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food prices still up

Budget tax cut fails to lower food prices

Publication Date: 6/14/2008

Kenyans will have to wait longer to enjoy the benefits of Finance minister Amos Kimunya’s tax reduction.

Members of the Citizens’ Assembly demonstrate at the Kibera district officer’s camp during protests where they had gone to present an alternative budget before being dispersed by the police. Major retail outlets are yet to reduce the prices of basic commodities. Photo/HEZRON NJOROGE

Supermarkets and other food outlets are yet to reduce the prices of bread, rice, maize meal and other consumer goods whose taxes were either reduced or abolished in the Budget.

However, the prices of beer went up just hours after the minister read his Budget speech in Parliament on Thursday.

Managers at major retail outlets said they were still analysing the new tax measures and were yet to adjust the prices of various commodities.

Supermarket managers in Nairobi said they were still working on new price lists and seeking interpretation of the new measures from experts.

Mr Thiagarajan Ramamurthy, the operations manager of Nakumatt Supermarket, said the chain was still studying the highlights of the Budget and would respond by the end of the day.

And the Tuskys supermarket general manager, Mr Frank Kamau said: “We are actually working on the new price list”.

However, he said the changes may not be effected overnight because some of the products in stock had been bought before the Budget was read.

Following an increase in excise tax on alcoholic beverages, East Africa Breweries Limited has already revised the recommended retail prices of its products and announced an increase of Sh5 for most beer brands.

The recommended retail price of Tusker Lager is now Sh75, Pilsner Lager Sh70, White Cap Sh80, White Cap Light Sh80, Castle Sh80, Allsopps Sh55, Citizen Special Sh40 and Tusker Malt Lager Sh80.

Other products affected are Smirnoff Ice Red and Smirnoff Ice Black whose recommended price is now Sh65. The prices of Guinness, Senator Keg and non-alcoholic Malta Guinness and Alvaro remain unchanged.

Excise tax for malt beer went up by Sh40 a litre while that on non-malt beers went up by Sh10 per litre. The new prices take effect immediately.

However, cigarette manufacturer British American Tobacco has asked retailers not to increase the prices of BAT products until new prices are announced.

“We shall communicate new prices when and if we make any changes. Until then, we ask our retailers to maintain the current prices,” said Mr Keith Gretton, the company’s Corporate Affairs manager.

Finance minister Amos Kimunya announced an increase of Sh7 per packet of cigarette. But BAT said it was still evaluating the full implication of the new changes on its products.

New measure

“Our consumers should understand that should there be any price changes, they will be communicated clearly through the usual channels,” he said.

And responding to the minister’s announcement zero-rating VAT on motor-cycles, Yamaha Motors Kenya, the official importer and distributor of Yamaha products, said it was still analysing the new measure.

The company’s marketing department had contracted PriceWaterhouseCoopers to help it interpret the tax implications.

And the Cereal Millers Association said it expected the price of a 2kg packet of wheat flour to reduce by between Sh8 and Sh10, subsequently reducing the price of bread and biscuits.

Wheat flour in major retail outlets was on Friday selling at between Sh110 and Sh116 as the reduction had not been effected. A 2-kg packet of maize flour was selling at between Sh64 and Sh85.

The millers’ association also welcomed the move reducing duty on imported wheat grain at a time when world wheat prices are at a record high and basic food costs have escalated beyond the common man’s reach.

“Reduction of duty on imported wheat grain as per the understanding of the Cereal Millers Association and the Cereal Growers Association will encourage domestic growth in the wheat industry and curtail the spiralling price of wheat and its by-products,” a statement from the association said.

Kenya Airways welcomed the move to zero rate VAT on international air tickets saying it would make the airline more competitive.

All Kenya Airways international flights have previously attracted a 16 per cent VAT. Chief executive Titus Naikuni said the waiver puts the airline at par with other international airlines.

“I thank the minister of Finance for having listened to us objectively,” he said. The airline had asked for the VAT waiver about a week before the Budget was read.

Kenya Airways serves over 2.7 million passengers annually. The airline flies to 43 destinations in 36 countries, including cities across Africa, as well as Amsterdam, Paris and London and select destinations in Asia, including Dubai, Mumbai, Guangzhou, Hong Kong and Bangkok.


In a statement, Mr Naikuni thanked Mr Kimunya saying this year’s Budget was good. He particularly applauded the minister for allocating Sh65 billion for infrastructure development.

The KQ boss noted that the main challenge will now be in the implementation of the various projects within the financial year. He expressed hope that the Mombasa-Nairobi highway will be given priority by the Roads Ministry.


About SG

Secretary general of Chama Cha Mwananchi. This blog www.chamachamwananchi.wordpress.com, is based in Sweden.


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