High food crop prices loom as traders cut imports

The government’s decision to impose import levy on food crops is now threatening to cause a shortage with an imminent price jump, traders have warned.

This is on the back of reduced volumes being brought into the country by traders who are citing a high cost of doing business.

Kenya slapped cereals, which include rice, wheat, rye, oats, barley, millet and maize, with a two per cent import levy effective July 1.

The Agriculture and Food Authority (AFA) are imposing the levy on imports and exports of all crops.

Importers of legumes or pulses which include beans, chickpeas, peanuts, lentils, lupins, mesquite, carob, tamarind, alfalfa and clover are also required to pay a two per cent levy on the customs value of the imports.

For instance a trader bringing in goods worth Sh20 million, calculated on the Cost, Insurance, and Freight (CIF), have to pay Sh400, 000 as food crop import levy.

Legumes are grown agriculturally, primarily for human consumption, livestock forage and silage and as a soil-enhancing green manure.

Those bringing in roots and tubers including potatoes, cassava, sweet potatoes and yams have the levy set at one per cent.

The three groups of food crops also have an export levy of 0.3 per cent.

While the National Treasury in June gave a six-month importation window of up to 500,000 tonnes of milled grade 1 rice duty-free, up to November 30, to address possible shortages as a result of low local production, traders say only a few are allowed to import under the arrangement.

The levies have affected both regional and overseas imports.

Kenya International Freight and Warehousing Association (Kifwa) whose members clear cargo for traders at the Port of Mombasa on Thursday confirmed a drop in rice imports.

“Rice importation has almost come to a stop,” Kifwa national chairman Roy Mwanthi told the Star on the telephone, noting that volumes for other affected food crops have also gone down.

In a letter to the AFA director general seen by the Star, Kifwa termed the levies counterproductive and a non-tariff batter to international trade in food crops.

“The amount of money payable is computed in advalorem [in proportion to the estimated value of the goods or transaction concerned], based on the customs value, and is very high considering that there are other government regulatory agencies also collecting duplicative levies,”Mwanthi said.

According to Kifwa, imposing high taxes on food crops will result in reduction on imports and may lead to shortage and rise in prices.

“It is in this regard that we kindly call for immediate suspension of imposition of these levies so as to give room for inclusive consultations by all stakeholders,” he said.

Rice and maize are among leading cereals that Kenya imports to meet the local consumption demand.

Agriculture Ministry data shows that Kenya imports the bulk of its rice from Asia and Tanzania to bridge the local production deficit.

The country averagely produces between 100,000 and 130,000 tonnes of milled rice while demand is around one million tonnes.

While maize is a major crop produced locally, the country is also forced to import the commodity to sufficiently supply national demand, projected to reach 60 million bags by 2025, against a current average production of 35 million bags.

The floods that swept the country in May this year, disrupting agricultural activities, are expected to have a long-term effect including low crop output for some commodities such as cereals, meaning high prices.

According to S&P Global, the country’s overall economic growth is expected to be lower by 0.3 percentage points compared to the baseline in 2024, as the country navigates the aftermath of the recent floods that rocked most parts, following above-average rainfall between March-April-May.

This resulted to widespread flooding and damage to infrastructure with the devastating floods have caused significant disruptions to various sectors, including agriculture, transportation, and retail. 

“The negative impact of the 2024 floods on Kenya's overall GDP appears likely to be higher than the 2018 floods,” the firm says in a report.

Source: The Star