Tax regime puts brakes on rising sorghum sector

Emerging market threats like the recent introduction of a 50 percent excise duty on key sorghum based beer is threatening to put brakes on a crop that has been the source of livelihoods and nutrition for thousands of farmers who have relied on it after other crops succumbed to vagaries of weather.

Sorghum has been a crop of choice for many farmers due to its ability to withstand drought and diseases. Over the last few years, the sorghum value chain, from production to marketing to processing, has registered rapid growth, fuelled in part by investment by the Government of Kenya and diverse stakeholders. In turn this has led to improvements in food security, livelihoods and income generation among the farming communities in various parts of Kenya, for whom profitable agriculture-derived enterprises were previously unimaginable.

Unfortunately, the sorghum value chain is faced with emerging market threats compounded by the recent imposition of a 50% excise duty on key sorghum-based beer following implementation of the Finance Act 2013. By the year end, over 25,000 smallholder farmers may not have their contracts renewed to supply the country’s largest buyer, East African Breweries Limited (EABL), with sorghum. This will gravely affect smallholder farmer incomes, nutrition and food security.

“The Government’s Vision 2030 is hinged on creating increased livelihood and job opportunities for all Kenyans and the recent tax policy action has had quite an adverse impact on the sector,” said Anthony Kioko, CEO of CGA, on behalf of the conveners. “The total investment by all players including the Government of Kenya, can easily total to more than Sh10 billion, with estimated farmer losses standing at close to KSh 3.4 billion,” he added.