Unga subsidy may run up to Sept on delayed harvest

An attendant stocks the Sh90 maize flour at an Uchumi Supermarkets branch in Mombasa. file photo | nmg
An attendant stocks the Sh90 maize flour at an Uchumi Supermarkets branch in Mombasa. file photo | nmg 

The State subsidy that has seen the two-kilo maize flour packet retail at Sh90 may be extended to September as Kenya grapples with delayed and inadequate harvests from the grain basket region of North Rift.

Agriculture secretary Willy Bett said the subsidy will run into the harvest season when maize prices are expected to fall, offering millers an opportunity to keep flour prices below Sh100.

The Sh6 billion subsidy was expected to last till end of July when produce from South Rift was expected to to come to the market in August and later in October that from Uasin Gishu and Trans Nzoia.

But estimates have since showed that the South Rift production will be 15 per cent less of last year’s while that from Uasin Gishu and Trans Nzoia will be delayed to November.

“We are monitoring how to exit from the subsidy around September but we want to be certain that the exit will not cause a steep increase in the cost of flour,” Mr Bett said, adding that the government may be forced to extend the programme in the event there is a price increase.

Kenya in May started subsidising maize importers to help lower the cost of flour that had shot to a historic high in the aftermath of a prolonged drought.

Under the subsidy programme, importers sell maize to millers at Sh2,300 for a 90 kg bag despite buying the produce at above Sh4,000, with the State settling the difference.

That allowed the millers to the sell the the 2kg packet of flour at Sh90. Mr Bett said Sh4.5 billion of the Sh6 billion subsidy had been consumed by Friday last week.

The Treasury also extended the period for duty-free importation of maize to September — beyond the earlier deadline of July 4.

More recently, supply of flour in the retail market has been improving with better delivery from the millers, easing the rationing of flour in supermarkets.

To keep the maize flour price in check, the government published a gazette notice criminalising its sale above Sh90.

The action is supported by an Act of Parliament that was passed in 2011 giving the State powers to control prices of essential goods.

Kenya has been banking on the August and October harvests to lower the price of flour further but that is likely to take a little longer with production expected to drop to an eight-year low this year.

Production is forecast to drop from the 37 million bags that were realised last year to 28 million bags in line with the projected 25 per cent loss on the current crop. 

Besides, an armyworm invasion of cereal-growing regions that began last month is expected to cut production by five per cent and erratic weather patterns by another 20 per cent.

The nine million bags drop means the country will be short of a three month supply of stocks given that Kenyans consume three million bags of maize every month.