Kenya’s sugar cane farmers oppose proposed VAT on transportation in Finance Bill 2024 

KENYA – Sugar cane farmers across Kenya have voiced strong opposition to the proposed 16 percent Value Added Tax (VAT) on the transportation of sugarcane to factories, warning that it would devastate the struggling sector.  

The Kenya National Federation of Sugarcane Farmers (KNFSF) expressed their concerns in a letter addressed to the Chairperson of the National Assembly Committee of Finance and the Principal Secretary of the Ministry of Agriculture. 

The letter described the proposed tax as punitive and discriminatory. “We as a federation representing sugarcane farmers strongly oppose this punitive and discriminatory proposed tax amendment and urge that it be scrapped from the proposed Finance Bill 2024,” the letter stated. 

The farmers highlighted that the current cost of production is already high and that the industry is facing numerous challenges

They argued that introducing VAT on the transportation of sugarcane would exacerbate these issues and potentially destroy the farming sector.  

They noted that the current average cane crushed across all sugar mills is 1.2 million (US$9,191.18) metric tonnes annually and that the additional VAT would translate to an extra cost of Kes164 million (US$1.26M) per month for farmers. 

The letter also questioned the rationale behind the government’s decision to impose additional taxes on transportation while allowing the importation of duty-free sugar, suggesting it would harm local farmers and benefit foreign producers. 

The National Treasury recently extended the duty-free importation period for sugar from outside the Common Market for Eastern and Southern Africa (Comesa) by two months.  

Earlier, the Kenya Association of Sugarcane and Allied Products (KASAP) welcomed President William Ruto’s commitment to inject Kes2 billion into sugarcane development.  

President Ruto assured that the new leasing model for five public mills would ensure prompt payments and annual bonuses for sugarcane farmers.  

He also announced the approval of an initial Kes600 million (US$4.9M) for seed cane development, part of a larger Kes2 billion (US$15.32M) investment plan. 

Additionally, the government has canceled Kes110 billion (US$842.6M) in debts owed by sugar factories and Kes6.9 billion (US$52.85M) in debts owed by coffee cooperatives.  

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