Govt. to work with counties to scrap produce cess

The government has opened talks with county governments to scrap excessive levies charged for the transportation of agricultural goods between county borders.

According to the Burden of Produce Cess study produced by the Kenya Markets Trust, shows that farmers as well as manufacturers have expressed concern that cess collection is not harmonized across counties and increases the cost of doing business across different counties in Kenya.

Trade and Industrialization Cabinet Secretary Adan Mohamed says county governments ought to understand the value of making Kenyan goods competitive, saying random levies and taxes only add to the high cost of doing business

“Competition is not our next door county; competition is the rest of the world. For us to be able to compete, our productivity must be as high as possible that way the unit cost of what we produce is competitive,” Mr Mohamed said.

Maize traders for example were found to incur cess of Sh70 per 90 kilogram bag or Sh6,000 for a 28 ton truck transporting maize.

On top of that traders were also slapped with transport, storage, handling as well as marketing charges by middlemen all driving up the cost of getting their produce to market.

“The discussion showed that cess, transportation and parking fee (for those selling in Nairobi and Mombasa) were some of the most burdensome charges, impacting maize trade. While rate of cess may appear less burdensome, levying at multiple levels made the total charge heavy on the trader,” the study indicates.

According to the report, money raised from the levy is in most counties not ploughed back to the sector, instead acting as a tool for revenue collection.

Kenya Markets Trust CEO Kamau Kuria said the government needs to eliminate trade barriers that enrich those in the supply chain of products rather than the farmer or manufacturer.

“How does that produce get to market and give them a just return so that it’s not always the producer is not in a position trickles through while other market intermediaries benefit,” Mr Kuria said.

The study indicates that some counties are in competition to see who could raise more revenue through the levy.

Mr Kuria said a one percent increase in cess is associated with a 0.8 percent rise in the average cost of distributing a product.

Mr Mohamed said the government would use the findings of the study to structure its engagement with the counties to show just how much additional levies were crippling competitiveness.

Report by Hilda Wathithi