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Confusion on pricing as unga subsidy project comes to a halt

Supermarket workers offload subsidised maize flour in Nyeri town. The government will not extend the subsidy programme as it could create a glut in the market once harvests from the grain basket regions are ready. PHOTO | JOSEPH KANYI | NMG
Supermarket workers offload subsidised maize flour in Nyeri town. The government will not extend the subsidy programme as it could create a glut in the market once harvests from the grain basket regions are ready. PHOTO | JOSEPH KANYI | NMG 

Households will from next week have to contend with higher prices of unga as the government begins to unplug the subsidy programme that has seen the price of the staple food fall to Sh90 per two-kilogramme packet since June.

Although Cereal Millers Association chairman Nick Hutchinson did not respond to our queries over an impending increase of maize flour prices, insiders say there is a simmering row between firms and the government, with the former keen on raising the price.

This could see millers revert to the prevailing market charges after the temporary relief since the prices skyrocketed to Sh180 a packet.

Agriculture Cabinet Secretary Willy Bett said even though the government will try to see that Kenyans are not exploited, the current subsidised cost will not hold for long.

“We will try to ensure the transition is smooth. But the Sh90 per packet will be a thing of the past. It will probably stabilise at where it was before the rise. We have received the early harvest and we expect another one next month,” Mr Bett said.

The CS said the government would not want to extend the subsidy programme as it would create an excess in the market once harvests are ready. This could hurt farmers from grain growing areas.

Faced with a potential backlash from the electorate who were suffering from high food costs, the government allocated Sh6 billion to subsidise the price of maize flour while allowing duty free importation of the commodity as the General Election was approaching.

The programme, which was meant to end in July, was extended amid a biting deficit and low harvest projections for this year following delayed rains and armyworm invasion.

Agriculture ministry officials have been holding meetings with millers to avert a possible increase in prices when the subsidy ends. The fear is that millers may not play ball.

A big miller who spoke on condition of anonymity due to fear of victimisation by the government, said they were keen to “recoup” profits following the “controlled” season of maize flour sales under the subsidy plan, claiming the scheme was badly managed.

“We were compelled to accept the intervention. But I can tell you that not all of us were happy with the scheme and not all of us were reimbursed fairly. Some of us gained more than others and there was poor monitoring on who got what. It will not be easy to tell what some people will be left with when this programme stops,” the miller said.

The miller said that plans to use the Kenya Revenue Authority to audit operations of the scheme had also caused jitters among dealers, who felt that the government was planning to use them as a scapegoat for the poorly monitored plan.

The programme, which saw importers sell maize to millers at Sh2,300 for a 90kg bag despite buying it at above Sh4,000, with the State settling the difference, was marred with deficiencies as shippers scrambled for the rare commodity for the better part of this year.

Most retailers restricted the number of packets a shopper could buy to two, while others insisted that one had to purchase other items before being sold the subsidised flour.

Some shopkeepers simply repackaged the commodity and sold it at double the price. It took warnings of jail terms and several reprimands by top government officials, including President Uhuru Kenyatta and his deputy William Ruto, for traders to stop short-changing buyers.

Last month, CS Bett said the government had identified 40 posho mills in Nairobi County to be allocated imported maize for processing as the State struggled to effectively implement the cheaper flour programme.

He had not responded to our queries on whether the plan was carried out, but had earlier expressed worry over a possible exploitation of consumers should the posho mills be selected without proper monitoring

“The worry was that if we included the posho mills in this programme without proper mechanisms in place, the subsidy might not benefit the intended consumers,” Mr Bett said.

Closure of the programme is equally prone to manipulation and exploitation by millers, analysts say.

The reality of harder times ahead is compounded by gloomy statistics that recently revealed  that maize production in the South Rift will be 15 per cent lower than last year’s, while that from Uasin Gishu and Trans Nzoia will be delayed to November.

With production expected to drop to an eight-year low this year, to 28 million bags from 37 million bags in 2016, due to an armyworm invasion and erratic weather patterns, the end of the subsidy plan may spell doom to the food situation and the cost of living that had started to ease.

Observers believe there will be less vigilance by the government at the end of the programme than at the beginning, which could create loophole for price manipulations.

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