Unga crisis: Why Kenyans are not out of the woods yet
By Dominic Omondi | May 23rd 2017
There is no cheap maize flour at Karanja’s shop in Umoja Estate, Nairobi. Here, a two-kilogrammeme of unga is still retailing at Sh150, despite its price having been brought down to Sh90 through a three-month Sh6.5 billion Government food subsidy programme.
“I have been to my distributor three times looking for this cheap unga, but I have not found it,” Karanja told Financial Standard. Millers are expected to pocket a whooping Sh1.2 billion through the subsidy programme that will see Government sell to them half a million bags of maize at Sh2,400 a bag.
Karanja said he had not heard of a duka which had this cheap unga. “They are mostly sold in the supermarkets,” he explained. Indeed, a mini-supermarket which is a few steps from Karanja’s shop has the unga. Here, the two-kilogramme subsidised unga of Soko brand is available. However, there is no Jogoo, Pembe, Hodari, and Ndovu.
At Naivas Supermarket in Donholm Estate, there are only two brands of maize flour: The pricey Hostess, going at Sh186 and little known Mama which is stamped with the Government logo and is going at Sh90. And only a few of these maize flour remain, a sure sign of panic-buying.
In the evening, when we pass by another Supermarket in this neighbourhood, we don’t find the subsidised maize flour. “It came in the morning, and ‘flew’ from the shelves as fast as it came,” says one of the attendants. “The maize flour that we sell in a week, we are selling in hours,” he adds.
It is the same story in Eldoret and Kitale. Supermarkets, where few people do their shopping, are stocked with the subsidised maize-flour while dukas continue to sell expensive unga. And 677km from Nairobi, in Lodwar, the Government’s hand in unga is yet to be seen. Here, unga is still retailing at a high of Sh165.
A day after the Government launched the subsidy programme, Tuskys Supermarket only had Soko brand in one of its outlets and shoppers were restricted to only two packets.
Clearly, the ‘feeding programme’ aimed at curbing run-away food inflation, especially of maize flour, is suffering some inefficiencies. The subsidy programme is a knee-jerk reaction, and populist policy, whose sole objective was to counter the growing tide of the ‘Unga revolution’.
Unfortunately, the initiative has already started showing signs of strain. Intermittent shortages characteristic of a price control regime have started showing. “The way the Government is going round this thing is wrong. It will not work,” said a visibly furious chairman of Unga Grain Millers Association Peter Kuguru, after the government launched the programme.
He was outside Kilimo House, where the offices of the Ministry of Agriculture are based. Kuguru lamented that Agriculture Cabinet Secretary Willy Bett had refused to meet his association whose membership comprised small millers who mill and distribute unga to the far-flung areas.
Instead, Bett and the Cereal Millers Association (CMA), were holed up in a room at Kilimo House. Kuguru said big millers only supplied to supermarkets.
Kuguru’s sentiments were supported by Economist David Ndii, a vocal critic of the Jubilee Government, in his latest column.
“We know that the most deserving do not shop in the big supermarket chains yet that is where the subsidised unga is being sold. Within hours of the subsidised unga hitting the shelves, half a kilo packs in polythene bags were being sold at Sh30 in the dukas and kiosks in my neighbourhood,” said Ndii, noting that the subsidy programme was not well targeted.
Kuguru sensationally claimed millers were being forced to brand maize flour with the Government logo, dramatically comparing it with the Government putting a gun on the miller’s head.
“But this price will only be felt in the supermarkets, outside in the open market, the price will still go up,” said Kuguru, noting that they were only given 100,000 bags and yet they served 60 per cent of the market.
Kuguru, who accused Bett of favouritism, dismissed the move to subsidise unga as a “political gimmick.” He predicted the collapse of the programme if the minister did not obey the law of demand and supply. “The minister is doing politics with the grain,” said Kuguru.
And as we head towards the elections, politics will most likely trump policy. The International Monetary Fund (IMF) has already taken note.
“Upcoming elections in Angola and Kenya could make it more difficult for these countries to address weaknesses in the underlying fundamentals,” said the IMF in its Regional Economic Outlook for Sub-Saharan Africa.
Last year was a gloomy year for the country’s agricultural sector and the government was made aware of the worsening situation.
Production of maize decreased in 2016 due to lower volume of rainfall, high costs of farm inputs and the residual effects of Maize Lethal Necrosis Disease (MLND), said the Kenya National Bureau of Statistics in the Economic Survey 2017.
Production of the cereal reduced from 42.5 million bags in 2015 to 37.1 million bags in 2016. Both the maize produced and maize taken to the market in 2016, declined.
The value of marketed maize declined by 7.2 per cent to Sh7.9 billion.
While the value of marketed rice and wheat also went down, their poor performances were quickly compensated with increased imports of the commodities. However, maize imports declined sharply from 480,100 tonnes in 2015 to 148,600 tonnes in 2016.
There was no maize in Tanzania and Uganda, from where Kenya plugs its deficit. The ravaging drought had ensured that they too were as maize-deficient as Kenya.
Kenya’s remaining option was to import the commodity from overseas, particularly Mexico, which is the largest producer of white maize.
