How Finance Bill will deal a huge blow to farmers - Finance Bill 2024

Kiambu Women Representative Gathoni Wamuchomba at County Hall,Nairobi. [Boniface Okendo,Standard]

She noted that this exodus has led to significant jams in Mombasa warehouses, where over 8 million kilos of tea are stranded. The taxes have made it unprofitable for packers to operate, affecting farmers who depend on these businesses to buy their produce.

Agricultural Economist Dr Kirimi Sindi says the introduction of a 10 pe rcent per annum investment allowance on specific agricultural equipment and infrastructure encourages investment in modern farming equipment and infrastructure, potentially increasing productivity and efficiency.

"However, Kenya is made up largely of smallholder farmers who do not use large farm equipment. Hence, this measure will benefit large-scale farmers while other measures are hurting the smallholder farmers," said Dr Sindi.

According to Sindi, higher excise duties and the removal of VAT exemptions increase the cost of farming, potentially reducing profitability and production levels.

"For instance, the increased VAT on fertilisers and pesticides directly impacts farmers' operational costs. The cost of fertilizers and chemicals is very high in Kenya. It is difficult for smallholder farmers to buy farm inputs even before taxes were introduced," he says.

The increased VAT on fertilisers and pesticides directly impacts farmers' operational costs. [Nanjinia Wamuswa, Standard]

The bill also proposes an increase in freight tax on non-resident shipowners or operators from 2.5 per cent to 3 per cent. Dr Sindi says higher freight costs can increase the cost of imported agricultural inputs and exported produce. Kenya imports most of the farm inputs by sea. Hence, their costs will likely go up and affect their affordability.

Higher transportation and input costs can make Kenyan agricultural products less competitive in international markets, leading to lower export volumes.

While improved infrastructure and investment in agriculture can enhance food security by increasing production efficiency and reducing post-harvest losses, this is unlikely to happen because the majority of the farmers are small-scale farmers.