EAST AFRICA: Budgets to ease food crisis

Kenya, Uganda and Tanzania, in their budget proposals for the 2008-2009 financial year, announced measures to cushion their populations against soaring food prices.

"The government has zero-rated VAT [Value Added Tax] on wheat flour, milk, and maize flour," Amos Kimunya, the Kenyan finance minister, said during the reading of the budget in Nairobi on 12 June. The budget was read concurrently with those of Uganda and Tanzania.

Kimunya said he would also be proposing to remove tax on bread and rice while reducing the import duty on wheat to 10 percent from 35.

The Kenyan government, he said, would also allow for the tax free importation of maize so as to boost the country's strategic grain reserve to eight million bags. "This would help dampen the pressure on maize prices."

Post election violence that especially affected the fertile Rift Valley region early in the year led to a reduced maize harvest. Additional funding had also been allocated for the resettlement of internally displaced persons.

Regional fertilizer factory?

Discussions are under way with Uganda and Tanzania on setting up a regional fertilizer factory to offset high costs and ensure long-term sustainable supplies, he said.

The cost of fertilizer has almost tripled in Kenya since the beginning of 2008.

Further provisions will be made to give farmers access to affordable credit. At least 25,000 farmers have benefited from 3 billion shillings (US$48 million) provided under an existing seasonal credit loans scheme, Kimunya said.

Other proposals included the scaling up of agricultural extension facilities for farmers, at a cost of 744 million ($12 million) along with the expansion of the wholesale fresh product infrastructure to promote business and increase agricultural productivity.

"If the prices of basic commodities such as sugar and flour, are high then the farmers also increase the prices of their fresh produce so that they can meet these costs," Steven Karatu, a trader at the Marikiti market, the main fresh produce market in Nairobi, said.

No price controls

The price for 1kg of maize meal is now between 80 and 90 Kenyan shillings ($1.45) up from 50 ($1.29) in 2007.

While Karatu welcomed the new measures outlined in the budget, especially the tax cuts, he said he would have liked to have seen price controls introduced.

"Local retailers might not even adjust their prices downwards, or they reduce them by 50 cents, which does not really make a difference," he said.

"If there was a control, saying that the flour will cost only 50 shillings, then we would be guaranteed that we will buy it at that price. Right now prices vary everywhere," he said.

Uganda

In Uganda, proposals were made to improve agricultural production by increasing the efficiency and effectiveness of the agricultural extension service through the National Agricultural Advisory Services (NAADS) programme.

NAADS is aiming to develop a demand driven, farmer-led agricultural service delivery system targeting poor subsistence farmers, with special emphasis on women, youth and people with disabilities.

The allocation to NAADS went up by 62 percent bringing the total allocation to 97 billion Ugandan shillings ($59 million), Uganda's finance minister, Ezra Suruma, said. The additional funding would help purchase farming inputs.

An additional 50 billion Ugandan shillings ($30 million) was allocated as credit guarantees for banks that provided loans for agriculture.

Suruma also proposed exempting income arising out of new agro-processing investments from income tax starting in July.

To mitigate the effect of soaring transportation cost on food prices, there would also be tax exemption for trucks with a loading capacity of at least 3.5 tonnes.

Commercial farming in Tanzania

In Tanzania, the finance minister, Mustafa Mkulo, said the government was encouraging investment in large-scale commercial farming. "Tanzania has vast arable land and the weather is reliable." he said.

"Rising food prices should be used as an opportunity for the people to earn more income, rather than a curse," he said.

In the short-term, Mkulo said, measures aimed at addressing the global food crisis locally were being contemplated, including either the banning of exports or increasing export charges.

Kenya's budget also allocated 1.5 billion shillings to a fund to increase job opportunities for the youth. At least four billion Kenyan shillings ($64.5 million) had also been set up for the civil contingency fund, drought relief and budget reserve for use in emergency situations.

Other key proposals in the Ugandan budget included the improvement of water storage from the current level of 48 percent to 52 percent of projected national demand, in addition to the allocation of an additional 37.2 billion Ugandan shillings ($23 million) for the Peace Recovery and Development Plan (PRDP) for northern Uganda.

The PRDP was launched in 2007 with the aim of eradicating poverty and improving the welfare of the people of northern Uganda.