The treasury is broke to sustain the Sh100 unga subsidy, says Munya

President Uhuru Kenyatta with Kenyan millers during a press conference on the 5th stimulus package focusing on food Subsidies at State House, Nairobi. [PSCU]

The maize flour subsidy that was announced by the government has hit a snug.

Agriculture Cabinet Secretary Peter Munya on Saturday cited the suspension to inadequate funds from the National treasury as the main reason for suspending the subsidy programme.

“Due to inadequate exchequer releases from the National Treasury, it has been decided that the Maize Flour Subsidy Program be suspended with immediate effect,” Munya said.

This means that the millers are at liberty to sell the maize flour as per their will.

Before the subsidy kicked in, a 2kg packet of maize flour was retailing for as high as Ksh230.

"As you are aware, the government through this Ministry and other key stakeholders has been implementing the ongoing Maize Flour Subsidy Program in partnership with contracted Millers under a Presidential Executive Order," the statement read in part.

Last month, President Uhuru Kenyatta announced stimulus measures to cushion Kenyans against the high cost of living, effectively lowering the cost of maize flour.

He added that all milling companies had been engaged in the fiscal measure to address the Unga crisis.

The Head of State said a 2kilogram-packet of Unga would retail at Sh100 down from an average of Sh225 following talks with millers at State House, Nairobi.

“I note with regret that the cost of a 2 kg pack of maize-meal remains out of reach for many, as it is currently retailing at an average of Sh205,” Kenyatta said after a meeting with Millers at State House.

He announced the suspension of the Railway Development Levy and the Importation Declaration fee,

The maize subsidy added to the previous State efforts, including tax waivers, for a 90-day duty-free importation of maize aimed at taming the rising cost of flour.

“As a consequence of this continued escalation in food prices, I today announce Fiscal Measures focused on food Subsidy, as our Fifth Stimulus Programme covering the supply and distribution of our nation’s staple food – maize meal, across the entire country,” he said.

Despite Uhuru's directive, many retailers failed to lower the price to Ksh100 leading to shortage of the commodity in all outlets across the country. 

Cereal Millers Association (CMA) blamed the scarcity of Ksh100 maize on panic buying. CMA explained that most Kenyans were buying in bulk ahead of the August 9 polls.

"This surge in demand is as a result of consumers enjoying the benefits of subsidized Ksh100 prices by buying above-average stocks. CMA stated that consumers stocking up ahead of August 9, General Election," the statement read in part.

"The government has taken the necessary interventions needed to make vulnerable households' food secure through the subsidy-backed programme that has capped the retail price of the 2-kilogram maize flour brands at Ksh100."

Millers further blamed maize flour scarcity to acute drought in some parts of the country.

The move marked the second time the government was invoking the Price Control (Essential Goods) Act of 2011 after the first cap of Sh90 per 2kg in 2017, which was also an election year.

The Act allows the State to set maximum prices of gazetted essential commodities after consultation with relevant industry players.

 The government then released Sh8 billion in order to finance the 4-week program which was to end on August 20, 2022. 

In 2013, which was an election year, the price of a 2kg packet of flour shot up from Sh70 to Sh130. A similar trend occurred in 2017 — also an election year —when prices hit Sh189 a packet. In June this year, a packet was retailing at above Sh200, the highest in Kenya’s history. ​