Kenya Kwanza’s Edible Oil Saga: From Government Initiative to Corruption Scandal – A Cost of Living Nightmare Unveiled
When the Kenya Kwanza government assumed control in 2022, a prominent issue was the significant rise in the cost of living that Kenyans faced both before and after the general election.
It then was no surprise that in October 2022, the Cabinet released a memo: “To address the cost of living, the Cabinet approved a framework to position the Kenya National Trading Corporation as the anchor of state initiatives to create a price stabilizer for essentials household food items… KNTC will leverage on its infrastructure and capacity to help stabilize price swings of essential items that are abnormal and against the public interest.”
In February 2022, the government, operating via the Ministry of Investment, Trade, and Industry (MITI), aimed to enhance the capabilities of the revitalized KNTC to increase its capacity for importing essential goods, among other objectives.
MITI was also looking for funding for the KNTC to assist the agency in acquiring necessities such as grains, edible oils, and fertilizer through imports, alongside renovating its deteriorating warehouses spread across the nation.
The ministry emphasized that these actions would play a crucial role in positioning the KNTC strategically to ensure food security and reduce the cost of living in the nation. It anticipated the active involvement of KNTC in both local and regional trade, expressing this intention clearly.
Ready to commence, KNTC initiated operations promptly with support from bank guarantees and exemptions granted by the Treasury and Kenya Revenue Authority (KRA). Among their initial transactions, alongside grains and fertilizers, was the importation of edible oil.
MANUFACTURERS NO LONGER AT EASE
Nevertheless, while these honorable plans were in progress, the anxious manufacturing industry in Kenya grew increasingly uneasy and voiced its concerns.
They were unhappy with the proposal to reduce the price of cooking oil and expressed their dissatisfaction to the government, stating that it could negatively impact the entire industry and potentially result in the loss of numerous jobs, both direct and indirect.
The government aimed to bring down local edible oil prices by importing 150,000 tons, which was part of their strategy to meet a portion of the annual demand of 600,000 tons for this commodity.
Cooking oil costs surged dramatically last year and continued into 2023, becoming increasingly unaffordable for numerous households, primarily because of market disruptions caused by COVID-19 and the subsequent conflict between Russia and Ukraine.
In Kenya, there is a 35 percent import duty applied to edible oil imports, but the KNTC shipments are exempt from this duty following the government’s directive.
This greatly angered the Kenya Association of Manufacturers (KAM) because the landed expense of the shipment would be notably less than the market price, potentially initiating a price competition.
It would lead to the downfall of the edible oil sector, leaving it with no choice but to cease processing oil intended for human consumption.
The manufacturers asserted that this unexpected policy change represented a notable deviation from the ‘Buy Kenya Build Kenya’ initiative, which is designed to foster the growth of domestic industries.
The manufacturing industry was curious about how this initiative would lead to an increase in its contribution to Kenya’s gross domestic product (GDP) from the existing seven percent to twenty percent.
‘EDIBLE OIL PROCESSORS IN KENYA ARE A CARTEL’
In addressing the worries of the manufacturers, former MITI Cabinet Secretary Moses Kuria acknowledged the arrival of the shipment. However, he specified that the State-owned Kenya National Trading Corporation (KNTC) was the importer, a statement that was later found to be somewhat inaccurate.
Ten companies purchased the edible oil and transported it to KNTC for a fee. CS Moses Kuria claimed that those who raised concerns about the edible oil transaction were involved in the groups that functioned during Uhuru Kenyatta’s leadership. He accused them of causing the elevated cooking oil prices, contributing to the overall increased cost of living.
The computer scientist further contested assertions about the existence of local factories producing edible oil. He suggested that these companies likely import refined oil, repackage it with their branding, and then distribute it to retail stores for sale.
He alleged that the domestic producers were causing substantial financial losses to the government by importing refined oil and presenting it as crude palm oil within the country.
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Addressing an event, CS Kuria strongly criticized the oil manufacturers, reiterating President Ruto’s three directives for cartels, summarized as “Mambo ni Matatu!” He alleged that five companies in the edible oil sector exhibit cartel-like conduct and urged them to heed the president’s counsel, akin to what was advised to the sugar cartels.
CS Kuria emphasized that the government possesses various choices available, which the oil industry companies ought to be aware of. According to data from the Kenya Association of Manufacturers (KAM), the edible oil sector directly employs 10,000 individuals and has an additional indirect employment impact on 200,000 people.
It was anticipated that the market would experience a minimum 20 percent decrease in the price of edible oil, as confirmed by CS Kuria, due to MITI granting KNTC permission to import by the Cabinet’s approval in November 2022.
‘WE WILL GROW PALM OIL AT THE COAST’
CS Kuria expressed strong emotions about the situation, stating that the government was dedicated to creating a comprehensive edible oils industry that spans from palm oil cultivation by farmers in the Coast region to value-addition processes at the Dongo Kundu Special Economic Zone.
KAM proposed taxes the government could forego to bring down the price of edible oil
In the meantime, representing the edible oil industry, KAM suggested that the government pursue an alternative approach to reduce the processing costs of oil to lower prices for consumers.
