What you need to know:
- Importers will only place firm orders once the relevant duty free Gazette Notice is in place.
- Depending on the inevitable congestion such bulk imports result in, the process could take two to three weeks at best.
- The price of white maize in the world market has risen since we last imported in 2017.
The announcement by Mr Andrew Tuimur, the Chief Administrative Secretary in the Agriculture ministry, that a duty free window for the importation of up to 12.5 million bags of maize is to be implemented is exceedingly welcome.
However, it is long overdue and the delay may well result in increasing shortages and escalating prices until the first few shipments arrive.
For Mr Tuimur to say the importation should be underway by the end of the month begs the question of when imports will actually arrive.
Let us look at the modalities and timelines. Importers will only place firm orders once the relevant duty free Gazette Notice is in place. Apart from welcome surplus maize from Tanzania, the bulk of our imports will have to come from countries like Mexico which have surplus of white maize.
That will take around five weeks to arrive in Mombasa. Then the maize has to be offloaded, cleared through the port and transported upcountry. Depending on the inevitable congestion such bulk imports result in, the process could take two to three weeks at best.
That means an overall lead time that takes us up to the end of August. If we have one month’s stock left, then supply shortfalls will be underway as we get into next month and prices will gallop upwards.
What the government as a whole must urgently address is the facilitation of the import process from beginning to the end: gazette notice licences and relevant import documentation; port clearance and so on.
What is commendable about the government’s decision this time around is that it is not going to be the importer, just the facilitator. Remember Kenya imports the bulk of its maize and rice needs so there are a number of importers and millers who have the relevant expertise and capacity to handle maize imports as well. This is all the more reason the government must go out of its way to facilitate the importation for the importers.
Are we likely to land up with too much cheap maize in the market which could jeopardise or undermine the domestic maize producers? The answer is largely in the negative for two reasons.
First, the landed cost of duty free imported maize will be in the same price range as domestically produced maize. The price of white maize in the world market has risen since we last imported in 2017.
Secondly, the private sector players are much better judges of the market and will import to satisfy the demand equation. It does not pay to import more than is needed.
There is one exception that should be mentioned. The landed cost of the 2.5 million bags of yellow maize for animal feed will be cheaper than that of white maize. This will be highly beneficial to the animal feed industry and should result in reduced prices for the relevant meats.
In conclusion, this move is welcome, but should have come a month ago. The delay could result in a painful time for consumers especially as we get into August. When it does arrive, it will help plug the demand and supply gap that will be with us until the next main crop comes in hopefully in December.
Better late than never!
Robert Shaw is an economic and public policy analyst. Email: email@example.com