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Costly levies on farm produce open window to cheap imports

Costly national and county government levies have edged out many Kenyan farmers and agro-processors from the market, opening a huge window for foreign-processed and fresh farm produce.

A study by Kenya Market Trust shows that the Port of Mombasa continues to attract many food processors who source fresh farm produce from foreign countries.

Some traders even cross the country’s borders in search of cereals and vegetables, where they buy them cheaply for sale at attractive prices in Kenya.

A visit to Githurai and Wakulima markets in Nairobi reveals that garlic and fish are among the foodstuffs sourced from China, with industrial sugar being imported from Brazil, rice from Egypt and an assortment of fruits from South Africa.

A study by Bayesian Consulting Group on behalf of a pro-farmer non-governmental lobby, Kenya Market Trust, shows that Mombasa has a thriving agro-based industry.

This industry deals mainly in tea processing and packaging, wheat, porridge and maize flour milling as well as vegetable oil processing. All these rely heavily on imported raw materials.

Capital expenditure

Imported raw materials attract a one-off levy before heading straight to the factories. No further charges are required as the raw materials are considered a capital expenditure to boost production.

Counties with harsh weather that hardly supports agriculture face the toughest economic challenges as they rely on other regions to feed their ever-growing population.

The non-governmental lobby asserts that Kenya could reverse this trend and promote agro-processing ventures in counties by reducing or scrapping the levies, thereby enabling cheaper transportation of fresh produce across the nation.

The lobby says sukuma wiki (kales), considered the poor man’s lifeline, attracts the highest transport cost at 58 per cent, followed by spinach (48 per cent), onions (38 per cent) and tomatoes (36 per cent).

“But onions, known to fetch handsome prices at city markets, attract a 29 per cent levy, tomatoes (15 per cent), and kales and spinach (10 per cent per bale). While county cess collectors claim to charge per bag, it is difficult to understand how they estimate a lorry load, creating a chance for multi-million-shilling graft networks to thrive,” it says.

The lobby’s portfolio director, Mr Ahmed Hasan, called for dialogue among all stakeholders to help reduce the cost of doing business.

He said counties should not be competing against one another but should instead complement one another to boost trade.

County governments have also been found to target the staple food – maize – where cess is charged and collected by millers upon delivery by traders.

It notes that absence of drying equipment in maize producing counties makes it costly for farmers, who have to transport the produce to other counties for the service.

This sees them pay cess as they start the journey and another sum as they enter another county.

“Once maize has been processed to the required moisture content, it is sent to a miller in another county, attracting further charges, as well as more costs for loading and offloading from hired lorries,” it notes. It adds that lorries charge waiting fees when kept waiting for days before offloading.

Industrialisation Cabinet Secretary Adan Mohamed said this raised the cost of doing business, making Kenyan goods more costly than imported ones.

“A packet of maize now goes for Sh100 instead of Sh60 due to these charges, which also hamper production. Seed and fertiliser transporters are also charged cess at every country entry point, with the charges passed on to end-users. This has affected production, with many abandoning farming in favour of other businesses,” he observed.

Hurting the vulnerable

The high demand for maize is aggravated by its increased use in animal feeds production. This has discouraged healthy eating, hurting Kenya’s most vulnerable people as county governments compete to raise internal revenues for use in service delivery.

The lobby recommended that a social audit be conducted to ascertain the use of cess funds in improving market facilities, rural roads in farming communities, and in promoting farmers’ welfare.

The study called for a downward review of cess if not abolition saying any increase led to an increase in the cost of production further impoverishing Kenyans.

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