Kenya Association of Manufacturers (KAM), Cereal Millers Association (CMA), Association of Kenya Feed Manufacturers (AKEFEMA), Eastern Africa Grain Council (EAGC), Agro-Processors Association of Kenya (APAK), Grain Belt Millers and Farmers Association (GBMFA), Agriculture Sector Network (ASNET) and United Grain Millers Association (UGMA) would like to register concerns on the shortage of maize and wheat in the country, which if left unchecked, shall lead to a devastating food crisis.
The shortage shall further push up the prices of these commodities and subsequently, worsen inflation – Kenya National Bureau of Statistics (KNBS) has attributed the rise in inflation to increasing prices of food items.
According to KNBS, the year-on-year inflation increased from 5.76% in April 2021 to 6.47% in April 2022. During the same period, the price of maize went up from Kshs 2,850 in 2021 to Kshs 4,200 in 2022 – a 47% increase, mainly caused by persistent drought and reducing maize inflows from EAC cross border trade. On the other hand, the price of wheat rose from KShs 3,800 in 2021 to KShs 6,000 per 90 kg bag in 2022.
In addition to this, the high and volatile international prices have resulted in unprecedented retail prices. A 2kg packet of maize flour is currently retailing at approximately Kshs 155-165, whereas that of wheat is Kshs 185-195. While farmers are set to gain from the current supply-side prices driven by inflation, consumers are exposed to the extremely high costs of products manufactured from imported maize and wheat.
Wheat production
Kenya produces approximately 100,000 metric tonnes of wheat against an annual demand of 2.4 million metric tonnes. This demonstrates that the country relies heavily on imported wheat – 96% of wheat consumed in the country is sourced from imports. Wheat is a sensitive product under the EAC Common External Tariff (CET) 2017, attracting an import duty import rate of 35%. However, millers are allowed to import wheat at 10% under the Duty Remission Scheme subject to approval by the Ministry of Agriculture (Agriculture Food Authority).
Kenya imports 60% of the deficit mainly from Ukraine and Russia. The current situation in the two countries has disrupted the importation supply chain. As a result, players in the sector have turned to the expensive importation of wheat from USA, Argentina, Australia and Canada. This has been aggravated by the total ban of imports from India by the Kenyan government.
Maize production
Maize production is estimated at 3.2 million metric tons per year against the consumption of 3.8 million metric tonnes. The deficit is bridged through imports from the region. Maize is also a sensitive product under the EAC CET 2017, attracting a 50% import duty rate. However, the government issues periodic exemptions to approved millers to bridge the deficit.
Whilst the government has announced the removal of import duty on maize for 3 months, there is a global shortage of the commodity, coupled with extremely high prices occasioned by the Russia-Ukraine conflict. The delayed decision to waive duty means that it is difficult to source affordable maize at this time, which will impact the cost of the finished products.
Our asks
Wheat and maize are the main staple food for Kenya’s population. The glaring shortage requires immediate and short-term interventions to avert a looming crisis, compounded by the persistent drought and global supply chain disruption owing to Ukraine-Russia crisis and COVID-19 pandemic.
To remedy this, it is paramount that government creates a fair and level playing field, by fully exempting imported wheat and maize from import duty and some miscellaneous fees and charges. This will achieve an equilibrium price between local farmers and consumers.
We, therefore, recommend the following measures to be undertaken:
- Government to immediately form a committee comprising of the Cabinet Secretaries, Ministry of Industrialization, Trade & Enterprise Development; Ministry of Agriculture, Livestock, Fisheries and Co-operatives; The National Treasury; and Ministry of East African Community and Regional Development to expedite solutions to mitigate wheat and maize crisis in the country.
- Kenyan farmers be encouraged to release maize stocks to millers at prevailing prices.
- The Government of the Republic of Kenya to diplomatically and bilaterally negotiate with the Governments of the Republic of Zambia and United Republic of Tanzania (URT) to allow the importation of 6 million bags of maize and ensure efficient and effective trade facilitation. It is also critical that Government supports transport and logistics for the importation of maize from these countries. This is because of the high cost of transporting produce from neighbouring countries, which ultimately drives up the price of finished products. Transport costs have increased from USD120 to 185per tonne from Lusaka to Nairobi, escalating the price of imported maize. Sea freight costs have also gone up since the outbreak of the COVID-19 pandemic and worsened by the Russia – Ukraine conflict.
- Immediate release of a modified gazette notice to allow duty free importation of European Union Standard maize, soya bean meal among others, by bona fide animal feed millers. Unfortunately, the omission of this EU standard in the 10th December 2021 Gazette Notice has made it nearly impossible to source the raw materials, leading to a serious shortage of raw materials used in the manufacture of animal feeds, and consequently, a sharp rise in feed prices to unsustainably high levels.
- Grant full duty exemption to bona fide food and feed millers charged on wheat for a period of 12 months to cushion consumers and local farmers.
Consumers are already struggling with increasing price of commodities. The implementation of these recommendations will be crucial in mitigating rising costs of wheat and maize-based commodities, should the situation persist.
We remain committed to working with the government to promote food security in the country.