Economy

New taxes for key Kenyan farm exports to Europe

bd-Oserian

A worker at Oserian farm. The changes are expected to hurt horticulture, the country’s leading foreign exchange earner. PHOTO | FILE | NATION MEDIA GROUP

A new trade regime coming into effect next week will see Kenyan exporters of agricultural products lose duty free access to markets in the European Union.

They will also be subject to new customs formalities.

The changes are expected to hurt horticulture, the country’s leading foreign exchange earner and one of the fastest growing agricultural sub-sectors.

One estimate suggests the new taxes will cost the country up to Sh400 million a month.

READ: New EU tax to cost Kenya Sh100 million per week.

Those hardest hit include exporters of cut flowers, including roses, who now face tariffs of between five and 8.5 per cent depending on the season.

Exporters of various raw vegetables such as peas, beans, broccoli and aubergines now face tariffs of about ten per cent for part of the year. Only carnations, unprocessed coffee beans and tea retain duty free status.

A statement from the European Union Delegation to Kenya advised that East African Community (EAC) exports to the EU will next Wednesday revert to a less generous market access platform in which some products attract taxes.

From October 1, Kenyan exports will fall under the Generalised System of Preferences (GSP) which grants developing countries conditional preferential market access for their goods.

Kenyan exports to the EU have enjoyed duty-free quota-free access to European markets since January 1, 2008. But from October 1, such access will be reserved for countries that have ratified Economic Partnership Agreements (EPAs) concluded with the EU. Exporters have also in recent months had to contend with stiffer rules on pesticide residue.

Kenya and other EAC partners have not concluded EPA negotiations. The EU says the talks are “ongoing and close to conclusion”.

READ: Fate of EAC trade deal with Europe in ministers’ hands

Kenya exports commodities worth Sh100 billion (about $1.1 billion or €857 million) every year to the EU market. The horticulture industry contributes 23 per cent of the country’s Gross Domestic Product.