Value addition is necessary for the provision of food that is of high quality and safe for human consumption. This process plays an important role in building resilient industries and provides numerous benefits to the well-being of domestic economies such as employment creation, poverty reduction, increase in foreign exchange earnings, and economic growth. This article explores the importance of value addition to the manufacturing industry’s growth and the benefits it brings to the economy.
To begin with, value addition refers to the transformation of a product or service from its raw form, in order to enhance its attractiveness to consumers. Improving the value of a product or service is good for businesses as it permits them to charge more money for their products or services based on the value-added as well as increases the capability of businesses to withstand competition from imported products on the market.
Value addition is important for the growth of the domestic industry as it makes companies stand out from the imported competition. That is, when value is added to a locally produced product, its competitiveness on the market increases, as a result, it competes favourably with other high-quality products imported from other countries. This gives companies the flexibility to charge higher prices for their products and this tends to upsurge their profit margins.
Recently, we have seen the Government’s commitment to supporting value addition in the country through the provision of incentives that encourage businesses to add value to local products. In the 2023 National Budget, the Government extended the local content allowance at the rate of 2%, for income tax purposes to encourage value addition to tomatoes. This was an add-on to other products that already enjoy such incentives such as pineapples, cassava, and mangoes.
Providing such incentives to local products has the potential to attract more investment in the food processing sector. This will encourage businesses to venture into the production of value-added products such as tomato paste and fruit juices in the domestic economy with a surplus exported to other countries. This may result in the creation of jobs as well as an improvement in the standard of living for the people. Additionally, the Government will be able to derive benefits such as increased foreign exchange earnings resulting from the exportation of surplus products.
The Government should be commended for taking measures to provide incentives that encourage value addition to selected products such as tomatoes, mangoes, pineapples, and cassava. However, it is recommended that the Government should be more inclusive and extend the incentives to other equally important sub-sectors such as leather and leather products, wood products, textiles and garments, and soya beans.
