Why Duty-Free Cooking Oil May Not Step Into The Kenyan Market

Kenyan edible oil manufacturers have challenged the government’s plans to import 125,000 metric tonnes of duty-free cooking oil.

Kenya National Trading Corporation (KNTC) is planning to import finished edible oils to cushion consumers from the high cost of the commodity. In a statement seen by Soko Directory, the Kenya Association of Manufacturers (KAM) said while it’s essential for the government to reduce the cost of living, the move to import edible oils will promote unfair competition to local industries besides loss of revenue and job cuts.

“The local oil manufacturing capacity is adequate to supply local market requirements, and is currently operating at 60 percent of the installed capacity. From our perspective, the move will promote unfair competition to local industries and the government stands to lose revenue of up to Sh3.5 billion and put over  40,000 jobs on the line,” KAM says.

Kam has called on the government to reconsider the plan and engage sector players to find a long-lasting solution.

Cooking oil is now one of Kenya’s most expensive essential commodities as its prices continue rising. A spot check by Soko Directory in major outlets in Nairobi established that a liter of the commodity is selling at around 355 shillings. This is an increase compared to the 206 shillings the commodity retailed at in January 2021, and around  303 shillings in December 2021.

KAM attributes the increased cost of edible oils to internal and external factors that elevate the cost of production. Kenya mainly imports crude palm oil from Malaysia and Indonesia. This makes the raw material volatile to external factors such as global freight cost, drought effect in Argentina’s Soya growing belt, supply disruptions due to the Russia-Ukraine war, palm oil export ban by Indonesia, and the introduction of the Malaysian export levy on palm oil.

The local 2 percent levy imposed by the Agriculture and Food Authority on nut and oil crops, the 10 percent excise duty on locally produced packaging materials, and the depreciating Kenyan shillings against the dollar have also contributed to the price increase. This has pushed manufacturers to pass the extra cost to consumers.

KAM wants the government to reinforce other policies such as growing palm oil trees locally and the use of other oil seeds such as sunflower that is grown locally as an alternative source to palm oil. This will protect the local industries and empower them to grow as the country seeks to increase the manufacturing sector’s contribution to GDP from 7.2 percent to 20 percent by 2030.

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