Maize millers are now demanding to be paid Sh2.57 billion arrears owed by the National Treasury from the month-long maize flour subsidy introduced last year.
Former President Uhuru Kenyatta introduced a short-term maize flour subsidy programme that was implemented between July 21 and August 17, 2022.
Under the programme, consumers were to purchase a 2-kilogramme packet of maize meal at Sh100 instead of the prevailing price of Sh210 in a move that was aimed at easing negative consumer sentiment over the high flour prices that had hit a historic high of Sh230.
The millers say they sold flour worth Sh4.34 billion but were paid only Sh1.76 billion leaving an outstanding balance of Sh2.57 billion.
The millers under their umbrella body, the Cereal Millers Association (CMA), now want the Treasury to settle the arrears arguing that some 1,207 invoices from the millers have already been verified to ascertain the authenticity of the sales.
In the subsidy deal, the government signed contracts with a total of 129 millers, including 27 members of the CMA, as part of its efforts to cushion consumers against the high price of maize flour.
“The CMA has been in communication and is still consulting with the Treasury and other relevant government ministries to address all matters related to the maize subsidy program and is urging the Government to pay millers their outstanding amounts, to enable them to buy adequate quantities of raw material to ensure food security during these difficult climatic and economic times,” said the millers.
The subsidy was introduced amid a significant increase in the cost of maize flour which was primarily due to the severe drought that impacted the East Africa region affecting local maize production.
Further, a global shortage of non-GMO maize resulted in a sharp rise in the price of a 90kg bag of maize grain from Sh3,000 to as much as Sh6,800 leading to the high price of maize flour.
The maize subsidy payment was part of the Sh60.12 billion that the government spent on subsidies for fuel, electricity, fertilizer, food, and other commodities in six months to cushion consumers from a high cost of living.
The half-year spending was more than double the Sh22.23 billion that the National Treasury had budgeted to spend on giving consumers a temporary buffer between high commodity prices in the full financial year 2022/23.
Data from the Treasury shows that the government had spent Sh43.91 billion between July and September before the expenditure rose by Sh16.21 billion between October and December to Sh60.12 billion.
However, the crucial subsidies may not be around for much longer as the government races to withdraw them arguing that subsidies can only support production but not consumption.
“As we finalise the budget for the FY 2023/24 and the medium term, I wish to emphasize that the economy is operating under tight fiscal constraints,” said Treasury Cabinet Secretary Prof Njuguna Ndung’u.
“This has warranted tough choices including suspension of subsidies on fuel, electricity, and food to ensure that scarce resources are directed towards priority areas of socioeconomic transformation while ensuring that debt levels are sustainable,” said Prof Ndung’u.