Price controls, subsidies to worsen food supply

It’s a slippery path that many governments have taken to their ever-lasting regret. It usually starts off as a temporary measure to tackle rising prices for food, fuel and other basic commodities.

Prime Minister Raila Odinga and his Agriculture Minister, William Ruto, did not say it openly but the Kenyan government is now subsidizing foodstuffs.

Subsidies and price controls are used to calm a restive population from engaging in food riots. In some countries, food riots have toppled governments, hence the Kenyan leadership’s rush to re-introduce price controls and food subsidies.

Economists say that subsidizing food is the worst decision any government can make. It is not sustainable because food prices always rise as a growing population demands more food.

The Kenya government has announced two different prices for maize: one for the poor, the other for the middle class. The government will sell ‘government branded maize meal’ to the poor using a chain of government regulated retail outlets.

If there ever was a way of creating Zimbabwe-style shortages, this is it.

It gets worse: The government has instructed the National Cereals and Produce Board (NCPB) to buy maize at Kshs1,950 (US$25) a bag from farmers then sell to millers at lower rates. This means the government has to pay NCPB the difference. The decision was made after maize millers argued that they could not lower prices due to tight margins. With annual consumption of maize in Kenya in the millions of bags, the treasury must find hundreds of millions of dollars for the new subsidy.

The Kenyan government’s intervention will distort the food market to such an extent that the poor will be the biggest losers. There is no guarantee that only the poor will by the cheap, ‘government-branded’ maize. The nature of economics is such that entrepreneurs will strive to obtain the cheap maize at Shs52, then supply it to upper-income retail outlets at Shs72, thereby making a huge profit.

The poor will eventually realize that, while their shops are empty, the supermarkets of the upperclasses will be fully stocked. This is exactly the case in Zimbabwe, where government price controls have twisted the market into epic proportions. It is not that goods are not available in Zimbabwe, but nobody is willing to sell at the state-sanctioned rates. The black market has pushed inflation to world record levels.

With time, the Kenya government will find it impossible to sustain food subsidies. The millers will find it difficult to operate in a restricted market. Yesterday, the government banned millers from buying directly from farmers. Several millers may close shop under such a stifling business environment.

The supply of maize will get worse because a government-controlled distribution chain inevitably breeds corruption. Unlike a free market situation which is dictated by forces of supply and demand, a state-controlled supply chain will create opportunities for kickbacks, horse trading and extortion.

Creating two sets of prices for the same commodity is ill-informed decision making. Why should a supplier sell maize to the poor at Shs52 yet the same commodity can fetch Shs72 a couple of hundred meters away?

The government’s plans to launch ‘branded’ packets of cheap maize are likely to draw the wrath of the World Bank and IMF. In the early 1990s, the Kenyan government implemented the two institution’s recommendations to open up the economy following rampant inflation, shortages and corruption by officials who were supposed to supply the commodities. Since then, supply has been constant even though prices have risen.

In the 1980s, Kenyans had to walk long distances looking for maize, wheat and milk because price controls encouraged hoarding. A similar situation is in store for a population already used to the abundance of liberalization.

There are fears that a black market in maize and other food stuffs may emerge. A black market will fuel inflation and put food prices outside the reach of the majority.

Black markets are controlled by criminal organizations and groups like Mungiki will have a new source of income. At the same time, black markets are not subjected to quality standards and consumers will be exposed to poor quality and dangerous food stuffs.

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Discontent on the rise as greedy politicians steal state maize

Kenyan politicians have lost all shame as they out-do each other in squeezing the last drop of blood from the country’s long-suffering citizens.

It is now emerging that politicians and their allies are putting pressure on the state-owned National Cereals and Produce Board (NCPB) to stop selling staple grains to milling companies.

Instead, the NCPB is forced to sell to the politicians at low prices so that they can demand hefty profit margins from millers.

As a result, consumer prices for maize meal have risen from Kshs85 (US1.1) to Kshs120 ($1.5) within a week. The price increase is disastrous in a country where more than half the population is surviving on less than $1 per day.

