Kenya is hurting from the East African Community (EAC) common market policy that restricts importation of duty-free maize, the World Bank has said.
In a newly released policy note on the drought and food crisis in the Horn of Africa, the institution has called for a review of the EAC grain trade policy so as to reduce Kenya’s future vulnerability to spikes in food prices.
“Kenya is a food deficit country even in a bumper harvest year, yet the country levies import duty on food grains that are only suspended on an ad hoc basis in times of crisis.
The East African Community customs union partners also impose export bans on cereals when Kenya experiences a food crisis,” said the World Bank report.
“Given that Kenya is consistently a net importer of maize, a policy of restricting imports necessarily harms Kenyan consumers, who bear the additional tax burden,” it added.
Under the EAC agreement, Kenya imports maize from its partners – mostly Tanzania and Uganda – duty free but imposes a 50 per cent duty on imports from other countries. While signing the EAC commn external tariffs treaty, Kenya had identified maize as one of its sensitive commodities, giving it the right to request an alteration in the terms of trade relating to the product.
Kenya had imposed an import duty on imports from outside the community countries, believing that it would be able to sustain its internal demand from local production.
However, the country has found itself having to import maize, which is its major food staple, even from beyond the member countries following Tanzania’s previous ban on exports to ensure its own food security and Uganda’s preference for the South Sudan market which offers better prices.
Kenya has an option of appealling to the East Africa Secretariat to have it reduce or import duty free maize from non-member countries. Analysts say the imports help to build strategic national reserves while millers import to meet current needs.
The policy note, which states that the agriculture policy and trade policy distortions are compounding the drought’s impact in Kenya, will boost Cereal Millers Association (CMA’s) plea to the government for an extension of the duty free window which closed on December 31.
“We did not get an extension. We had requested it for the reason that we should not be taking chances that the local and regional supply will be enough and then finding ourselves in the same situation as last year,” said Mr Diamond Lalji.
The initial request was turned down by Ministry of Finance which said the importation could be detrimental to local farmers, albeit advising the millers to work with the Ministry of Agriculture for a re-consideration. The millers appealed to the Agricultural Ministry to support its bid but did not get a response.
A senior official at the Agricultural ministry told Business Daily that given the good harvest this year, an extension would cause an outcry as it would be viewed to be detrimental to the local farmers.
“The duty-free window causes an outcry when it is opened whenever there is a boom so we opt to use it only in times of crisis,” said an official from the Ministry of Agriculture who could not be named as he is not authorised to speak to the press.
Last June, flour prices had risen to Sh160 per two kilogramme packet following a sharp increase in maize prices which were at Sh4,200 per 90 kilogramme bag. This persuaded the government to open the duty free importation window.
“The government has intervened in maize markets in ways that keep maize prices high and have little impact on price stability,” said the World Bank.