Tax-free essential good imports to fight inflation


The government will import large quantities of rice, cooking oil, sugar, wheat and beans duty-free through the Kenya National Trade Corporation (KNTC). FILE PHOTO | AFP

The government will import large quantities of rice, cooking oil, sugar, wheat and beans duty-free through the Kenya National Trade Corporation (KNTC) as part of efforts to tame the rising cost of essential commodities in Kenya.

The plan has caused disquiet among manufacturers and food processors who are yet to determine how they will fit into the State’s intervention in the supply chain.

KNTC will import rice amounting to 150,000 tonnes, cooking fat/oil (125,000 tonnes), sugar (200,000 tonnes), wheat (25,000 tonnes) and beans (80,000 tonnes) according to documents seen by Business Daily.

“The Cabinet through the Executive Office of the President approved the positioning of KNTC as an anchor agency of the State initiatives to create price stabilisation for essential household food items, in the face of prolonged drought affecting Kenyans,” the Kenya Revenue Authority (KRA) wrote in a departmental circular dated February 14, 2023.

“Pursuant to the Cabinet approval and the request by the Ministry of Investment, Trade and Industry, the Cabinet Secretary, the National Treasury and Economic Planning approved the duty-free importation of the following products by KNTC.”

Kenya is among countries grappling with high inflation caused by multiple factors including drought, weakening of the shilling and trade disruption brought in the wake of the Russia-Ukraine war.

Kenya’s cost of living rallied from lows of 5.2 percent to peak at 9.6 percent in October and has started easing slowly, standing at nine percent last month.

The government is betting on the duty-free imports by KNTC to tame the runaway prices of goods on the shelf, which has seen a two-kilogramme packet of sugar retail at Sh312 with maize flour going for Sh200.

The duty-free window is expected to run up to January 2024 but it can end earlier if the quota is exhausted before the lapse of the deadline, according to KRA.

The taxman says the latest exemption on the commodities to be imported by KNTC does not affect the approval of the importation of the same products issued in December last year.

“The quantities approved in the referred letter of January 20, 2023, relating to the importation of KNTC do not in any way affect the exemptions previously granted under other legal notices and shall continue to be processed under the tenor of the approved exemption,” KRA said.

The move is already causing jitters among some companies who argue that imports are meant to kill the local industry, which cannot compete with cheap goods from abroad.

The Kenya Association of Manufacturers (KAM) in a communique to its members last week said it would push for talks with the government regarding its plans to leverage KNTC to bring in the commodities.

KNTC will be funded by Afreximbank and will enable the company to guarantee sufficient importation of key commodities.

Wheat processors say that allowing duty-free imports by KNTC will have detrimental effects on them as they are currently importing the grain at a 30 percent duty.

“This is killing our businesses because we cannot compete with the wheat that is being imported at duty-free when manufacturers are paying a 30 percent tax,” said Bimal Shah, the chief executive officer of Broadways Company.

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