Kenya’s supermarket shelves are empty, an eerie resemblance to the situation in Zimbabwe. As a result of this unprecedented state of affairs, massive discontent is brewing among the Kenyan populace, as a greedy ruling elite plots the next orgy of rape, murder and ethnic cleansing.

In recent weeks, Kenyan legislators and judges have resisted paying taxes even as manual labourers earning a few dollars a day bear the burden of financing a bloated 42 member cabinet.

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Below are excerpts of the story from the Daily Nation (click here for the full story).
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A racket involving senior politicians and businessmen has been blamed for the artificial shortage of maize and maize flour that has hit many parts of the country.

Investigations by the Nation indicate that the politicians have been buying maize from the cereals board and selling it to millers at exorbitant prices.

Letters from the Ministry of Agriculture are being used by the cartel to authorize the purchase of maize from the National Cereals and Produce Board. The cartel later resells the maize to millers at a higher price.

The shortage of maize has seen the price of the staple maize meal shoot from an average Sh85 a week ago to Sh120 for the two-kg packet.

Sources have revealed that those in the cartel, including a number of MPs, have made millions of shillings from the dubious deals.

On Monday, Prime Minister Raila Odinga held a crisis meeting with a Cabinet sub-committee on food security where they decided that middlemen be pushed out of the maize business.

Fears are also emerging that the cartel has been engaging in similar dealings for sugar and fertiliser, whose prices have been on the increase since the beginning of the year.

The politicians and businessmen are said to be buying a 90-kg bag of maize at Sh1,700 ($21.8) and selling it to the millers at between Sh2,200 and Sh2,700 ($28.2 – $34.6).

It is, however, believed that the politicians are not using their money in the shady deals. Instead, they have been acting as brokers. According to one reliable source, several associates of the politicians showed up three weeks ago at the cereals board depots with letters authorizing them to buy 25,000 bags of maize each.

After the dubious deal, each of the politicians earned between Sh12.5 million and Sh25 million ($160,000 – $320,000) depending on the price at which they sold the maize.

The price of maize flour has shot up by up to 50 per cent in the recent past to retail at Sh120. Millers have warned of an acute shortage of the product that was selling at between Sh80 and Sh85 only a week ago.

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Food, fuel shortages worsen Kenyan life

As though life for the ordinary Kenyan wasn’t hard enough, inefficiencies in government are causing shortages in maize, petrol and LPG gas.

What makes it painful is that the products are in the country but are unable to reach the shops thanks to political interference intended to create lucrative business opportunities for well-connected personalities.

Unreasonable taxation by the Kenya Revenue Authority has impeded the movement of fuel from the Mombasa port into the interior. The harsh measures are intended to increase government revenue and pay high salaries for the President, Prime Minister, Cabinet ministers and Members of Parliament.

At the moment, President Mwai Kibaki earns almost as much as US President George W. Bush even though Kenya is at the rear end in terms of economic, social and political indicators.

Kenyans will, thus, have to pay more for food and fuel because of an artificial shortage designed to line the pockets of a corrupt ruling elite already wallowing in ill-gotten wealth.

According to the Saturday Nation, maize millers are unable to obtain supplies from the National Cereals and Produce Board (NCPB), which is a state organization. The millers say they are forced to negotiate with brokers, who buy the maize from the NCPB then sell it to millers at 26% commission. The brokers are likely to be people with high level connections.

As a result, consumers are buying a packet of the 2kg Jogoo maize flour at Shs87 (US$1.2). With Christmas holidays just a month away and demand expected to soar, the price of maize flour is bound to break the Shs100 barrier. As always, the poor will be hardest hit. Consumer inflation will exceed the 31% recorded in the middle of this year.

The obvious solution to such a crisis would be to import from regional countries, especially Tanzania and Malawi. However, the Ministry of Agriculture is making it cumbersome to import foodstuffs, arguing that Kenyan farmers need to be protected. The gains of a liberalized market are slowly being reversed for the benefit of a few.

Shortages in LPG gas are inflicting major losses on hotels and restaurants. 5-star restaurants now resemble rural kiosks as they resort to using firewood and charcoal to prepare meals. Of course, the results are nothing to boast about and customers are turning away in droves. The use of firewood and charcoal is extremely expensive on a large scale. The gas shortage has been attributed to inefficiencies at the Changamwe Oil refinery and tax measures.