Maize from overseas was subjected to a 50 per cent duty, a duty that was put in place to protect Kenyan farmers. Politicians in government, however, perceived it differently.
Around February this year, Deputy President William Ruto, insisted that the country would not import maize, even after the Cabinet Secretary for Agriculture Willy Bett had said the country was mulling importation of the commodity to cushion most Kenyan households against the rising price of, not just maize flour, but other commodities such as cabbages, sukumawiki, rice and milk.
Indeed, millers had approached CS Bett with the request that the government allows for importation of duty-free yellow maize which could be used as animal feeds, thus easing the pressure on white-maize which could now only go towards food.
Bett refused. “Those saying that we do not have enough maize are impostors. These are people who want us to go back to things of yesteryears of looking for ways of importing maize,” said Ruto. “We cannot allow imported maize because we have enough maize for our country Kenya,” added the tough-talking deputy president.
Kwame Owino, chief executive Officer of the Institute of Economic Affairs (IEA-Kenya), a public policy think tank based in Nairobi, blames the Government for dithering even when it is apparent that the country is facing an imminent shortage of a food commodity such as maize and sugar.
And Ndii in his column added: “Had the government organised the importation of maize at the right time, it would have dampened the pressure on prices and the subsidy would not have become necessary.”
In March 30, Cabinet Secretary for National Treasury Henry Rotich, in his budget speech would, however, acknowledge that consumers were hurting and overruled the deputy president and opened the window for importation by removing the 50 per cent duty on imported white maize.
He also zero-rated inputs used in the manufacture of maize and wheat flour. Two days later, Rotich put on the Kenyan Gazette regulations that allowed for zero-rating of all inputs used to manufacture maize and wheat flour.
His Agriculture counterpart, Willy Bett released a million bags from the Strategic Grain Reserve (SGR) to be sold to millers at a subsidised cost of Sh3,000 as opposed to the market rate of Sh4,500.
Meanwhile, some millers were immediately allowed to import maize from Mexico with the first consignment having touch the Port of Mombasa a fortnight ago.
Until then, millers would get about one million bags from SGR and another stock of import from Ethiopia.
The effect of all these, reckoned Rotich and Bett, was that the price of a two-kilogramme maize flour would tumble down to Sh115 from a high of Sh155 in less than 15 days.
It never, instead the price of maize flour shot up to a high of Sh162. All of a sudden, maize from Mexico arrived in less than 30 days, the speed of the ship catalysed by increasing political temperatures.
Even if this was duty-free maize from Mexico, it would take some time before it was milled and Kenyans had a taste of the cheap unga. Going by the initial experience, there was no guarantee that the price would go down. Meanwhile, the Opposition began to galvanise around the politics of unga.
The social media went bonkers with memes of how unga had become such a rare gem that some Kenyans went to extent of even sleeping with their stock, a panga within reach or an unga jackpot.
The Government was under pressure and quickly came up with what it believed was a counter-narrative in this political duel. It decided to buy unga for Kenyans - or at least help them buy unga.
And millers who had already been allowed to import duty free and mill unga without being charged VAT for such inputs as transport, power and packaging, made a kill.
Farmers and consumers were the biggest losers. The Government said it had temporarily lifted import duty, which it maintains to protect farmers. It took this painful, but necessary decision to alleviate the suffering of consumers, who also happen to be farmers.
Interestingly, when in the beginning of last month, we asked Bett whether the ministry had determined the deficit of maize in the market and who the licensed importers would be, he said importation would be open. He added that the ministry would monitor the imports as they came in, and discontinue the process as soon as the imports reached a certain level.
This was a perfect environment for unscrupulous traders to flood the Kenyan market with cheap maize. Clearly, it is not this maize that was used to manufacture the subsidised maize flour. This flour was manufactured in March, in what some people have said is an indication that millers have been hording this commodity.
Even if the subsidy programme which the Government expects to run for the next three months until the next harvest, runs smoothly it does not mean we are out of the woods yet. When we visited TransNzoia County in March, one of the country’s food basket areas, acres and acres of land were being prepared for planting but not many farmers had sunk a seed in the soils.
The rains had delayed. And this too, had been predicted. According to the Intergovernmental Authority on Development (IGAD), even the March/April rains might fail, aggravating the already worse food crisis.
Experts have already predicted that the harvests for this year will also be reduced due to the delayed rainfall and the outbreak of the Fall Armyworm (FAW) in nine western and Rift Valley counties as well as in parts of the coastal marginal agricultural areas.
“The pest has affected some of the off-season crops, and also poses a threat to the long rains crops that are still at early stages of development,” read a report by USAID’s Famine Early Warning Systems Network (FEWS NET).
FEWS says in its April report that besides to the March-May rains beginning late, they “so far remain below average, ranging below average, ranging between 30 and 70 per cent of normal.”
“Land preparation and planting activities are ongoing across the zone though at below-normal levels due to the poor rainfall and earlier forecasts that dissuaded farmers from planting as usual,” added the report. As far as expensive ugali goes, it seems like Kenya is not yet out of the woods yet.
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