Food import bill overtakes machinery on duty waivers

Imported yellow maize being offloaded at Mombasa port. FILE PHOTO | NMG

Kenyans have this year spent more money on importing food than capital goods such as machinery for the first time, underlining the impact of a prolonged drought and disruptions in the global supply chains which prompted the William Ruto administration to waive duty on key food items.

Traders splashed a record-high Sh199.75 billion on food and beverages ordered from abroad in the first seven months of the year, analysis of the latest official data suggests, a 49.84 percent jump over Sh133.30 billion in a similar period last year.

This came at a time when the Ruto administration, which took power in mid-September 2022, allowed the waiver of import duties to smooth the purchase of key food items from abroad.

Read: Kenya's food imports bill hits 5-year high on biting drought

Goods which were allowed entry into the country tax-free included white maize, rice, yellow maize, soya beans, soya bean meal, assorted protein concentrates and feed additives.

The waiver was granted in a bid to “bridge the food stocks deficit as well as lower and stabilise food prices,” according to Treasury Cabinet Secretary Njuguna Ndung’u.

The provisional data, collated by the Kenya National Bureau of Statistics, indicate the food import bill exceeded expenditure on machinery and other capital goods like tools and equipment used in production processes, whose value dropped 9.64 percent to Sh157.29 billion in the review period.

The increased food import bill largely reflects the lingering effects of a debilitating climate change-induced drought last year, thought to be the worst in 40 decades, and the Russia-Ukraine war which exacerbated disruptions in supply chains. That sent prices of food items like wheat and rice through the roof.

The growth also partly reflects the weakening of the shilling over the year through July to an average of 142.36 units against the US dollar compared with 118.80, a 19.84 percent depreciation.

The twin shocks also resulted in a considerable decline in the production of key food crops last year after farmers struggled with elevated prices of farm inputs like fertiliser, seeds and pesticides.

“A severe drought witnessed in the region and most parts of the country associated with climate change gravely impacted on food security. The impact of climate change, therefore, created the urgency to refocus investments on mitigation, adaptation and firm resilience,” Prof Ndung’u wrote in the draft 2023 Budget Review and Outlook Paper on September 15.

“The drought not only aggravated the inflationary pressures but also subjected millions of homesteads to severe food insecurity, loss of lives, livelihoods and loss of livestock.”

Food prices have been a major driver of recent runaway inflation, rising by double-digits on a year-on-year basis since April 2022 through June this year.

Kenya has been struggling to ramp up food production and cut its appetite for imports, with challenges such as erratic rainfall, fragmented farm sizes and high production costs standing in the way.

The expenditure on food imports in the review period is Sh75.53 billion, or 60.80 percent, more than Sh124.22 billion spent in a corresponding period in 2017 when a similarly biting drought-hit crop and fodder production, triggered a national food crisis.

At the time, the Treasury also allowed waiver of import duties to lower cost of shipping in key food items such as maize, rice and milk powder from abroad.

A confluence of bottlenecks in global supply chains and drought across the globe also saw some countries adopt protectionist policies, subjecting Kenyans to record high prices of some items such as edible oil, staple maize meal, rice and wheat.

For example, protectionist rules in Indonesia, which accounts for about 60 percent of global palm oil production, to prioritise supply to its domestic factories last year, resulted in Kenyans paying record-high prices for edible oil.

Grain export restrictions in Tanzania in part also resulted in maize flour prices hitting record-high levels after meals were forced to look for maize supplies in far-flung markets.

Raed: Puzzle of skyrocketing food prices in spite of cheap imports

In the current financial year ending June 2024, Kenya has successfully got approval from the East African Community’s Council of Ministers to import wheat at 10 percent duty as opposed to standard 35 percent for the bloc, while the rate for rice has been slashed to 35 percent from 75 percent.

“The adequate rainfall during the long rain season in most parts of the country and the anticipated short rains later in 2023 will continue to support activities in agriculture,” Prof Ndung’u wrote in the outlook paper.

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