KENYA – Manufacturers of vegetable oils in Kenya are calling on the National Treasury to abolish the recently imposed 10 percent import duty tax on crude palm oil, a move they claim has significantly increased the cost of this essential commodity.
The Edible Oil Manufacturers Association of Kenya, represented by spokesperson Billow Kerrow, submitted a formal petition to the Treasury on August 1, 2024, expressing their concerns over the tax’s impact on both local production and consumer prices.
Kerrow emphasized that the government failed to consult industry stakeholders before implementing the tax, stating, “We have told them that this is unacceptable because they did not involve the industry before the tax was imposed. But we haven’t gotten any response.”
He criticized the government for what he described as an ambush with additional taxes, which he believes are already excessive and punitive.
The tax, which took effect on July 1, 2024, has led to a sharp increase in the price of a 20-litre jerry can of edible oil, which has risen by over Sh400(US$3), now retailing at approximately Sh3,800 (US$29).
This surge in price is attributed to the increased costs manufacturers face due to the new tax regime. “Such price hikes will disproportionately affect the most vulnerable members of society, exacerbating the already high cost of living, plunging millions into deeper financial distress,” Kerrow warned.
The imposition of this tax follows Kenya’s application to the Council of Ministers of the East African Community (EAC) to enact the duty, which was approved and published in the EAC gazette on June 30, 2024.
This decision aligns Kenya with Uganda, the only other EAC member currently enforcing a similar tax. However, manufacturers question the rationale behind this decision, especially since Kenya relies entirely on imports of crude palm oil from countries like Indonesia and Malaysia, which dominate the global market.
The cumulative tax burden on crude palm oil now totals 32 percent, including a Value Added Tax (VAT) of 16 percent, an Import Declaration Fee (IDF) of 2.5 percent, a Railway Development Levy (RDL) of 2 percent, and an Oil Crops and Nuts Development (OCND) levy of 2 percent.
Kerrow pointed out that the escalating costs could push local manufacturers to pass these expenses onto consumers, making essential products less accessible.
“Things have become so expensive. We no longer export. The countries we used to export edible oil to, like the Democratic Republic of Congo and Rwanda, are now importing directly from Malaysia and Indonesia at cheaper rates because our product is not competitive,” he noted.
The edible oils sector plays a crucial role in Kenya’s economy, directly employing around 15,000 individuals and indirectly supporting over 30,000 jobs.
The introduction of the import duty is expected to have a ripple effect on various industries, including soap manufacturing, which relies on over 20,000 tonnes of crude palm oil monthly.
Additionally, the bread and baked goods industry, which uses palm stearin—a by-product of crude palm oil refining—could see prices rise, with estimates suggesting an increase of about Sh10(US$0.077) for a 400-gram loaf of bread.
Kerrow concluded by urging the government to reconsider the tax decision, asserting that its removal would alleviate pressure on consumers and help stabilize prices in the market.
“Abandoning this tax will cushion millions of Kenyan consumers, especially the vulnerable ones, against imminent significant price hikes for these essential household products,” he stated.
The outcome of this petition remains to be seen as manufacturers await a response from the Treasury.
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