This archive report was first published on 4 June 2020.
Kenya's Rural Economy Faces Triple Threat Amid Covid-19 Pandemic ¶
Published on June 4, 2020
More than two-thirds of Kenya's population live in rural areas, where agriculture is the backbone of the economy. The sector is crucial for food production and the country's economic growth.
However, the Covid-19 pandemic has brought unprecedented challenges to the rural economy. Severe flooding in western Kenya has displaced families and communities, resulting in massive crop losses. The desert locust invasion is also expected to persist, potentially causing significant crop losses.
Furthermore, the pandemic has disrupted supply chains, limiting farmers' access to high-quality farm inputs. Rural markets are closed to prevent the spread of the virus, and off-farm businesses have become less profitable.
The government has taken steps to support the rural economy, including declaring the agriculture sector an essential business during the pandemic. However, the Finance Bill for the 2020/2021 financial year, tabled in the National Assembly on May 6, rolls back these gains.
The bill proposes to impose value-added tax (VAT) on certain key utilities, increasing the cost of farming. Agriculture is the largest sector in the economy and a significant contributor to gross domestic product. Imposing VAT on tractor imports would make agricultural mechanization more difficult, undermining the government's 'Big Four agenda' on food security.
Additionally, the bill proposes to introduce a 14% VAT on solar products, which would increase their cost and deepen the exclusion of rural populations from the grid. This move would also undermine the push for clean energy.
Lastly, the bill proposes to charge VAT on clean cookstoves, making them inaccessible to families that need them most. Cookstoves offer significant benefits, including improved health, time savings, and preservation of forests and associated ecosystems.
Lawmakers must reject these insensitive proposals contained in the bill to protect the long-term health of the Kenyan economy.
Ms. Michelle Kagari is the global director for government relations and policy at One Acre Fund. Ms. Amy Azania is a government relations and policy adviser at One Acre Fund.
