Inside President Uhuru Kenyatta's low-priced unga deal

President Uhuru Kenyatta addresses the nation after a meeting with millers at State House, Nairobi. [PSCU]

President Uhuru Kenyatta yesterday announced that a two-kilogramme packet of maize flour would be retailing at Sh100.

This followed four days of intense talks between officials at the Agriculture Ministry and millers.

Without revealing the exact date when Kenyans would begin to buy cheaper unga, the Head of State noted that the subsidy programme would see the government compensate millers Sh105 for every two-kilogramme packet of maize flour they sell to retail outlets.

Prices of unga have risen sharply following a drought and a surge in prices of fertiliser, with a 2kg packet retailing for as high as Sh230 in some outlets.

The news of cheap unga offers much-needed relief to millions of Kenyans who have been overburdened by high food prices.

“This programme of subsidy of Sh105 per 2kg pack of maize-meal is meant to lower the cost of living for the vulnerable households as we look for a sustainable solution to the recurrent rising price of unga,” said President Uhuru as he also questioned the pattern of “unga crisis” in virtually every election cycle.

By afternoon, it was not clear whether Kenyans were going to once again start enjoying ugali, with as much regularity as before.  

One of the issues that were to be resolved is the payment of pending bills, with some of the millers that sold maize under the 2017 subsidy programme yet to be paid.

Most of the millers had been pushing back, seeking assurance from the State that their payments would not delay as they did in the last subsidy programme in 2017.

On Tuesday, the millers had sent a statement saying that they were still consulting with the government and other stakeholders on how best to reduce the price of maize flour.

“Please be advised that the negotiations are at an advanced stage, but no prices have been set,” said the Cereal Millers Association (CMA), a lobby group for millers in the country.

Gerald Masila, the chief executive of East African Grain Council, said that millers feared that some of the unpaid bills, some going back as far as 2017, may not be honoured after the August 9 elections.

There are grumbles that only one of the millers’ lobbies, the Cereal Millers Association, has been represented in the subsidy yet it represents only between 35 per cent and 40 per cent of the market.

The issue of logistics - how the maize would be moved from the mills to the retail outlets—also featured.

There were also questions over what was to be done by the stock on shelves, which had been acquired at a higher price.

This might explain why President Kenyatta has been silent on when the subsidy was to begin.

There was also a push for the government to subsidise maize rather than flour.

Maize flour on sale at a supermarket along Langata Road, Nairobi. [File, Standard]

Subsidising the cereal would then see the maize go into the mills at a lower cost and would not be riddled with complications such as the need for account reconciliations. 

Escrow account

In addition to the removal of duty and levies on imported white maize, Uhuru, who described this as the fifth subsidy, also suspended the two per cent Railway Development Levy (RDL) on all imported maize.

Import declaration fee (IDF), which is charged at two per cent of the Customs Value, has also been suspended.

The disagreement between the millers and government officials was informed by the experience of the 2017 subsidy programme.

Some of the millers claim they have never been paid for the maize they sold at a subsidised price. To win over the millers, the government has proposed the subsidy money be deposited in an escrow account.

An escrow account is where funds are held in trust, at the Central Bank of Kenya, whilst two or more parties complete a transaction.

The account, which the contract said would always have sufficient funds, would be opened and operated by the Agriculture Ministry. 

The subsidy programme and the escrow account are to be overseen by a committee comprising officials from Agriculture Ministry, the National Treasury, and CMA.  

To ensure the millers keep their end of the bargain, the contract stipulates, the ministry will deploy its representatives to the premises and depots to verify invoices. 

They will also authenticate the delivery or dispatch document evidencing the sale of sifted maize flour. 

The ministry will verify each of these documents by signing and stamping to confirm proof of sale. 

The miller shall, on verification by an officer of the ministry, raise and submit invoices daily for the subsidy amount together with a copy of the signed dispatch document to the Principal Secretary for payment.

President Kenyatta said that the government had engaged all the milling companies registered under Agricultural and Food Authority and Cabinet Secretary for National Treasury Ukur Yatani issued a legal notice to this effect.

Small-scale millers, however, claimed conditions set by the government to implement a subsidy programme are unattainable and others said they were not engaged in talks.  

They claimed yesterday that it would be expensive for them to invest in new requirements that will be enforced for only 28 days.

These requirements, they said, only favoured established operators.

“It is difficult for small-scale millers to meet the new conditions set by the government within short timelines.

“Most of us have been out of operations for some time now,” said Rachel Miami, director Ramm Millers Ltd in Eldoret.

Rachel Miami, director Ramm Millers Ltd in Eldoret. [Christopher Kipsang, Standard]

Her firm is among 30 members of the Grain Belt Millers Association, most of whom have shut operations following the high cost of maize for processing.

“The government now wants us to register with Agriculture and Food Authority (AFA) and avail ourselves at Kilimo House for signing in order for us to access maize subsidy. Registration will cost over Sh30,000, yet the subsidy programme will last for a short period,” said Ms Miami.

Kitui Flour Mills Director Said Salim Bajaber said the waiver for maize import had not been gazetted, which had forced them to pay duty at the borders.

“Other than the waiver issue, we still have to look for maize. We are confident that some of these teething problems will be addressed following the president’s intervention,” he said.

Bajaber said they are operating below capacity due to maize shortage.

Countries such as Tanzania where millers used to get maize had also started running out of the cereal, said East African Grain Council boss, Masila.

This at a time when the hitherto frosty relations between the two countries have started thawing, with the flow of maize from and through Tanzania becoming steady.

“Even they (Tanzanians) are now buying maize from Zambia,” Masila said.

While millers are still concerned about the availability of maize from the local market, the government insists there are individuals hoarding the cereal to create an artificial shortage and benefit from it.

“In fact, there seems to be an engineered connection between elections and the high prices of unga,” Uhuru said.

“There is an obvious trend between the manner in which the price of unga goes up during elections.”

He also berated millers and traders for what he believed were cases of hoarding.

“The pain of expensive maize flour is not about to ease, especially now during elections. Yet in the end, if hoarding results in an increase in prices to an unaffordable level and consequent instability, the damage is highest on corporate citizens,” said Uhuru.

The maize programme adds to a bag subsidies President Kenyatta has offered Kenyans to cushion them against the high cost of living.

Already, the government has waived the 50 per cent import duty on non-genetically modified organisms (GMOs) white maize, yellow maize and animal feed.