State officials meet to review duty free maize import window

Top government officials will on Tuesday meet to decide the fate of duty free maize imports, in a move expected to determine the pricing of unga in the coming months.

The team comprising Agriculture, Special Programmes and Treasury officials will decide if Kenya should apply to the East African Community’s Council of Ministers for an extension of the duty free imports based on the national grain stock levels.

“The meeting will review stock levels in strategic grain reserves as well as those in the hands of millers and farmers to make a firm decision on the duty waiver,” Special Programmes PS, Ali Mohammed, said.

Millers have warned that consumers should be ready to pay more for maize meal if the duty free window is closed because additional costs will be passed on to the end users.

Ms Paloma Fernandes, the chief executive of Cereal Millers Association, said millers and private importers are holding 1.5 million bags of maize they intend to sell at the current prices, but insisted that consumers will have to bear the cost of any duty charged on maize.
“Uncertainty over supplies could trigger speculation, hoarding and artificial shortages that will ultimately push up maize flour price,” she said.

An acute shortage of the staple maize flour early last year pushed Kenya to the brink of food riots, forcing the government to roll out a two-tier maize flour pricing system aimed at easing the burden of food inflation on low income earners. Kenya’s 22 grain millers have been piling pressure on the government to extend the duty free window it had opened last year to ease the grain shortage. Concern has been rising that profiteers may exploit anxiety over future supplies to push up maize flour prices.

Top Government officials have been sending conflicting signals since the grace period for duty free importation maize expired last week. Treasury has insisted that there is enough produce locally to help meet the country’s needs and that it was unnecessary to extend the import window. But Agriculture minister, Mr William Ruto, wants the duty waiver extended for another six months – a proposal East African ministry officials say he is yet to forward to the Council of Ministers. “We have heard of the push for extension of the duty free maize imports programme but nobody has approached us formally to put Kenya’s case before the EAC Council of Ministers,” said EAC permanent secretary, Mr David Nalo

Kenya, Uganda, Tanzania, Rwanda and Burundi are members of the East African Community, which has the mandate of charging duty on maize imports according to the provisions of the Common External Tariffs. Kenya cannot extend the facility without approval of its partners through the Council of Ministers. The EAC protocol requires the Agriculture ministry to back its proposal for extension with the current production figures and present it to Treasury for a formal application to the council.

Treasury PS, Joseph Kinyua, on Monday upheld Kenya Revenue Authority’s position that all maize imports after January 16 would be subjected to the relevant customs duty rates because line ministries have yet to make a formal application for exemptions.

“It is the ministries of agriculture and special programmes that have the duty to trigger any action. Treasury can only apply for exemptions based on reported production gaps versus national consumption requirements,” said Mr Kinyua. Under the EAC custom union’s common external tariffs (CET), maize from within the Common Market for Eastern and Southern African (Comesa) attracts an import duty of 25 per cent while that from outside the bloc is charged at 50 per cent.

Kenya mainly imports her maize from non-Comesa Southern Africa countries and the US which has since extended a Sh4 billion credit guarantee scheme to speed up the duty free importation programme. With the maize flour already selling for more than Sh70 per 2kg packet, the levying of duty could return flour prices to last year’s peak levels of Sh120 that nearly sparked food riots in Kenyan towns. Millers have been importing maize duty free from January last year when the combined effect of the 2008 post election violence and prolonged drought caused severe grain shortage that condemned 10 million Kenyans to starvation.

Duty free imports were initially meant to end after last year’s harvests but were later extended to early this year following persistent drought that saw agriculture output diminish for the ninth consecutive quarter by end of September last year. Ministry data indicates that only 17.6 million bags of maize were harvested between September and December 2009 representing 62 per cent of expected output of 28 million bags.

While the ministry had earlier counted on the much publicised enhanced E nino rains to improve the 2010 output, erratic rainfall patterns have since dampened the outlook, cutting the expected output to only four million bags from the harvests of the short season, which usually contributes six million bags.

Farmers who harvested their crops during the long season harvest largely ignored calls to sell the grains to the National Cereals and Produce Board, insisting the government should increase producer prices beyond Sh2,300 per bag compared to the Sh2,100 at which maize shipped all the way from South Africa sells in Mombasa.

“Generally, farmers are not planning to block the extension duty free maize import programme because we don’t have enough stock to last the country up to the next long season but we appeal to the government to implement it careful to ensure it doesn’t hurt local farmers,” said Dr John Mutuga, the Kenya Federation of Agricultural Producers chief executive.

But unlike millers who want the instrument extended up to November next year when this year’s long season crop is expected, Dr Mutunga asked the government to extend it in three months reviewable periods to ensure its doesn’t stop local produce from finding market.