Excise Tax Changes and Their Impact on Gadam Sorghum Demand in Kenya

Abstract

Gadam sorghum has in the recent past been promoted by various operators through a Public-Private-Partnership. Taking advantage of this, the largest brewing establishment in Kenya developed a beverage targeted for the low-end market in an effort to stem the problems associated with illicit alcoholic beverages while giving farmers a reliable income source. With its promotion, a number of farmers have devoted effort at availing grain to via contract, for the purposes of brewing. However, excise tax changes are destined to impact this arrangement by altering the conditions for different players along this particular chain. Using ARIMA time series modelling, we analyse the imposition of two tax changes — a reduction of tax in 2006 and an increase of tax in 2013 — on the demand for the product and therefore demand for Gadam sorghum grain. Data is represented by Results show a relatively large change in demand occasioned by tax increases. The paper argues that the further encouragement of sorghum growing will undoubtedly cushion farmers from climate change impacts while it’s processing can boost manufacturing to meet the targets stated in Vision 2030 while offering farmers a consistent income source.