Duty-free food import loopholes

By Business Daily Africa

The Minister for Trade, Investment and Industry, Moses Kuria, is very annoyed with local manufacturers of cooking oil.

Appearing on a local prime-time television show this week, Kuria spoke of the existence of a five-member cartel that was dictating high consumer prices. He warned the quintet of a looming ‘waterloo’.

Mr Kuria charged that local cooking oil manufacturers do not do any significant value-addition as all they do is merely bring in imported finished products in drums to pack locally.

He said local firms did not deserve to be called manufacturers and derisively suggested the industry’s lobby- the Kenya Association of Manufacturers (KAM), should change its name to Kenya Importers Association.

He was reacting to protests by the sector about the decision by the government to import 125,000 tonnes of cooking -nearly 10 percent of local production- through the State-owned Kenya National Trading Corporation.

I want to urge the minister to cool his tempers and engage local manufacturers in conciliatory discussions. Instead of confronting one another, let the parties come together to confront the problems facing local manufacturers.

We must always remember that after we passed the 2010 Constitution, the new philosophy is that the government should no longer be above the people, to be lobbied, petitioned and begged for favours.

Currently, the local manufacturing sector is sandwiched between high electricity prices, debilitating shortages of hard currency, and a volatile and falling shilling that has seen the cost of imported raw materials and inputs skyrocket unpredictably.

It is hardly a good time to engage the government in discussions that are approached with recrimination and frayed tempers.

The good thing is that some of the issues raised by the minister can easily be proved by facts. For instance, if indeed there is a cartel that is exploiting consumers, all that is needed is to task the Competition Authority to conduct a quick investigation.

We must not forget that both crude palm oil and refined palm oil are sold on international markets.

The prices are quoted daily on commodity exchanges such as the Kuala Lumpur Commodity Exchange. You can see the daily prices even on google. It will not be difficult for the competition watchdog to determine whether or not consumers are indeed being exploited by the cartel the minister is talking about.

Are local manufacturers of cooking oil importing cooking oil from Egypt and merely repackaging it here? What does it cost to invest in a refinery or a fractionation plant?

How many people do local manufacturers and the whole ecosystem, including, packaging, cartons, plastics, labels and transportation employ?

How much does the ecosystem pay in taxes? These are issues that can easily be settled.

Last year, a dispute with the cement industry was settled after the government and the industry agreed by appointment of a multi-sector community that was tasked to verify production capacities and another issue- including pricing.

What is my point? When not well-assessed duty-free imports and exemptions can erode the tax base and deprive the government of much-needed revenues.

The Kenya National Trading Corporation is being turned into a market player. All that the cooking oil manufacturers are asking for is a level playing field with this new competitor.

Is it fair –in the name of market stabilisation- to allow one player to sell goods in the market without competing with a local manufacturer who pays full taxes?

If the objective is to stabilise prices, why don’t you give similar fiscal incentives to local producers?

The government may very well have a point in reviving KNTC. But can we have a little more transparency in its operations?

How are traders being given contracts? Who has the contract to bring in what and in what quantities?

Under the current programme we have with the IMF, one of the conditions for support is that entities and contractors who win in public tenders must disclose ultimate beneficial ownership.

Parting shot: Why are there so many mistakes in the letters that have given approvals to the duty imports programme?

For instance, the headline of the letter Prof Njuguna Ndung’u to KRA on January, 20 refers to a quantity of 800,000 tonnes of beans when the correct number is 80,000 tonnes.

Another key letter- the one from the Secretary to the Cabinet Secretary of Trade and Industry is headlined: ‘Inventionary measures to lower the current cost of living’. Clearly, the writer meant ‘intervention’. We could do with a little less sloppiness.