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State seeks investors to put up beer plants using millet

By Mercy Mwai
Thursday, February 13th, 2020
National Treasury Cabinet Secretary Ukur Yatani. Photo/PD/FILE
In summary

Mercy Mwai @wangumarci

The government is seeking investors who can set up beer plants using millet, sorghum and cassava through a new regulation it has presented to Parliament.

In the proposed laws, National Treasury Cabinet Secretary Ukur Yattani promises tax remissions or excise duty reduction to those willing to pump at least Sh5 billion into the economy.

This is set to force a surge in orphan crops – a diverse set of minor crops like finger millet, yam, roots and tubers that tend to be regionally important, but not traded around the world and receive no attention by research networks.

If Parliament passes the new regulations tabled this will see investors utilising these crops as raw materials to manufacture beer benefit from tax remission or reduction of exercise duty for five years from the commencement date of the beer manufacturing.

Encourage investment

Analysts say the tax break is expected to encourage investments in the lucrative beer market which has for the longest period been dominated by East Africa Breweries Ltd (EABL), and spur economic growth.

Tax expert and partner at Ernst and Young Francis Kamau said these regulations will pass in Parliament based on the fact that they will make it lucrative to farm cassava, sorghum and millet.

“The government has for a long time wanted to grow crops that are drought resistant, require less water and are susceptible to pests.

These crops fit that bill. They also require less fertiliser and have little post harvest losses,” he added.

“The Cabinet Secretary may, on the application by a manufacturer, grant remission of excise duty at 90 per centum with respect to beer made from sorghum, millet or cassava or any other agricultural produce grown in excluding barley grown in Kenya,” the rules, pushed by Yatani through legal notice number 196 on December 18, 2019, say in part.

Following tabling of the regulations by Leader of Majority Aden Duale, the National Assembly Speaker Justin Muturi referred them to the committee on delegated legislation to consider them and table a report to the house for the adoption or rejection.

In order to qualify for the enhanced excise duty remission of 90 per cent, the manufacturers will be required you invest at least Sh5 billion in the plant.

Also, the manufacturer and the government will be expected to enter into an agreement whether the investor will be required to meet specific commitment relating to the manufacture of beer.

Adds the notice: “Legal notice No. 196 spells out the requirements that an investor (manufacturer) of beer made from sorghum, millet or cassava or any other agricultural produce grown in Kenya will have to meet in order to qualify for an enhanced excise duty remission of 90 per cent.”

In Kenya, Senator Keg beer which is a product of EABL, is a low-priced lager made from locally-grown sorghum and has in the recent past become the fastest growing brands due to its huge demand occasioned by low prices.

The  regional leader in beverage alcohol recently invested Sh15 billion in a plant in Kisumu with a two-year production run of its Senator Keg beer after which it will then move on to mainstream brands like Tusker.

Kenya Breweries Managing Director Jane Karuku disclosed in a recent interview that had already contracted over 15,000 farmers from western Kenya to supply sorghum to its Kisumu brewery expected to increase the production capacity of the Senator Keg beer which is popular among low income earners.

Hugely successful

“This model has been hugely successful since we started its production in 2009. In the year ending July 2018, farmers delivered 31,000 tonnes of sorghum worth Sh1 billion, and the commercialisation of this activity has resulted in a huge socio-economic transformation,” she added.