10 January 2019

Kenya: Taxpayers to Pay Millions in Interest on the Sh2.3 Billion Owed to Millers

Taxpayers will foot the interest accruing from the Sh2.3 billion that the government owes millers under the maize subsidy programme concluded at the end of 2017.

The government agreed to pay interest to the processors in the event it delayed paying them for the imported subsidised maize, which it eventually did.

According to the millers, the principal amount and interest have accrued to Sh2.7 billion with no sign of payment. The millers have been left to their own devices as they struggle to stock grain for future milling.

The debt, in its second year now, has almost paralysed small millers who struggle to pay workers and meet other financial obligations.

The processors said their operations have been constrained by cash-flow challenges.

"We have been negotiating to no avail for the last two years. We are facing serious financial challenges as we cannot buy enough stocks for future use," said Cereal Millers Association chairman Mohamed Islam.

"It's now a situation of hand-to-mouth as we cannot stock as we would do under normal circumstances," Mr Islam said.

The government, through the National Cereals and Produce Board (NCPB), set the buying price of a 90 kilogramme bag of maize at Sh2,300 but has not started purchasing the grain as funds are yet to be released.

The price of maize flour has risen with a two-kilogramme packet sold at Sh90, up from Sh85.

Agriculture Principal Secretary Hamadi Boga last year said the Treasury did not set aside funds for millers. "At the moment we are still waiting for funds before the exercise of buying maize from farmers begins," said Prof Boga.

The delays have given room to cartels who are now offering farmers low prices with a 90-kilo bag selling at Sh1,300. In 2017, the government allowed millers to bring in maize at subsidised price following a long-running drought. It also waived duty for large operators to drastically bring down overheating retail prices.

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