Kenya pays three times for SA maize enriching wealthy importers

John Otieno who sells maize and owns a business of poshomill at work where he sells a kilo of maize for seventy shillings and mills for another ten shilling at his business premises in kibera

Kenya is paying nearly three times the current price of maize in South Africa, pointing to huge margins for traders but huge costs to the taxpayer.

The removal of duty on imported maize only helped to compound the profits raked in by the few wealthy traders who have the financial muscle to engage in large-scale imports.

Yesterday's average selling prices in South African markets were about Sh14,000 (SA Rand 1,750) per ton, or Sh1,360 per 90kg bag of white maize, market data at closing indicated.

An ongoing State-funded subsidy plan has also assured the importers of a ready market for their cheap maize, and at a guaranteed price of at least Sh3,600 per bag.

Already, Sh6.5 billion has been allocated to pay importers as the country pays the price for poor planning ahead of the crisis that sent flour prices through the roof in recent days.

"We shall pay Sh3,600 per bag for all maize before selling it to millers at Sh2,300," said Agriculture Cabinet Secretary Willy Bett after launching the subsidy plan last week.

In the proposed purchase price from the State, millers will pay an equivalent of Sh25,500 per metric ton – which is still lower than the landed price of maize from South Africa.

Estimates for shipping costs indicate that a vessel similar to IVS Pinehurst, the ship that delivered the 29,900 metric tonnes of maize imported from South Africa, would charge about Sh33 million for the work.

Brokerage firm

Danil Ostapenko, who works for an international freight brokerage firm known as Searates, gave The Standard a quote of $330,000 (Sh33 million) for a 30,000-ton consignment from Durban to Mombasa.

That is roughly equal to Sh1 for every kilo, or Sh100 for a 90kg bag.

Add the minimal cost of clearing and handling costs, and importers could have spent a maximum of Sh150 to move a bag of maize from warehouses at the Durban Port to a storage facility in Mombasa.

A breakdown of the supply chain of the imported maize from the source markets indicates that the traders are guaranteed a profit of Sh2,000 per bag.

A bumper harvest in SA is already underway and expected to depress prices.