Kalonzo tells Treasury to scrap keg beer excise

Former Vice President Kalonzo Musyoka has led regional leaders in demanding that the Treasury scraps tax on keg beer, which has hit sorghum growing zones hard.

Mr Musyoka said that the tax had condemned residents of Ukambani, Nyanza and Western into poverty.

“To us this is not just an appetite for more tax revenues. It’s clearly designed to emasculate poor farmers,” he said, adding that many farmers risked having their property auctioned by banks to recover loans they obtained to venture into sorghum farming.

East African Malting Ltd (EAML), a subsidiary of East African Breweries Ltd (EABL), had partnered with several organisations including Kenya Agricultural Research Institute (Kari), Cereal Growers Association, Africa Harvest, Agra and Equity Bank to promote the growing of sorghum.

Equity Bank offered farmers low interest loans to buy seeds and inputs while the rest provided technical support to ensure the best quality grains were produced for consumption by EAML. 

The excise tax took effect last October under the Finance Act 2013. Thousands of smallholder farmers across 14 arid counties had been contracted by EABL to grow Gaddam sorghum, a white variety suitable for making beer.

EABL’s interest triggered a 600 per cent price surge, from a low of Sh5 per kilo of sorghum to an unprecedented high of Sh33, with the brewer paying farmers instantly for deliveries.

Farmers’ fate now hangs in the balance after EABL warned it would not renew contracts.

READ: Keg excise tax costs sorghum farmers, transporters Sh258m

In an interview Mr Musyoka yesterday questioned the fiscal logic of taxing goods using locally produced raw materials instead of discouraging the importation of barley and other grains to empower farmers and spur economic growth.

“The promotion of sorghum was not only based on concern for poor farmers alone but also its contribution to the national economic growth and therefore policies should instead give subsidies and incentives to spur agricultural growth,” said Mr Musyoka who insinuated the tax targeted opposition zones.

EAML head Lawrence Maina said the whole value chain was hit.