Kenya allocates US$495m for the agriculture and food sector in the 2020/21 budget

KENYA – Kenya’s National Treasury Cabinet Secretary Ukur Yatani, on June, 11 presented the 2020/2021 budget statement aimed to deliver an economy that is confronted by perennial challenges, among them frequent droughts, low agriculture and industrial productivity, among others.

The Ksh 2.79 trillion (US$26 billion) budget will see the government inject more funds to catalyse growth in the agriculture industry – one of the pillars in its Big Four Agenda.

The sector, whose growth is projected to fall this year owing to an invasion of locusts, floods and the Covid-19 pandemic, has been allocated an estimated Sh52.8 billion (US$495.9m), up by just over Sh1 billion (US$9.4m) from Sh51.7 billion (US$485.82m) in the financial year 2019/2020.

The State Department for Crop Development and Agricultural Research will get the lion’s share, having been allocated Sh40 billion (US$375.7m), reports Daily Nation.

The department has over the years been involved in the development of genetically modified crops, including BT cotton and GMO cassava.

Maize farmers seem to be a happy lot as the government has exempted maize or corn seeds from VAT to boost production.

As part of its ongoing efforts to cushion the sector from a myriad of factors, the government has set aside a Sh6.5 billion (US$61m) stimulus package to assist small-scale farmers to access farm inputs and boost irrigation methods.

Of the Sh6.5 billion, the CS said Sh3 billion (US$28.1m) would subsidise farm inputs reaching 200,000 small-scale farmers through an e-voucher system, while Sh3.5 billion (US$32.87m) would be for expanding community household irrigation

“These interventions will support and sustain the farming communities as they provide employment to thousands of workers in our agricultural sector,” he said.

The flower and horticultural farmers will receive Sh1.5 billion (US$14m) to access international markets amid low demand because of global restrictions to curb the spread of Covid-19 pandemic.

Other players in the food sector like the alcohol manufacturers and consumers have featured in this year’s ‘sin tax’ as Treasury seeks to increase the excise duty to incorporate more alcoholic beverages by reviewing the coverage of the tax by strength of alcohol content.

According to the bill it will include beer and mixtures of fermented beverages with non-alcoholic beverages, spirituous beverages, spirits and liqueurs of alcoholic strength exceeding 8%.

“On one hand, the proposal reduces the beers which are subject to excise duty while increasing the spirits subject to excise duty. Given that the excise duty on spirits is higher, the changes will increase the excise duty collections,” audit firm KPMG says in its assessment of the implications of the new measures.

The growing E-commerce sector which has been shaping the better part of the food and beverage industry with players such as Jumia Foods, Uber Eats and the likes were also featured as an avenue of earning the government income.

The ministry proposed a new digital services tax on online transactions (DST) calculated at 1.5 percent of gross sales as the government moves to get a piece of the action in the growing sector.

 “With the fast advancement in technology, many business transactions are increasingly being carried out through digital platforms,” the CS said.

Uganda’s 2020/2021 budget statement

In neighboring Uganda, Finance minister, Matia Kasaija also presented the country’s 2020/2021 budget in which the government has increase the import duty on agricultural products to 60 per cent and other products to 35 per cent, reports Daily Monitor.

“In order to promote import substitution and the development of local industries, we have increased import duties on goods that are produced or can be produced locally,” he said.

In addition to further support the agriculture sector, VAT on the supply of agricultural equipment will be exempted, adding that the supply of processed milk will also be exempted from VAT to enhance the price competitiveness of milk produced in Uganda.

As indicated by President Museveni in his State of the Nation address last week, Uganda is now producing 2.6b litres of milk per annum. This rose from 200million litres 34 years ago when Uganda was importing powdered milk from Denmark.

Today, Uganda has a huge surplus since only 800m litres are consumed by the locals out of the 2.6b litres production capacity.

The global demand for milk products is worth US$718bn (Shs2, 692tn). This is foreign exchange Uganda can tap into if the surplus is processed and exported.

“Our farmers and processors, however, need to know that to sell internationally, we must have good quality milk and cheaper than the milk of New-Zealand, Ireland,” President Museveni said.

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