Loaves of bread and pieces of chapati. PHOTO/Pexels
In Summary:
- The proposed 2024 Finance Bill includes higher excise duty on edible oils, likely raising the prices of basic commodities.
- The increase in excise duty could significantly impact families, hospitality, and tourism sectors.
Kenyans may soon face higher prices for essential goods if the 2024 Finance Bill, which proposes increased excise duty on edible oils, is passed by Parliament.
This bill could lead to price hikes for items such as bread (400g) from Kes 70 to Kes 80, long bars of soap from Kes180 to Kes270, and chapatis and mandazis, which depend on edible oils.
Other affected commodities include chips, which may rise from Kes 80 to Kes100; 200g biscuits, from Kes120 to Kes150; 40g crisps, from Kes 50 to Kes 70; and 250g margarine, which could soar from Kes160 to Kes 300.
Additionally, the price of palm oil, currently at $930 per barrel, may increase to retail at Kes 6,737 for a 20-litre jerrican, up from Sh4,046.
The cost of a 10kg carton of cooking fat is expected to rise by Kes1,098 to Kes 3,230.
The impact on consumers will be significant, with palm oil prices per litre expected to jump from Sh202 to Sh337 and cooking fat from Sh107 to Sh162.
The National Treasury’s plan includes a 25% increase in excise duty, a 10% reintroduction of excise duty on plastic packaging, and an eco levy of Sh150 per kilogram to encourage responsible waste management.
This spike in prices could make it difficult for a family of four to afford even one full meal a day, according to Fathi Hayel Saeed, chairperson of edible oil manufacturers, and Vimal Shah, managing director of Bidco Oil Refineries.
Saeed highlighted that consumers are already strained by existing taxes such as the housing levy and Social Health Insurance Fund (SHIF), making additional taxes unsustainable for the average family earning around Sh18,000 gross.
“Consumers are already constrained by increased taxes such as the housing levy and Social Health Insurance Fund (SHIF). Minimum wage is approximately Sh18,000 gross. With an increase in rents and the cost of basic daily consumables such as bread, mandazis, and chapatis, a family of four will struggle to have a full meal a day,” Saeed stated.
Shah emphasized that higher excise duties would hurt local manufacturers by making it more expensive for them to produce goods, potentially leading to increased imports.
He questioned the rationale behind these policies, suggesting they could harm local businesses rather than support them.
The proposed taxes are expected to affect the hospitality and tourism sectors, where edible oils are essential for food preparation.
Saeed argued that these industries would face higher costs, impacting the overall cost of hospitality services.
Saeed urged the committee to repeal the proposed excise duty on edible oils and margarines and remove the Import Declaration Fee (IDF) and the Railway Development Levy (RDL) on crude oil imports.
He also called for the elimination of the Nuts and Oil Crop Directorate (NOCD) levy and the East African Community duty, which would save significant costs for local manufacturers.
“Remove the various proposals in the Finance Bill 2024/2025 as these will have greater implications on the cost of cooking oil in Kenya,” Saeed stated.
Shah pointed out that the cost of doing business in Kenya is higher compared to Tanzania and Uganda, where manufacturers receive incentives.
He also criticized the proposal to ban plastic packaging, noting that alternatives like glass or tin are more expensive and less practical.
“Glass is three to four times expensive. Recycling it is even very expensive. You want to bring down the cost of living, then there is no other cheaper solution than plastics,” he stated.
Rajain Maide, managing director of Pwani Oils and Kartasi brands, refuted claims that edible oil manufacturers had blocked competitors from entering the market.
He mentioned the potential for diversifying raw materials, such as planting sunflower, provided the government supports these initiatives.
Maide also addressed concerns about product standards, assuring that their goods meet the Kenya Bureau of Standards’ requirements, including the addition of vitamin A.