A major showdown between manufacturers and the government is in the offing, with consumers likely to bear the brunt of higher cooking oil prices.
This follows the proposal by the Investments, Trade and Industry CS Moses Kuria to remove the 35 per cent duty on edible oils, and substitute it with 10 per cent export and investment promotion levy on imports.
While the ministry argues the move is intended to support local manufacturing in the edible oils value chain, manufacturers are reading malice.
There is already a fall-out between the government and the local edible oil players, with Kuria labelling them “cartels” out to exploit consumers with exorbitant prices.
This comes after the government imported duty-free products through the Kenya National Trading Corporation (KNTC), raised questions over the importing companies’ ownership and beneficiaries.
Both CS Kuria and his Treasury counterpart Njuguna Ndung’u have however defended the decision to import 125,000 tonnes of cooking oil, saying it was intended at lowering prices.
This, as global vegetable oil prices are set to rise for the remainder of 2023, driven by tightening supplies, global biofuel targets and China's return to the market.
“The edible oils value chain continues to be a major contributor to net cost of basic food commodities in the country,” Kuria said.
In a letter dated June 20, he said while the government has created measures to stabilise prices for essential household commodities, the importation of crude oil in the country, estimated at Sh102 billion continues to draw back local manufacturing of the basic food commodity.
“This levy, introduced on selected goods which local manufacturing industries have capacity to produce is meant to incentivise investments in local manufacturing,” Kuria said.
The introduction of the levy in the edible oils sector will also create a more level pricing of this basic food commodity.
“The proposed substitution will be effected once the exports and investment promotion levy comes into effect and will also contribute to growth of palm, soya and sunflower farming,” notes Kuria.
This now adds to concerns by manufacturers who in May expressed concern that a sustained duty-free importation of edible oils could lead to the closure of local industries, with up to Sh52 billion in taxes lost annually.
Kenya Association of Manufacturers is expected to hold a meeting on Friday [today] to deliberate on the government decisions which will affect crude palm imports and other raw materials.
“The edible oils sector is expected to meet to discuss the issue,” a source familiar with the developments told the Star.
Yesterday, Pwani Oil indicated it would stop production, send home at least 1,600 employees and instead opt for ready imports.
“Duty on raw materials and finished products will be the same. Why will anyone bring raw materials? We will close and bring in ready product,” director commercial development, Rajul Malde, told the Star.