EDITORIAL: Maize cartels ripping off taxpayers, consumers

Ten years ago, when a World Bank study found that Kenya’s white maize (and sugar) prices were among the highest in the world, an opportunity arose to review the entire production chain.

The study raised a crucial policy question. Why should maize produced in southern Africa and transported all the way to Nairobi cost less than the local produce?

Apparently not much has happened in the policy space since the study was released.

Middlemen – the lot blamed for keeping maize prices at artificially high levels - still dominate the maize market.

Latest reports indicate that brokers are currently buying the 90-kilogramme bag of the commodity from farmers at Sh1,800 and selling it to the National Cereals and Produce Board (NCPB) at a 78 per cent mark up of Sh3,200.

What that means is that the low prices associated with the harvest season glut are neither beneficial to the consumer nor taxpayers, but it is all being pocketed by a few brokers.

In other words, 78 cents of every shilling used by the State to restock its strategic grain reserve ends up in the pockets of brokers.

By the time the last coin of the Sh7 billion State purchase budget is spent, brokers will have earned a whopping Sh5.46 billion, leaving thousands of actual producers to share the remaining Sh1.54 billion. This is not sustainable.

The reason the government sets aside money to restock the strategic grain reserve in the first place is to ensure none of the value chain players is allowed a free hand to make abnormal profit at the expense of the consumer.

In maize production, the taxpayer faces a lose-lose situation all through. First, an average of Sh6 billion that the government spends on farming inputs subsidy has never translated into low producer prices.

On the contrary, reports have sometimes emerged of seeds and fertiliser under the programme ending up with underserving beneficiaries.

Second, the billions of shillings that the State spends on maize flour subsidy are only known to benefit millers and other value chain actors at the expense of the consumer.

The State must rid the maize flour value chain cartels who manipulate prices for selfish ends.