Proposed food crop trade levy: Navigating economic benefits, food security and trade dynamics

  • 3 Jun 2024
  • 2 Mins Read
  • 〜 by Jewel Tete

The Agriculture and Food Authority has announced the imposition of a levy on the import and export of certain food crops, effective July 1st. This levy will affect cereals, legumes/pulses, and roots and tubers, with varying rates for imports and exports. Specifically, cereals and legumes will be subject to a 2.0% levy based on their customs value for imports, while roots and tubers face a 1.0% levy. Exports of all these food crops are subject to a 0.3% levy on their customs value. This policy aims to regulate the trade of essential food crops and generate revenue for the government. However, we ought to acknowledge the impact on the economy, food security, and trade dynamics.


Economically, the levy is expected to boost government revenue. This additional income could support agricultural development projects, research, and support programs for farmers, ultimately benefiting the sector’s growth. However, importers and exporters of food crops will face higher costs due to the levy. These additional costs may be passed on to customers, leading to increased food prices. Importers might need to reassess their sourcing strategies, potentially seeking cheaper alternatives or negotiating better terms with suppliers to offset the levy. 


In terms of food security, the levy may lead to price volatility in the market. Increased import costs could result in higher prices for cereals, legumes, pulses, and roots and tubers, impacting affordability for consumers, particularly low-income households. This price increase might exacerbate food insecurity for consumers, particularly low-income households. On the other hand, by imposing a levy on imports, the government might be encouraging local production. Farmers could benefit from the reduced competition from imported goods. However, this positive outcome depends on the government’s support for local agriculture through subsidies, training, and infrastructure development. Delays in adapting to these changes could lead to temporary shortages or surpluses, affecting the availability and prices of food crops.


Success also hinges on addressing potential drawbacks, like the impact on regional trade within blocs like the EAC. Regarding trade dynamics, Kenya’s relationships with neighbouring countries could be impacted. Countries within the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA) might reconsider their trade relationships with Kenya due to the new levies, potentially leading to the renegotiation of trade agreements and shifts in trade patterns within the region. The export levy, though lower, could make Kenyan produce slightly less competitive internationally, discouraging exports and potentially reducing foreign exchange earnings. Exporters may face challenges in maintaining competitive prices, potentially losing market share to other countries with lower export costs. Conversely, local producers might gain a competitive edge in the domestic market if imports become less attractive due to higher costs. 


In conclusion, the imposition of a levy on the import and export of food crops in Kenya is a significant policy shift with wide-ranging implications. While it offers potential benefits such as increased government revenue and support for local agriculture, it also poses challenges related to higher costs, food security, and trade dynamics. The ultimate impact of this levy will depend on how effectively the government manages these challenges and supports the agricultural sector. Ensuring that the additional revenue is reinvested in the agricultural value chain and that measures are in place to mitigate negative effects on food prices and availability will be crucial for the policy’s success.