It requested the Treasury to eliminate the two percent levy imposed by the Nuts and Oil Crops Directorate. Additionally, they suggested exempting edible oil from both the Railway Development Levy and the Import Declaration Fee.
The value-added tax (VAT) applied to a 20-liter unit of edible oil amounts to Ksh.530. The Kenya Association of Manufacturers (KAM) stated that consumers would collectively save Kshs.667 for every 20-liter unit of edible oil purchased.
MEDIA RAISES EDIBLE OIL SCAM
Nevertheless, the situation changed drastically when CS Kuria aggressively confronted a certain segment of the media due to their coverage revealing the specifics of the importation process. This notably included the revelation that companies owned by individuals connected to high-ranking government officials were exclusively chosen to purchase edible oils and supply them to the Kenya National Trading Corporation (KNTC).
In June of this year, a record submitted to the National Assembly and obtained by the media revealed that KNTC exclusively selected companies to handle the contract for importing 125,000 metric tons of edible oil.
KNTC awarded Multi Commerce FCZ and Shehena Company Limited a Ksh.8.12 billion tender and Ksh.1.33 billion tender respectively.
To ease future imports, the Kenya Revenue Authority (KRA) utilized Kenya Gazette notice number 250, which was a government-issued announcement on November 21, 2022, by the President, establishing the National Steering Committee on Drought Response, although its use for imports might be debatable.
In a subsequent circular, the Treasury indicated the quantities of edible oils to be imported were cumulatively at 125,000 Metric Tons (MT).
On the taxes due from the edible oil importations, a KRA memo said: “The remissions and exemptions office shall facilitate the issuance of an exemption code to exempt 100% import duty, the other taxes, fees, and levies shall be payable as per the applicable laws…”
However, and contrary to expectations, customs department documents revealed that KNTC failed to pay all taxes and levies.
The controversy surrounding the importation of edible oil has seen the Government providing KNTC with tax waivers amounting to almost Kshs. 10 billion. Despite KRA’s strong efforts to increase revenue, they are faced with the potential loss of nearly Ksh. 10 billion in revenue due to this situation.
KRA AND KNTC OFFICIALS QUESTIONED BY DCI
On November 28th, 2023, it was revealed that the Directorate of Criminal Investigations (DCI) was investigating whether the public had suffered financial losses due to the edible oil scandal. This scandal had previously been denied by CS Kuria, who has since been transferred from MITI.
The DCI is said to be investigating the questionable import bids worth Ksh.16.5 billion for edible oils by KNTC. So far, they have interviewed the Managing Director of KNTC and banking staff.
The investigators from the DCI are eager to understand the method used to make payments for the goods before their sale, how the banks managed the transaction, and the reason behind the commodities remaining unsold until now.
The Ethics and Anti-Corruption Commission (EACC) is actively seeking the KNTC’s financial records, bank accounts affiliated with the businesses that were successful in supplying the goods, as well as the tax exemption documents issued by the National Treasury and the KRA.
The DCI would also want to know if the tenders were competitive, the firms that won the tenders, and the beneficiaries of the said tenders.
The Senate became involved in the events occurring at KNTC and inquired whether the government had brought in 12,500 tons of edible oils after a house committee was unable to find the shipment meant to alleviate the increasing cost of living in Kenya.
EDIBLE OIL UNFIT FOR HUMAN CONSUMPTION
With concerns already brewing about the government’s revenue loss and the unchecked profiteering benefiting a select few linked to high-ranking officials, this week brought the most alarming revelation: the supposedly imported edible oil for top government figures, sourced by wealthy and influential individuals, turned out to be unsafe for consumption.
In a letter from the Kenya Bureau of Standards (KEBS) dated 5th September and addressed to the Managing Director of KNTC, KEBS affirmed that “The consignments have been rejected and the importer is hereby advised to reship them back to the country of origin within 30 days from the date of this letter, failure to which they shall be destroyed at the importer’s cost.”
The results established that the consignments failed to comply with Vitamin A and Insoluble Impurities.
The examination by KEBS in July 2023 regarding the quality of imported oil aimed to demonstrate the considerable influence of the wrongdoers. However, it remains unclear why all shipments received before July were not subjected to laboratory testing.
A shipment labeled with consignment number 23MBAIM402747001 and sent by Multi Commerce FZC, a company based in Sharjah, UAE, did not undergo testing.
Why didn’t KEBS follow through with the destruction of the unusual oil as mentioned in its letter?
The KRA, EACC, The Treasury, and other related bodies have remained silent, only acknowledging that they are examining the deal more closely without providing any additional information.
However, what is even more concerning is that despite Kenyans grappling with exceptionally high living expenses and unchecked taxes, charges, and impositions, corruption among those in influential positions remains prevalent and active.
When does a government-led initiative to alleviate the burden of high living expenses get taken over by corrupt groups within the influential circles of governance?
From an economic expert’s point of view, would such an approach be an effective mechanism to tame spiraling edible prices? So many questions and few answers
Kenya Kwanza’s Edible Oil Saga: From Government Initiative to Corruption Scandal – A Cost of Living Nightmare Unveiled
