduce the number of smokers in the country and ultimately improve public health outcomes. However, some are questioning whether this measure is punitive enough, considering the existing syntax on tobacco products that has been gradually increasing over the years. John Doer, an investment analyst with Cytonn Investments, shared insights on the proposal during a recent interview on CNBC Africa. He emphasized the importance of looking at the issue from a health perspective, pointing out the significant financial burden that smoking-related illnesses place on the government's healthcare system. Despite the efforts that have been made in the past to discourage smoking through visual campaigns and public awareness initiatives, the number of smokers in Kenya has continued to rise. The WHO believes that a substantial increase in cigarette taxes could be a more effective deterrent, especially among the youth demographic. In addition to the tobacco tax proposal, the discussion also touched on the concept of inclusive economic growth in Kenya. While the country has experienced a relatively high GDP growth rate compared to other sub-Saharan African nations, there are concerns about the distribution of wealth and opportunities. Inclusive growth entails ensuring that all segments of society benefit from economic development, not just the privileged few. Doer highlighted the disparity in wealth distribution in Kenya, noting that despite being classified as a middle-income country, it ranks low on the human development index. Addressing issues such as unemployment and income inequality is crucial to achieving inclusive economic growth and reducing poverty rates. The conversation then shifted to the tea industry in Kenya, which has been facing challenges due to poor climate conditions leading to a 30% drop in production. While the decrease in volume has led to a relative increase in prices, some are advocating for strategies to make the market more predictable and sustainable in the long run. One proposed solution is to focus on value addition within the tea industry, moving away from raw tea exports to packaged and branded products that can fetch higher prices in the global market. However, the lack of local expertise and infrastructure for value addition remains a barrier to implementing this strategy. Furthermore, the trend of tea farmers converting their land into real estate ventures raises concerns about the long-term viability of the agricultural sector in Kenya. Diversifying away from traditional crops like tea and investing in sectors like real estate and manufacturing could provide more stable income sources and reduce the economy's reliance on volatile commodity markets. In terms of investment advice, Doer recommended diversifying portfolios and considering banking stocks and manufacturing companies, particularly those involved in the construction sector. He highlighted banking stocks like KCB and Equity Bank, as well as cement companies like ARM and Bamburi, as potential investment opportunities given the anticipated growth in the construction industry. As the debate over the WHO's tobacco tax proposal continues to unfold, the broader discussions around inclusive growth and economic diversification in Kenya are essential for shaping sustainable and equitable development in the country.