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Kenya lost Sh23b in maize scandal

By | December 19th 2009

By Morris Aron

The maize scandal ghost is back to haunt the National Cereals and Produce Board and a host of business cartels following revelations that much more money was lost than initially thought.

A new report by World Bank, Standing Still: Kenya’s slow economic recovery from quadruple shocks, released on Thursday indicates that Kenya public lost an estimated Sh23.4 billion ($30 million) in subsidies and taxes.

"What we have is a report that has been thoroughly researched with indications that the high maize prices also contributed to the slow economic growth registered across the year," said Mr Johhanes Zutt, Word Bank country director-Kenya.

Initial estimates had indicated that the country had lost just under Sh1 billion from the maize scandal; the World Bank figure however puts the figure much higher.


The bank is blaming NCPB’s failure to follow the original plan of an initiative to cushion the poor by selling maize directly to millers at below market prices.

The NCPB, which determines the producer price of maize by intervening to buy on behalf of the Government, in times of surplus harvest and selling when supply is low, instead chose to sell the maize to brokers who later sold it to millers at a profit.

In business deals involving politicians and businessmen, brokers — who sometimes doubled up as millers — exploited the loophole and bought maize from NCPB and later sold the consignments to millers at a profit pushing maize prices to double that of international trends.

As a result, maize prices rose to Sh30 per kilogramme compared to globally where it is Sh15 per kilogramme.

"Kenya’s maize prices have remained higher than the prevailing international trends despite intervention measures by the Government, meaning that something is not working," said Wolfgang Fengler, World Bank-Kenya chief economist.

The World Bank said the rising prices of the staple food affected the urban poor who are mainly net buyers, the landless and subsistence farmers who at some point in the growing cycle have to buy maize.

In Kenya, approximately six out of every ten farming households are net buyers while in contrast two per cent of farmers control more than 50 per cent of the maize sales.

The report also notes that the rising food prices affected the spending power as many poor households were forced to spend up to 77 per cent of their income on food alone, leaving other sectors of the economy to suffer and stalling growth.

The revelations — coming at a time when another report by the Kenya Food Sector report is warning of another looming maize shortage due to insufficient rains — is bound to evoke a debate as to how best to avoid a repeat of such scandals.

KFSSG is forecasting that insufficient rains experienced between February and August will herald a maize shortfall of 1.9 metric tonnes —25 per cent bellow anticipated targets.

The development means that 3.8 million urban poor, 2.5 million chronically food insecure in the arid and semi arid areas, 1.5 million primary school children and two million living with HIV/Aids will need emergency food from March.

Lower Tarrifs

World Bank is proposing that the Government lowers further tariffs for grain imports to allow maximum amounts of the staple food to enter the market. It has also called for radical reforms on NCPB as ‘most interventions by the body have only served to increase prices. Only two per cent of farmers sell their grain to NCPB.

"We have seen the Government come up with subsidy programmes to reduce input costs such as fertiliser and other initiatives to do away with over-reliance on rain fed agriculture which is good," said Ms Jane Kiringai an economist with the World Bank.

"More needs to be done in addressing NCPB operation structure and grain import policies on non-tariff barriers."

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