Cooking oil, soap prices to rise on new 10pc import tax

Cooking oil displayed on shelves at a Nairobi supermarket. 

Photo credit: File | Nation Media Group

The cost of cooking oil, soap, margarine, and some cosmetics with glycerin is set to rise by double-digit rates starting this month after Kenya imposed a 10 percent import duty on crude palm oil, a key raw material used to produce them.

The East African Community Council of Ministers chairman Deng Alor Kuol said Kenya’s application to raise duty on crude palm oil to 10 percent from the current zero rate under the common external tariff (CET) has been approved.

Kenya now joins Uganda which last year imposed a 10 percent import duty on crude palm oil.

“It [new duty] will increase the cost of everything we make from crude palm oil — cooking oil, cooking fat, margarine and all that — by 10 percent,” said a top official at a leading manufacturer. “As manufacturers we pass on additional cost to the consumer.”

The increased duty on crude palm oil, harvested from oil palm trees, forms part of a few options left for the Ruto administration to raise new and higher taxes after the government was forced to drop the Finance Bill 2024 last week following deadly youth-led protests.

The youthful demonstrators, who are not affiliated with political or ethnic groupings, poured onto the streets of cities and major towns across 35 counties to oppose plans to impose new and higher taxation measures to raise an additional Sh346 billion to fund a nearly Sh4 trillion budget for the year starting July.

Other goods targeted are semi-trailer trucks whose duty has now been raised from 25 percent to 35 percent, joining other motor vehicles which started paying the 35 percent duty last year.

The higher duty on crude palm oil could see households pay an average of Sh359 per litre of cooking oil, based on an average cost of Sh326.36 per litre in June as per data collated by the Kenya National Bureau of Statistics.

Kenya already applies a duty of 25 percent or $500 (Sh65,000 based on the conversion rate of Sh130 per US dollar) per metric tonne, whichever is higher, of refined sunflower oil, corn oil, palm oil, and soybean oil, making importation of finished product even more expensive.

Prices of cooking oil and fat, soap, and cosmetics with glycerin sky-rocketed in 2022 after global prices of crude palm oil shot up to record levels initially due to drought in Southeast Asia last year followed by protectionist export rules in Indonesia which prioritised supply to domestic factories.

Indonesia produces nearly 60 percent of global palm oil followed by Malaysia which makes up more than a quarter of the production, according to the US Department of Agriculture.

Kenya has been courting Indonesia, whose high-profile delegation of top government and private sector officials visited Nairobi last year, to support farmers through large-scale farming and an out-grower scheme like the one used for sugarcane farming in western Kenya.

The government-backed plan targets farmers in Lake Region counties of Homa Bay, Migori, Kisumu, and Busia as well as Lamu, Kwale, Tana River, and Taita Taveta at the Coast.

Studies by the Kenya Agricultural and Livestock Research Organisation (Kalro) have shown that the oil palm tree, introduced in Kenya in 2003, can grow along the Equator.

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