Doubts over maize flour subsidy cost delays payments for millers

Maize prices

The State recently resorted to subsidising maize flour to keep the prices of the commodity low.

Photo credit: File | Nation Media Group

Mystery surrounds the maize flour subsidy that ended a month ago, with no confirmation on how much taxpayers have spent on the programme.

Although the Ministry of Agriculture has yet to release any official statement on the matter, some sources have indicated that Sh7 billion was spent on the programme that ended on August 20. Yet other sources in the ministry said the four-week subsidy cost Sh6 billion.

Commenting on the subsidy in his inauguration speech, President William Ruto said it had “gobbled up” Sh7 billion.

Even the amount owed to the millers who participated in the scheme seems to be a matter of conjecture. The firms have expressed concern about delays in settling their debt.

By the time the subsidy scheme ended on August 20, Sh3.5 billion had been paid to 119 millers from the Sh4 billion deposited in an escrow account opened at the Central Bank of Kenya (CBK) to run it. The ministry used Sh532 million to pay some millers’ debts owed since 2017 for a similar maize subsidy. However, ministry, senior government officials and insiders in the programme disagree on the exact amount owed to the millers.

“After completing verification of invoices submitted by millers this week, we identified that we owe them Sh3 billion. This is owed to 89 millers who were not fully paid and the ministry has requested the National Treasury for the funds,” a ministry official told the Nation.

A representative of the millers on the oversight committee that was formed to oversee the implementation of the subsidy put the figure at Sh2 billion.

“Our engagement with officials handling invoices at the ministry reveals that Sh2 billion remains unpaid to millers who supplied maize flour,” the source said. However, in an interview with local TV stations at the weekend, Deputy President Rigathi Gachagua said the Ministry of Agriculture had requested an additional Sh4 billion from Treasury for the subsidy.

These contradictions have the millers, mainly small and medium-scale firms, worried about when they will be paid, if at all. Their working capital has now been stuck at the ministry for four weeks. The unga subsidy was conceived shortly before the elections amid public protests at the high cost of living. However, its effect was limited by shortage of the subsidised flour as rogue traders hoarded it.

Crops Development and Agricultural Research Principal Secretary (PS) Francis Owino, who was in charge of the subsidy, has not offered any comment on the matter. Millers have complained that they have been sidelined as the PS has not been in contact with the subsidy oversight committee.

Sources from the committee said there had been a plan to hold a final meeting after the conclusion of the subsidy to assess its status, but the PS has been quiet.

The millers are worried about the fate of their payment due to the transition to a new government.

“Going by the statements the President and his deputy are making, we fear our payment could be delayed,” a source said.

Mr Gachagua appeared suspicious whether the amount constitutes legitimate bills, saying, the government will conduct its own investigations to ascertain the debts before settling them.

“We have to audit and confirm what happened. The bills must be interrogated, they must be verified, they must be inspected,” the Deputy President said.

“The working capital of many millers was depleted as they supplied the product expecting to receive payments within the agreed five days of submitting invoices,” Mr Antony Wambugu, a representative of small and medium-scale millers told the Nation.

The Cereal Millers Association (CMA) said its members who are owed are facing severe cash flow constraints and urged the ministry to pay up. CMA tried to hold out hope for the payments.

“We are still working with the government to expedite the remaining payments owed to our members. We cannot confirm the exact amounts as invoices are still being verified and validated and this process will be completed soon.”

“CMA is confident that the Ministry of Agriculture will release the remaining payments for verified invoices so that millers are able to continue milling,” CMA said last week.

Under the subsidy contract signed by millers, the Ministry of Agriculture was supposed to pay them after five days of submitting invoices, failing which millers would be allowed to sue it and recover interest and penalties.