How farmers forced government to relook at Finance Act

CS Treasury Njuguna Ndungu reads the Budget Highlights for FY 23/24 at the Parliament. June 15th,2023 [Elvis Ogina, Standard]

Events of February 26 that saw Kenya Revenue Authority (KRA) officers chased away from an avocado farmers forum in Kandara have forced the government to re-look the controversial Finance Act 2023.

During the forum convened by national avocado farmers chairperson Munyui Wanjohi at Matenjagwo stadium in Kandara constituency, farmers laid bare their displeasure with Section 23 of Finance Act 2023.

They particularly cited the clause makes it mandatory for farmers to register on the Electronic-Tax Invoice Management System (e-TIMS) before selling their produce.

“We are opposed to the clause since it is not practical and it is not implementable, we have already started feeling its impact as exporters have relocated to neighboring countries,” Wanjohi said in the forum.

Fear of losing farmers' support has forced MPs from the avocado-growing regions to join them in opposing the e-TIMS requirement.

In return, farmers have refused to sell their produce to the aggregators and exporters for fear of being subjected to taxation.

Peter Kariuki a farmer and an aggregator from Gatanga in Muranga county said most of the growers have refused to sell their produce while others are selling to oil processors at Sh8 per kilogramme.

“The sector is on its knees thanks to the e-TIMS requirement, a kilo of avocados has four fruits and selling at Sh8 it’s a total loss because a kilo of avocado for export goes for Sh70. This means farmers will make huge losses this year compared to last year,” Kariuki said.

He disclosed that the farmers have also refused to accept payment through mobile money for fear of being tracked by KRA while the buyers want to send them money for proof in future in case they are interrogated by the taxman, further deepening the crisis.

The farmer said dogs have been left to feast on the fruits that could be earning the country the much-needed foreign exchange.

Samson Muriithi, an exporter, said in a week, they usually export between 300 to 350 containers of avocados but with the protest by farmers, they are only able to get 200 containers.

“This means that the country will lose its credibility in foreign markets like the European Union because we have already assured them of our fruits and when we don’t deliver, they will look to other countries," he said.

The Avocado Exporters Association chairperson regretted that there has been misinformation, especially by legislators that if farmers agree to register on e-TIMS and expose their Personal Identification Number (PIN) their farms may be grabbed which has forced them to hoard their produce.

The outcry by farmers saw the Deputy President Rigathi Gachagua on Tuesday convene a stakeholder’s forum at his official residence in Karen, Nairobi, where a committee was selected out of the 100 in attendance with a view of looking for a 'temporary solution' to remove the e-TIMS requirement on avocado farmers.

"It is true that we have challenges in the Finance Act and tomorrow's (Wednesday) meeting will establish a first aid strategy even as our MPs embark on the long process of amending the Finance Act which has a due process to be followed," Gachagua said. 

In yet another move that may be a shot in the arm to farmers, the second in command announced that a task force  would be established next week to address issues raised in the forum and will be expected to complete work in 30 days.

The issues included duplication of duties between Horticultural Crops Directorate (HCD) and Kenya Plant Health Inspectorate Service (Kephis)

According to farmers, the two government agencies have duplication of duties such as synchronisation and double inspection which he said caused delays in response and dispensation of service within the industry. 

"Both institutions lack enough inspectors and infrastructure such as vehicles and dry matter test machines for inspection which is again mandatory in both regulatory bodies," said Muriithi.

He complained that Kephis has continued to charge facilitation fees and mileage fees which is 5.85 per kilometer from Jomo Kenyatta International Airport (JKIA) yet the service should be free. 

"We propose that inspection points be established where exporters can deliver samples for testing or when the HCD confirms produce has attained threshold, an express phytosanitary certificate is issued," said the exporter. 

Among other issues that will be addressed by the taskforce include the bureaucracies in KRA and the Kenya Ports Authority (KPA) which the stakeholders said was brought about by regulations by the HCD and Kephis. 

"Customs clearance procedures have become long, tedious and punitive. Recently a long list of documents have been mandatory in order to allow containers into the port. The documents include HCDA clearance, export certificate, phyto certificate, port certificate, customs entry, that discourage stakeholders," the stakeholders said. 

The move, farmers said, saw many containers missing the vessel cut off times affecting quality, the shelf life and the country's credibility in the international market. 

They further said despite the taxation, avocado farmers were not receiving agricultural subsidies from the government and intention to levy them was tantamount to wanting to milk a cow one never fed.

HCD acting director Christine Chesaro noted that the avocado sub- sector was grappling with inadequate research to develop better varieties and mitigation of pests and disease prevalence.

"Expensive air transport especially due to the current situation in the Red Sea necessitating shipment to Europe through South Africa is a major setback in the sub sector," Chesaro said. 

She noted that India charges 30 per cent custom duty on Kenyan avocado exports while least developed countries are not being charged the same, a move she said made Kenyan produce less competitive in the Indian market. 

Despite the challenges in the sector, Kenya remained the number one exporter of avocado in Africa, it was positioned six in the world after Mexico, Colombia, Peru, Indonesia and Dominican Republic with avocado's foreign currency earnings standing at Sh19 billion in 2023 an increase with Sh4 billion in 2022. 

According to HCD, 32 counties in Kenya produce avocados with the country's production in 2023 standing at 518,500 metric tonnes over an area of 29150 hectares that are under avocado farming. 

Muranga led in avocado production accounting for 23.2 per cent by value followed by Nakuru (12 per cent) Kisii (11 per cent) Kiambu (9 per cent) Nyamira (5 per cent) Meru 4 per cent) and Bomet which stood at 3 per cent. 

The Netherlands is the leading importer of Avocado from Kenya, followed by UAE, Spain, France and Germany