The prices of maize, cassava and wheat flour may drop by 16 per cent if parliament adopts proposals to amend the Value Added Tax (VAT) to allow millers reclaim tax from raw materials used to manufacture the products.
If the Finance Bill 2018 is amended, cassava, wheat and maize will change their status from exempt to zero rate meaning manufacturers can claim VAT thereby reducing the cost of production.
The proposal comes at a time when maize flour prices have dropped from Sh110 to Sh90 in the last three months as harvesting season begins. The price is the lowest since 2012 according to data from the Kenya National Bureau of Statistics.
In 2017, the shortage of Kenya’s staple food maize, led to increase in maize flour prices from an average of Sh110 to Sh150 for a two kilogram packet forcing the government to subsidize the cost through imports.
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Soko maize meal brand. Courtesy
In this, the government imported more than 100,000 tonnes of the produce to curb shortage thus allowing millers to sell a two kilogram packet Sh90 each, a big relief to more than 70 per cent of Kenya’s estimated 46m people who depend on the crop as food and for commercial purposes.
On the other hand, Kenya’s wheat production decreased by 23.1 per cent from 214,700 tonnes recorded in 2016 to 165,200 tonnes in 2017 according to the 2018 economic survey report released by the Kenya National Bureau of Statistics in April this year.
Wheat imports into the country increased by 36.2 per in 2017 from 1362.3 thousand tonnes in 2016 in order to curb the shortage of the produce that is used to make bread, cakes, and other baked foods.
According to KNBS, Kenyans consume an estimated one million tonnes of wheat annually hence the country faces a deficit of more than 750,000 tonnes.
The crop is the second most important cereal rain after maize in the country.
Kenya produced 1.112m metric tonnes of cassava in 2017 according to the 2018 Economic Survey Report.