Monday, December 08, 2008

Kenya puts price controls on maize

Amid protests from the public, the Kenyan government has put price controls on a staple food. The government has put a price cap on maize flour which is a food stuff the people of the country depend on.

The price controls should put it back into the reach of low income people in Kenya. As the price of the commodity has skyrocketed this year. But, the government created a difference in price between government flour and private flour.

Cedric Lumiti from East African Business Week provides details on the action in Kenya.

The action is a culmination of fears that the East African country long considered as the region's economic powerhouse could slip into starvation as the price of the precious staple used in preparation of ugali was retailing at KShs120 (US$2) per 2-kilogramme packet, well out of reach for the common masses.

The new arrangement will see the subsidized government flour retailing at KShs52 per 2kg packet which will be specially branded with the government label. Supermarkets stocking the usual brands will retail the commodity at KShs72, prompting concerns on how the government will ensure adequate supply of the subsidized brands while at the same time ensuring no artificial shortages of the cheap maize flour.

The new arrangement will see the government release 1.2 million bags of maize for both the private sector branded and the government branded maize products. Another 5 million 90kg bags of maize will be imported to cushion the country's reserves in a situation that appears to have caught the coalition government flat footed. The measures have however attracted the wrath of a section of the civil society which feels that the government is slowly turning the country into a caste society where the rich and the poor have distinct market outlets further widening the poverty gap.

Professionals in the agriculture sector have criticized the government's move terming it restrictive for free business and asked the government to divest from the business of cereal importation and allow the forces of demand and supply to dictate prices. Prime Minister Raila Odinga at his office announced the long awaited measures to the press.

The arrangement will only target genuine millers vetted by the Ministry of Agriculture in consultation with the Cereals Millers Association registered by the National Cereals and Produce Board (NCPB).

NCPB will purchase maize from farmers at KShs1, 950 per 90kg bag with immediate effect. No other individual or company will be allowed to purchase more than 10 bags from farmers as police have been instructed to be on the lookout for brokers and middlemen.

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