Edible oil producers now say the government’s duty-free imports will not alleviate the steep cost of the product due to high distribution costs, amid an ongoing tussle between the State and manufacturers.
The sector says the cost of duty-free finished edible oil imports will be Sh240 cheaper than the cost charged by local firms for every 20-litre jerrycan, translating to only Sh12 per litre—before factoring in the distribution costs to be incurred by the government.
This is based on an analysis that the estimated cost of the duty-free oil will work out at Sh4,229 for 20 litres, compared to Sh4,469 for the locally produced commodity, which has estimated production costs including packaging material, labour, and electricity at Sh448.
“The data has not taken into consideration the distribution costs that the government will incur to ensure the final consumer can access the edible oil products,” Kenya Association of Manufacturers (KAM) CEO Anthony Mwangi said in a memorandum to the Trade Ministry.
“It is likely that the distribution costs will result in the final price of the duty-free imports to be similar, if not more expensive, to the locally manufactured products. Evidently, the decision to proceed with the importation of finished edible oils will have far-reaching implications for the Kenyan economy with minimal to no impact on price stability as intended.”
The government plans to import 125,000 tonnes of cooking oil duty-free through the Kenya National Trade Corporation (KNTC) to tame the runaway shelf prices of the product.
KNTC will also import rice amounting to 150,000 tonnes, sugar (200,000 tonnes), wheat (25,000 tonnes) and beans (80,000 tonnes) as part of wider efforts to bring down the cost of food.
However, edible oil manufacturers claim that the decision will drive them out of business, a move that has also seen the Law Society of Kenya (LSK) move to court. The case will be mentioned on May 15, for directions.
The duty-free window is expected to run up to January 2024 but it can end earlier if the quota is exhausted, according to Kenya Revenue Authority.
Local manufacturers want the State to instead consider the removal of the two percent nuts and oil crops development levy, 1.5 percent railways development levy and another similar rate of import declaration form charges to save Sh122 per 20 litre jerrycan and make cooking oil cheaper in the local market.
A removal of EAC duty can also save Sh70 per 20 litres in the Kenyan market, the manufacturers say.
The price of global crude palm oil has increased over the last few years due to global shocks attributed to Covid-19 which resulted in restrictions on freight movement and the Russia – Ukraine war that led to harvest losses in raw material used in edible oil production.
This has been compounded by the depreciation of the shilling which has increased the production costs.
