Maize prices set to rise after lapse of tax waiver on imports
What you need to know:
- Families will have to tighten their belts as maize flour prices are expected to rise further.
- This is after a waiver on charges and fees on imported maize expired on Friday.
- The 90-day waiver that has been in place since July 1 was effected to control prices after they shot to Sh225 just a month before the elections.
Families will have to tighten their belts as maize flour prices are expected to rise further. This is after a waiver on charges and fees on imported maize expired on Friday.
The 90-day waiver that has been in place since July 1 was effected to control prices after they shot to Sh225 just a month before the elections.
This cushioned consumers from high prices amid rising food inflation.
On Wednesday, Kenya Plant Health Inspectorate Services (Kephis) managing director Theophilus Mutui notified deputy directors within the organisation to resume charges on maize effective October 1, in an internal memo seen by the Sunday Nation.
“The gazette notice No.7499 directive for waiver of fees and charges for maize with effect from July 1 to September 30 refers. Please note that the waiver period will lapse on September 30. You are hereby advised to resume charges for maize and animal feeds from October 1,” Dr Mutui said in the memo.
Outgoing Agriculture cabinet secretary Peter Munya gazetted the waiver in early July as the government tried to control a rise in maize flour prices that had left households spending an average of Sh225 for a 2kg packet of flour.
This would then be followed by a subsidy on sifted maize flour that aimed to reduce prices to Sh100 for a 2kg packet, but which was unsuccessful as the subsidised product was largely unavailable in the market.
Millers now say with the resumption of the charges – despite expected poor harvests in the country due to poor rains that have hit agricultural productivity – they may not have an option but to increase prices further.
A 2kg packet of maize flour is currently retailing below Sh200 on average, with many brands selling at Sh189 at local supermarkets.
In the Kenya National Bureau of Statistics (KNBS) latest Consumer Price Index (CPI) data released on Friday, maize flour prices contributed to the largest raise in the inflation rate from 8.5 per cent in August to 9.2 per cent in September.
KNBS reported that while food prices rose by 15.5 per cent compared to a similar period last year, loose maize flour prices went up by 8.4 per cent just within the month.
The maize flour prices increased by nearly thrice the rate of any other commodity.
The latest Central Bank of Kenya’s April-June economic review observed that the Agriculture sector contracted by 0.7 per cent as it suffered impacts of inadequate rains last year.
This followed a further contraction of 1.2 per cent in the first three months of the year.
“Activity in the sector remained subdued following inadequate rains last year and delayed onset of rains during the quarter under review which adversely affected production. Contribution of the sector to overall GDP growth stood at -0.1 percentage points during the quarter under review,” the CBK stated.
Meanwhile, the taxes on bottled water, fruit juice, alcohol, chocolate and cigarettes among other excisable items did not rise yesterday as had been anticipated.
In a notice issued on September 1, the Kenya Revenue Authority (KRA) said it would revise the tax amounts to be in tandem with the inflation rate as of October 1.
A source told the Sunday Nation that the increment did not happen because a gazette notice had not been issued.
And Mr Eric Kiniti, the group corporate relations director at East African Breweries Limited, confirmed that the prices of their products had not changed by yesterday.
“The new tax rates have not taken effect as expected, hence there will be no price changes,” he wrote in a message. “KRA haven’t effected the changes they had proposed.”
The Kenyan manufacturers’ lobby group had sharply opposed the increase of rates by 6.3 per cent, saying it would only hurt industries that were already suffering the vagaries of the Covid-19 pandemic and encourage illicit trade.
“At a time when Kenyans are struggling to make ends meet and businesses continue grappling with shocks arising from the pandemic, the proposed inflation adjustment could not have come at a worse period,” said Ms Phyllis Wakiaga, the former CEO of the Kenya Association of Manufacturers, in a statement.
“Tax policies that make locally made excisable goods a lot more expensive than imports open up room for illicit trade to thrive. Consumers will be forced to opt for cheaper products, which may be illicit or counterfeits,” she added, noting that such revisions do not always translate to more taxes collected.
KRA, on its part, said implementing the changes is part of the powers given to it by the Excise Duty Act of 2015.