Faces of the coin that the Unga subsidy is.

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 With the government’s subsidy on maize flour in place, ugali sosa is set to make a comeback, much to the delight of many Kenyans. However, the move has elicited vociferous debate, on social media platforms with a section of Kenyans terming it to be a political move now that we are on the cusp of the general elections, while others query why the government couldn’t have intervened much earlier. The bottom line however is, if it happens that on your next visit to kwa Mathe the first ugali serving does nada to calm the pangs of hunger, you can afford to say “Mathe, leta sosa!” without batting an eye lid.

In the previous week’s post, I had opined that instead of using price controls to check the rising costs of living, as a section of Kenyan tweeps were earlier clamouring for, the government should instead use subsidies to lower the prices of key food commodities. Considering that ugali is a staple in the diets of many Kenyans, the move to subsidise its retail prices is laudable. There’s a caveat however nay, caveats.

One of the downsides of this subsidy is the fact that it ignores equity. The subsidy saw the price of a packet of 2kg maize flour drop to sh 100 up from sh 205. While this is a sigh of relief to Kenyans in urban areas who buy packed maize flour, what happens to the rural poor (which is the most vulnerable group) who buy maize and have it grinded to flour at a kisiagi? The connection here being the fact that, the jump in the prices of unga stems from a decrease in maize supply which has forced prices to go upwards. So, while the price of packaged maize meal has gone down, the subsidy does not tilt the price of a gorogoro of maize for the rural poor.

The success of such a subsidy depends on effective implementation by the government. How this subsidy business is supposed to go is; the government gets millers to sign up for the subsidy programme - by end of Wednesday, data from the Ministry of Agriculture showed that 70 millers had signed up representing 80 per cent of millers- upon agreement on the prices, the government deposits money for the subsidy programme into an escrow account. Presently, according to Cabinet Secretary for Agriculture Peter Munya, the government has already made an initial deposit of sh 8 billion. The amount deposited into the escrow account is expected to cover the difference between the subsidized selling prices and the market prices before the subsidy. The mechanics of the fuel subsidy which has been in place since late last year work much in the same way as that of the maize subsidy. However, a delay in payments by the government to the stabilization fund in April this year saw major oil marketers hoard their stocks leading to an acute shortage. This is a situation that could befall the maize subsidy if the government is not keen to play its role. Given that we are talking about food here, a staple in most consumer households for that matter, one would hate to imagine the ramifications if government reneges on its payment to the subsidy.  

The move by the president to make the subsidy programme indeterminate pre-empts the danger that millers might hoard stocks in anticipation of higher prices once the timeframe for the subsidy elapses. That said, it should be understood that subsidies are only stop-gap measures, we therefore ought to pursue long-term solutions to the perennial maize shortage problem. Agricultural policy experts advise that the government needs to wean maize farmers off rain dependency, a coordination of subsidy programmes – the government has been at fault for double subsidy that is, subsidizing both farmers and consumers which ends up putting inflationary pressure on consumer prices, and a clear, coherent and timely plan on maize importation to cover the deficit

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