The Sh20 billion cheap cooking oil lie

A supermarket attendant helps a customer shop for cooking oil in a supermarket. [Denis Kibuchi, Standard]

The cooking oil that was imported by the State with the aim of bringing down the cost of the essential commodity could end up being more costly for the taxpayer. 

It has emerged that edible oil, which was imported at a cost of Sh20 billion, has to be reprocessed at an additional cost, casting doubt as to whether it will have any impact in bringing down the cost of the commodity that has remained out of reach for many Kenyans.

The government has reached out to local edible oil manufacturers to reprocess some of the 125,000 tonnes of oil that had been imported by the Kenya National Trading Corporation (KNTC).

A manufacturing industry source confirmed to The Sunday Standard that there have been discussions between the State-run trading company and a section of the industry but no deal has been reached yet.

“There are discussions but nothing has been decided so far. KNTC has made a proposal to some of the sector players to reprocess the oil but so far nothing has been solidified…but yes, discussions are taking place,” said the source. 

Narok Senator Ledama Ole Kina raised the red flag about the oil last week when he claimed that the three large edible oil manufacturers had been forced to buy the KNTC cargo.

He also raised queries on what happened to the cooking oil that KNTC had imported, including what became of a programme that the corporation launched in August to distribute the product through dispensing machines.

The ministry of Industry, Trade and Investment declined to comment on the claims or offer clarity on the discussions between KNTC and the manufacturers.

The ministry has been at the forefront in pushing for KNTC to import the cooking oil and other essential food items.

It even said it had mapped some 500,000 retail outlets that would stock the cooking oil to cut the long distribution chain and middlemen that tend to make items expensive. 

When contacted for information, the ministry directed The Sunday Standard to KNTC, adding that the agency is semi-autonomous and should be able to have engagements with industry players without roping in the ministry. 

KNTC did not respond to our questions. 

Earlier this year, KNTC started importing the cooking oil as well as other essential food items in a move backed by Cabinet that was aimed at reducing the cost of living.

The firm was expected to use its expansive distribution network in the country to deliver the essentials to local shops but this appears not to have worked, going by the sustained high cost of basic food items in the country.

To distribute the edible oil, KNTC launched the Mama Pima cooking oil automated dispensing machines in August in a move it said was aimed at enhancing access for Kenyans.

The vending machines were to be located in neighbourhood shops and other places where Kenyans would conveniently access the affordably priced cooking oil.

This was to be implemented together with Pt Industrial Nabati Lestari (INP) of Indonesia.

The automated dispenser also appears to be slower in picking than expected, with the Trade ministry now turning to local manufacturers to take up the product for further processing and take it to the market.

Cooking oil prices are currently around Sh320 per litre, having risen from about Sh190 per litre in 2020.

KNTC had said the Mama Pima cooking oil dispenser would have brought prices down to Sh210 per litre.

Local industry players have cited a combination of challenges including high taxes and global geopolitical factors that have pushed up cost of supplies as well as limited access to raw materials for causing the sharp rise in the cost of cooking oil.

KNTC was founded in the 1960s as the sole wholesaler and distributor of essential items such as salt, sugar, cement and other products.

Its monopoly was, however, broken with liberalisation in the early 1990s.

The firm was last year identified as an ideal vehicle for importing and distributing essentials as the government started implementing President William Ruto’s plan to lower the cost of living.

The agency, according to the Cabinet, would be “the anchor of State initiatives to create price stabilisation for household food items”.

Last November, it was given a waiver to import about 600,000 tonnes of food items duty-free, including the cooking oil.

The Trade ministry had earlier this year negotiated financing for KNTC with Cabinet having approved a request to give it the leeway to borrow up to Sh20 billion. 

The food items that the corporation was to import duty-free included 125,000 tonnes of edible oil, 200,000 tonnes of sugar, 150,000 tonnes of rice, 25,000 tonnes of wheat and 80,000 tonnes of beans.

KNTC was also expected to deliver the 25,000 tonnes of wheat that crisis-hit Ukraine donated to Kenya to help the country fight the impact of prolonged drought.

The whole process kicked up a storm earlier this year and at some point degenerated to a spat between then Trade Cabinet Secretary Moses Kuria and local manufacturers.

The preferential tax treatment that was being accorded to KNTC did not settle well with some of the manufacturers, especially those of edible oils.

The industry at the time protested to the ministry of Trade, saying that flooding the country with cheap imports would jeopardise many jobs as well as the billions of investments that local manufacturers had put up.

Other than the fierce competition that the manufacturers feared, they also noted that there were concerns that Kenya could run afoul of East African Community (EAC) laws that require any country importing duty free essential items to file notices to EAC. 

KNTC also had to fend off allegations that it did not stick to the Public Procurement and Disposal Act (PPDA) when procuring the commodities, including competitively searching for suppliers.

At the height of the debate, Marsabit Senator Mohamed Chute, questioned the handling of the importation of edible oils worth Sh9 billion.

He demanded a statement from Moses Kuria, then CS for the Ministry of Trade, Investments and Industry, on how the cooking oil was imported.

In response, Kuria told senators that the idea to import the edible oil was mooted to protect Kenyans from cartels.

 He said the intervention to have KNTC import the consignment was arrived at in order to arrest the ballooning costs of edible oils. “I instructed KNTC to import edible oil with a target that one kilo of edible oil would retail at Sh250... the price of oil has gone down today to Sh218 per litre,” Kuria said.

KNTC got the go-ahead to import the consignment through a Cabinet Memo in October last year.

“To address the cost of living, the Cabinet approved a framework to position the Kenya National Trading Corporation as the anchor of State initiatives to create a price stabilizer for essential household food items,” the Cabinet memo stated in part.

“KNTC will leverage its infrastructure and capacity to help stabilize price swings of essential items that are abnormal and against the public interest.”

Chute was not satisfied with the answer and vowed to consider a parliamentary inquiry into the matter.

According to tabulations by the manufacturers, the government would be losing some Sh3.5 billion in tax revenues.

Refined cooking oil imports attract an import duty of 35 per cent.