Wednesday, 20 June 2012

Kenyan Budget 2012/13 Estimates - What does it mean for Kenya's Agriculture?

Last week on Thursday, the Kenyan Finance Minister gave his ritualistic Budget estimates to the August House and the country as a whole, for the year 2012/13. With an election year beckoning and also the new structures of governance as recommended in the new Constitution, Mr. Njeru Githae had a tough task of balancing his figures
Finance Minister holds up Budget suitcase - Image courtesy of Business Daily

Of importance to us though is what these estimates bode for the agricultural sector. Here are some of the recommendations that directly affected agriculture;

  • An additional amount of KSh. 1. billion was added to the Agribusiness Fund to help promote credit access to Kenyan farmers. This is together with the agreement for banks to invest 10 Shilling. for every 1 shilling of Government invested bringing the total allocated to Agribusiness Fund to KSh. 10 billion.
  • KSh. 1.5 billion was recommended to write off farmers debts in the sugar, rice and coffee sectors. 
  • KSh. 1.6 billion was set for Strategic Grain Reserves and another KSh. 2 billion for famine relief.
  • Contigency Fund was allocated KSh. 6 billion to help mitigate against unforeseen conditions and market forces. 
  • KSh. 8 billion was allocated to the National Irrigation Board - which manages various irrigation schemes in the country - this is to help bring agriculturally potential areas to optimal production levels.
  • KSh. 53.3 billion will be spent by the Ministries of Agriculture, Livestock & Fisheries and others relating to the agricultural sector. This represents approximately 5% of the total budget ( remember agriculture remains one of leading sectors bringing in about 25% of total revenues especially in foreign exchange terms...)

Other recommendations include;

  • Tax issues - Exemption of duty for importers of inputs in bee-keeping ( apiculture)
  • Trade promotion strategy for expanding and diversifying exports, main focus being on nuts ( macadamia and cashew-nuts) 
Overall, in my opinion, not much effort was made to enhance Kenya's food production. This is because, more efforts would have been put in enhancing value addition in export-oriented products. A case in hand is the coffee industry which should borrow a leaf from the Ethiopians who were able to get Starbucks to recognise their brands of coffee.

More items and food production inputs should have been zero-rated to enable Kenyan farmers produce more and a cheaper cost. Items such as fertilisers, machinery parts and also fuel which plays a major role in almost all sectors could have been on a lowered tax regime or staggered over the next 12 months.

But as financial analysts will tell you, the figures are the easy part, implementing and balancing them is the tougher battle. 

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