Shortage of maize sets the stage for imports

The total stock of maize in Kenya can only last up to July, the latest government statistics have indicated, supporting the case for duty free imports.

A report on the national food situation released last week by the Ministry of Agriculture indicated that maize stocks held by farmers, traders, millers and the National Cereals and Produce Board (NCPB) stood at 16.9 million bags at the beginning of May.

Agriculture permanent secretary Dr Romano Kiome said the stock was only likely to last for three more months, justifying the case for scrapping the 50 per cent duty on maize imports.

“Due to low level of the strategic grain reserve stocks held by NCPB, importation of maize by the private sector is advised,” said Dr Kiome in the report issued after a closed-door meeting at the Prime Minister’s office.

Farmers are holding 10.9 million bags, traders 2.4 million, millers have 519,530 bags with National Cereals and Produce Board (NCPB) is holding 3.1 million bags – against a target of 8 million bags - as the strategic reserve.

The report released last Thursday came almost three weeks after Prime Minister Raila Odinga promised Parliament that the government would scrap duty on maize and wheat imports after conducting a national food survey.

Maize is the country’s staple food with a national consumption rate of 3.5 million bags a month.

The report says large-scale farmers have refused to release their stocks into the market, meaning only the 2.9 million bags held by traders and millers are in circulation.

This artificial scarcity has forced national prices up at a time that cross border inflows have also dropped due to drought that affected short season production across the region.

The national maize prices have hit a 13-month high of Sh3,000 in most parts of the country — up from Sh1,000 at the close of last year — according to the ministry’s data.

The price of a two-kilogramme packet of high grade flour has risen to Sh100 from Sh72 at the beginning of the year while wheat flour is now priced at Sh130 from Sh115 in January.

“The prevailing market prices have raised the cost of every two-kilogramme packet of dry maize at Sh66, long before other factory overheads and distribution costs are factored in,” said Munir Sabit, finance officer at Mombasa Maize Millers.

The government report indicates that only 24,202 bags of maize got into the country from Uganda and Tanzania last month, a 35 per cent drop from March inflows.

This decline defied rise in the prices of dry maize from Sh2,300 to Sh2,700 per 90-kg bag over the same period.

“Traditionally, the national maize stock is partly cushioned by maize inflows from neighbouring countries, especially Uganda and Tanzania,” says the Assessment Report, adding that inflows from neighbouring countries have generally declined since February this year.

Maize from East African Community countries is allowed in the country duty free and is normally counted as part of the domestic stock.

A duty free import window usually helps the country to buy maize from southern African countries like Malawi, Zambia and South Africa.

Being Comesa members, maize from Malawi and Zambia are subjected to 25 per cent duty to be allowed into the country while those import from South Africa -like other non-Comesa markets – attract 50 per cent import duty.

Under the duty free window that the government used to accelerate imports in 2009, maize imports from South Africa increased from Sh5.57 billion in 2008 to Sh23.64 billion, meaning the Government lost the opportunity to collect up Sh11.82 billion in custom duty.

The planned duty waiver on maize and wheat is expected to further undermine Kenya Revenue Authority’s ability to meet its collection target coming just one week after the state proposed to lower taxes on diesel and paraffin.

The taxman is already Sh35 billion below its collection target according to quarter three budgetary review released by treasury last week.

Mr Sabit said the duty waiver will stabilise without lowering the retail cost of flour since the landing cost of imported maize will be Sh3,200 per bag – slightly higher than current domestic prices.

“The cheaper and readily available maize in South Africa is the genetically modified type but we cannot import at the moment because the government is yet to gazette the Biosafety Act which regulates such commodities,” said Mr Sabit.

The country is, however, cushioned from future supply shock of other important grains like beans, wheat and rice as their prices are projected to fall sharply both in the domestic and international markets after the coming harvests, the report indicates.

Dr John Omiti, head of productive sector division at Kenya Institute for Public Policy Research and Analysis says the country’s vulnerability to international food prices is driven by over-reliance on grains as the main foodstuff.

“By making widely consumed cereals our staple food, we are directly exposing the local consumer to direct competition with consumers across the world,” said Dr Omiti in an earlier interview.

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.