A sorghum farmer inspecting his crop in Lambwe Valley, Homa Bay County. FILE PHOTO | NMG The government plays a dual role in ensuring that agricultural production remains profitable and consumers, especially those in urban areas, enjoy affordable prices. To attain these objectives, the government must balance policies that support farmers, other value chain actors as well as consumers.
Presently, the government is implementing an ambitious transformation strategy through the Big Four Agenda and the Agriculture Sector Growth and Transformation Strategy 2019-2029. The primary objective is to grow smallholder productivity and incomes as well as guarantee affordable prices. Enhancing farm level productivity, value addition and agro-processing are at the heart of these strategies.
In addition, the strategies also have measures aimed at increasing employment opportunities along agricultural value chains. When implemented successfully, these strategies will significantly enhance the economic contribution from agriculture and transform rural economies.
As such, the publication of the notice for the remission of excise duty amendment regulations, 2020 by the Treasury puzzles many stakeholders in the sector. The regulations seek to reduce excise duty remissions of beer made from locally grown sorghum, millet or cassava or any other agricultural produce from 80 percent to 60 percent.
The Treasury’s objective is to collect additional revenue to aid the government economic recovery strategy post-Covid-19. However, this specific measure will likely be counterproductive and the government will unlikely meet its revenue target or economic growth as planned.
In the 2015/2016 financial year, a similar proposal was implemented. The price of sorghum beer increased as the added tax was passed on to consumers. The demand for sorghum plummeted as the beer processors scaled down processed volumes and also cancelled contracts for famers. This had a negative impact not only for famers, but other value chain actors such as input sellers, grain aggregators, and transporters. Instead of the government raising revenue, it actually lost Sh2 billion in forgone tax due to losses accruing to the sorghum beer processors and other value chain actors.
The policy measure was rescinded after stakeholders presented this evidence to the government. It is not clear why the Treasury is optimistic that this time around the policy will be successful.
In Kenya, sorghum is grown in the Western, Lower Eastern and Coast regions, areas which are characterised by low rainfall and high temperatures by an estimated 240,000 farmers. In these areas, due to challenges of weather and lack of investment in irrigation, profitable […]