19 September 2018

Kenya's New Pesticides Tax Could Fuel Trade in Counterfeits

A decision by Kenya to introduce value added tax on pesticides has sparked concerns of a potential influx of illegal imports and counterfeits in East Africa.

The 16 per cent VAT on crop protection products became effective on July 1. In Tanzania and Uganda, the products remain zero-rated.

Agrochemical companies now fear farmers will no longer afford genuine products, leading to an influx of counterfeits.

It is estimated that Kenya losses $50 million annually in revenue to unregistered agrochemicals dealers and counterfeit pesticides. Industry insiders say 18 per cent of pest control products in the country are counterfeits.

In Tanzania and Uganda the figure rises to 40 per cent and 45 per cent respectively.

"With the taxation, illegal imports from the region will increase thereby harming the local industries," said the Agrochemical Association of Kenya's chief executive Evelyn Lusenaka.

Ms Lusenaka said that the VAT will also increase the cost of agricultural production, and eventually impact on food security -- one of four pillars in the Jubilee government's Big Four Agenda. The others are manufacturing, universal healthcare and affordable housing.

It is estimated that pests and diseases account for 40 per cent of crop losses, and in some cases can cause 100 per cent loss, particularly with the emergence of pests like the fall armyworm.

In response, the region has witnessed a steady increase in the use of pesticides with Kenya importing about 14,700 tonnes at a cost of $124 million last year.

This is a 9.6 per cent increase from the 14,600 tonnes imported in 2016 at a cost of $112.3 million.

In Tanzania and Uganda, imports stood at 11,000 tonnes and 9,000 tonnes respectively last year.

While the increase in pesticides use saved farmers from crop losses, it has also resulted in a surge in counterfeits and illegal imports.

"Favourable taxation has helped to keep pesticides affordable thereby ensuring improved yields due to reduced losses associated with pests and diseases. Now these gains will be eroded," said Ms Lusenaka.


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