Edible Oil Manufacturers Warn of Severe Economic Impact Threatening To Exit Kenyan Market
Edible Oil Manufacturers Warn of Severe Economic Impact from Proposed Tax Hikes in Kenya’s Finance Bill 2024/2025
Edible oil manufacturers in Kenya have voiced serious concerns over the proposed tax increases in the Finance Bill 2024/2025, warning of significant economic repercussions for Kenyan households. The bill suggests a 25 per cent excise duty on edible oils and margarine, which is expected to significantly raise the prices of these essential items.
Impact on Cost of Living
Addressing Members of Parliament, Hayel Saeed, Chairman of the Edible Oil Manufacturers, emphasized the severe impact the increased taxes would have on the cost of living. Vimal Shah, Chairman of Bidco Manufacturers Limited, argued that the excise duty, intended to reduce palm oil imports and boost local sunflower oil production, would instead harm local manufacturers.
“The bad news about this will apply on our locally grown sunflower oil, so even we will stop focusing on buying local and focus on exporting the sunflower oil. Why are we destroying our local manufacturing?” Shah remarked.
Calls for Abandonment of Proposed Tax
Shah maintained that the proposed tax should be abandoned to protect local manufacturing. “We can’t be talking about improving value addition locally by promoting agriculture and manufacturing, yet in this one stroke we are destroying that,” he said.
Concerns Over Additional Levies
Manufacturers are also challenging the 2 per cent levy on the Nut and Oil Crops Directive, arguing it would provide minimal savings on oil products and disadvantage local processing. “Remove the 2 per cent levy on the Nut and Oil Crops Directive on all crude oils to promote local processing. We are now disadvantaged and less efficient on all products that use edible oils as input,” Saeed urged.
Nitin Shah, CEO of Kapa Oil, criticized the frequent tax increases, noting that they deter investors compared to more stable environments in neighboring countries like Egypt, Uganda, and Tanzania. “Investors look for profits after investing from four to five years. If you keep changing your policy every year, then no investors will come here to invest. If you want investors, the policies must be consistent,” Shah noted.
Opposition to Eco-Levy
The introduction of an eco-levy at Sh 150 per kilogram has also been met with opposition. Industry stakeholders argue there is no clear mechanism to support environmental conservation through recycling, making the levy counterproductive. Rajan Malde emphasized that this cost would ultimately be passed to consumers, given the high expense and impracticality of alternative packaging like glass.
“We are not against environmental conservation; in fact, we are part of a wider scheme under the Ministry of Environment so that they can recycle plastic waste but this will not support the industry,” Malde stated.
Potential Humanitarian Crisis
A recent statement by the Edible Oil Subsector of the Kenya Association of Manufacturers highlighted the severe repercussions of the proposed tax, warning it could lead to an 80 per cent increase in cooking oil prices. This would make the product unaffordable for millions, especially low-income earners and small-scale traders. Moreover, prices of related products like bread, soap, and margarine could also see significant hikes, worsening the already high cost of living and pushing many into deeper financial hardship.
Conclusion
As discussions on the Finance Bill 2024/2025 progress, the Edible Oil Manufacturers remain firm in their opposition, stressing the dire economic and social implications of the proposed tax measures. They urge the government to withdraw the proposed excise duty to avoid a potential humanitarian crisis and protect local manufacturing and consumers from severe financial strain.
