The Kenya National Chamber of Commerce and Industry (KNCCI) has issued a memorandum to the Kenya Plant Health Inspectorate Service (KEPHIS) expressing significant concerns about the impending implementation of new phytosanitary service fees, scheduled to take effect on July 15.
KNCCI, which represents over 100,000 businesses, most of which are in the agricultural sector, emphasizes the critical role KEPHIS plays in facilitating Kenyan exports and ensuring biodiversity safety through its quality control services. As a key partner, KNCCI issues certificates of origin to exporters, certifying that products are genuinely from Kenya.
However, KNCCI has several concerns regarding the new fees for phytosanitary services. First, the increase in fees is steep, with charges for phytosanitary inspection and certification for fresh produce rising by 337%. This increase moves the cost from the current 15 cents per kilo plus Ksh 500 for the certificate to 50 cents per kilo plus Ksh 500. KNCCI argues that this significant hike will make it difficult for many businesses to sustain their operations.
Additionally, KNCCI points out that this increase contradicts the government’s commitment to boosting exports. Agriculture is a cornerstone of Kenya’s economy, contributing 21.8% of the GDP and being the second highest wage employer in the private sector. The new fees threaten to undo the progress made in promoting agricultural exports by making Kenyan products less competitive internationally. Compared to similar charges in Tanzania, Uganda, and the United Kingdom, the current fee in Kenya is already higher, and a 337% hike will further disadvantage Kenyan products.
The impact on micro, small, and medium enterprises (MSMEs) is particularly concerning. These new fees dramatically increase operational costs for businesses involved in the export and import of agricultural products, especially smallholder farmers who produce 80% of the country’s agricultural output. The increased costs threaten the viability of these enterprises and the livelihoods of the farmers they support.
KNCCI also questions the justification for the fee increase. Although these fees were approved in 2009, there is a lack of clarity on how the additional revenue will be used to enhance phytosanitary services. Members are concerned about whether the fee increase is matched by corresponding improvements in service delivery.
To address these concerns, KNCCI requests the following actions:
- Shelve the New Fees: Halt the implementation of the new phytosanitary fees immediately to prevent further financial strain on businesses while discussions are held.
- Stakeholder Engagement: Initiate a comprehensive stakeholder engagement process involving KNCCI and other market actors. This process aims to find a balanced approach that incorporates input from all relevant stakeholders.
- Consider a Quantity Tier System: Reintroduce and enhance the quantity tier system, which is currently absent in the new charges. For example, KEPHIS charges 15 cents per kilo for quantities up to 280 tonnes, after which the charge drops to 10 cents per kilo. The new fees impose a blanket charge of 50 cents per kilo for all quantities. A tiered system can provide a fairer fee structure aligned with the volume of trade.
KNCCI believes that a collaborative approach is essential for fostering a favorable business environment and promoting economic growth. By shelving the new fees and engaging in meaningful stakeholder consultations, KNCCI and KEPHIS can work together to find a balanced solution that supports both regulatory compliance and business sustainability.
Industry Reactions:
Clement Tulezi, CEO of the Kenya Flower Council (KFC), stated, “We have taken up the matter with the Ministry of Trade and will speak on behalf of the industry to find a resolution.”
Hosea Machuki, CEO of the Fresh Produce Exporters Association of Kenya (FPEAK), added, “Horticulture enterprise in Kenya is becoming quite difficult. We need a better, conducive business environment that encourages growth. We reject the new fees and are engaging elsewhere to have this shelved.”
