Kenya: MPs Say Maize Subsidy a Political Tool to Siphon Funds as Millers Demand Payment

Nairobi — Members of Parliament have hinted at advising government to default on pending bills owed to millers while describing the maize subsidy programme initiated in the sunset days of President Uhuru Kenyatta's regime as a scam.

The government entered into a four week contract with 129 millers to subsidize flour at Sh6.6 billion to address the maize shortage that had caused a spike of Unga prices.

Appearing before the National Assembly Agricultural Committee, the Cereal Millers Association who are owed Sh2.5 billion had requested MPs to push for their payments but the latter are now saying the subsidy program was a political avenue to siphon funds.

Gatundu South MP Gabriel Wangombe stated that the millers worked in cahoots with the government officials to embezzle public funds.

"You cannot ascertain the value for money to the user. You don't even know if the maize flour reached the end user. You don't know how it left the distributor door," said Wangombe.

Vice Chair of the Committee who doubles as Konoin MP asked the millers to outline and produce evidence on the distribution of the subsidized flour that was done saying the Sh100 Unga was barely felt in major towns.

"During this time for subsidy flour disappeared from the shelves even the flour that was supposed to retail at Sh100 wasn't there. Where is the flour that was supposed to be the subsidy that will reach the common mwananchi go?" said Yegon.

Soy MP David Kiplagat mentioned that the previous regime created an artificial shortage in the market so as to ensure it releases subsidies on the pretense of cushioning consumers.

"Initially before the subsidy maize flour was on the shelves but when the subsidy programme started suddenly there was a shortage and the shelves were empty. Consumers were telling the customers that for you to get a 2kg packet of maize you must shop goods worth Sh1,000," said Kiplagat.

Nyando MP Jared Okello questioned the role of the millers in subsidizing the maize prices in the market given that they are requesting payment for a subsidy program whose impact was not felt.

"Where did your role end into the distribution chain because my small shopping center in Lothuo market in Ahero. I don't know if its your responsibility to ensure that Luthou has a surplus supply of subsidized maize or if we are giving you a job that cut at a particular stage," said Akello.

Millers however defended themselves saying the process was open and transparent and not a conduit to embezzle the public coffers.

Mohammed Islam from Mombasa Millers Association mentioned that the program was short for only one month yet the demand was very high.

"It's a proven fact that flour was there in the market and it was evidenced in the major supermarkets. You have to realize that the demand was high and it was a political time and in political season that they keep a little more because they don't know what might occur," said Islam.

This comes even as the taxpayers are poised to cough Sh269 million to pay the Cereal Millers Association (CMA) as part of accrued interest in the maize subsidy programme.

The government has failed to pay the millers Sh2.5 billion balance for supplying maize flour on a subsidized price due to the maize shortage that led to the prices of Unga skyrocket.

In the revelations made before the National Assembly Agricultural Committee, CMA was contracted to supply maize flour worth Sh4.4 billion but the government only paid them Sh1.7 billion with the status of the balance payment in limbo.

"The outstanding Sh2.5 billion has not been paid and continues to accrue interest which will be forwarded to the taxpayers and continues to increase until its paid," said Paloma Fernandez, CMA CEO.

In the contractual agreement, the Ministry of Agriculture led by CS Peter Munya signed a contract with 129 Millers to supply subsidized maize flour from June 19 to August 20, 2022.

The maize subsidy programme contract also underlined that any delayed payment will attract interest until it is paid.

Of the 129 millers who were part of the Sh6.6 billion subsidy program, 29 of them were from the CMA.

In a letter seen by Capital FM, the millers have severally written to Treasury Cabinet Secretary Njuguna Ndungu to remind him to honor the subsidy contract with millers decrying that the delays in payments have negatively affected their business.

"With this letter, we humbly request for a meeting with your office in the coming week to further discuss the settlement of the outstanding bill," they stated.

"We are afraid that further delay of the payment will continue to adversely impact on the operations and running of the flour milling business and might also affect maize importation," the letter read in part.

The desperate calls by the millers for the government to sort out the outstanding bills comes amidst revelations by the government that the public coffers are dry and the economy has been crippled.

Further, the President William Ruto administration has been against the subsidy programme saying it was a conduit to siphon public funds.

Nominated MP Sabina Chege raised eyebrows on the delayed payment that have continued to attract interest at the expense of the taxpayer saying forces within the government were working to ensure the payments accrue interest for personal reasons.

"You have been paid Sh1.9b with a balance of Sh2.5b which you say is the principal amount without interest. The agreement with the government was that if the money was to be delayed you would have been paid interest," she said.

"Why do we have these delays each and every time, it seems like someone is doing this intentionally to benefit," stated Chege.

Okello requested the millers to forgo the accruing interest expressing that the government is currently broke due to the cash flow constraints.

"We all understand the situation that the government is going through unless you are a visitor in Jerusalem. Could you be magnanimous and patriotic to only pursue the principal amount of Sh 2.5M in the interest of the economy of Kenya," said Okello.

CMA however argued that they risk being auctioned as the government continues to delay with their payments with no hope in sight.

"As we talk the bank will not say since the government is having the money with it we will stop charging interest. The bank charges us interest of the whole loan with penalties and before you know it you are being auctioned," said CMA legal counsel.

In mid-2022, former President Uhuru Kenyatta's administration introduced a subsidy program to cushion Kenyans from high prices of maize flour.

It came after the price of a 2-kilo bag of flour increased to Sh230 from Sh100 previously. Millers were to sell maize flour at a subsidy rate of Sh100.

In total, millers sold Sh4.34 billion, of which the state paid Sh1.77 billion, leaving Sh2.57 billion in arrears.

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