Interruptions in the supply of petrol have become alarmingly frequent in the past year. A decade ago, Kenya’s oil industry prided itself on its efficient distribution network that made it easier to buy fuel than to find clean water. That is no longer the case. Multinational oil companies, fed up with a short sighted government, are deserting the country.

In a move that only a Kenyan politician can dream of, the government wants to create a new oil monopoly in the form of National Oil Corporation of Kenya (NOCK). The government has 100% shares in NOCK and multinationals leaving the country are being pressured to sell to NOCK. It is feared that, in the next few years, shares in NOCK will be sold to highly placed individuals disguised as “strategic partners.”

At the same time, individuals close to the centre of power have their eye on departing multinationals. They took over the operations of Mobil Kenya by creating a new company called Oil-Libya. The deal was sealed following shuttle diplomacy between Kenya and Libya.

What does this mean for Kenyans? More fuel shortages and higher prices for the little that is available.

In addition to supply shortfalls in food and fuel, Kenya is currently experiencing shortages in electricity and water supply. Utility companies – all owned by the state – have failed to keep pace with a growing population. Industries are worst hit and must maintain expensive fuel-powered generators just to keep going. Now, even their generators may grind to a halt because fuel does not arrive on time.

Moi Day Special: Kenya’s second president

On the occasion of Moi Day, the Nairobi Chronicle recalls milestones of the Moi presidency. For better and for worse, Moi’s 24 year presidency will influence Kenyans for a long time to come.

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Daniel arap Moi. Picture by CNN.

Daniel arap Moi. Picture by CNN.

Whereas Mzee Jomo Kenyatta was a transitional leader, managing change from colonialism to African majority rule, Moi got into power when Kenya had become a truly African state. With time, Moi’s actions and policies came to resemble those of neighboring states from which Kenya had distinguished itself with its relatively sophisticated socio-economic and political structures.

Moi’s presidency was a contradiction of sorts: on one hand he craved the awe which Jomo Kenyatta got from the public. On the other hand, he wanted to be different from Kenyatta, by being more in touch with the average man in the village.

When he assumed the reigns of government, Moi started traveling in a Volkswagen Kombi, raising eyebrows. As it was argued, such types of conveyance are for ordinary folk, not for a President. However, Moi was determined to get his people. The Kombi was the only vehicle which could grapple with the country’s difficult terrain – dusty roads, hairpin bends, precarious cliffs, unbeaten tracks.

One time, while on his way from Kisumu to Nakuru, Moi expressed the wish to use a short-cut from Sondu through Sigowet to Kericho town. His aides condemned the route as impassable. “Are there people living in the area where this road passes?” he asked and declared he had to tackle the road, passable or otherwise.

After ascending to the presidency on 14th October 1978, Moi pledged to maintain the stability that Kenya had enjoyed since independence. He sought to assure apprehensive citizens, investors and diplomats that he would follow the footsteps of Mzee Kenyatta. But it soon became clear that Moi had his own ideas for the country. Whereas Kenyatta practiced a hands-off style of leadership, Moi preferred hands-on management. He famously said, “Those who want to lead the country must wait their turn … I am the President and every minister must sing like a parrot to my tune.”

While emphasizing national unity, Moi laid great emphasis on the need for dynamism in a globalizing world. Moi can be credited for introducing changes that would have been virtually impossible under the Kenyatta era. Moi’s critics say his initiatives were expensive experiments culminating in failure. However, Moi’s critics are mostly Kenyattaists and had they been in power, the country would have petrified in stagnation. The fact that some of Moi’s programmes did not succeed could be attributed to sabotage by Kenyatta loyalists inherited by Moi’s administration.

As president, Moi’s first decision was to release political detainees from the Kenyatta era. These were politicians, academics, university students and journalists detained for criticizing Kenyatta’s government. Several of them had been in detention so long that they were in a critical condition requiring advanced medical treatment.

During Kenyatta’s presidency, the civil service, security forces and state corporations came to be dominated by members of Kenyatta’s tribe, the Kikuyu. This was not a deliberate policy on Kenyatta’s part but a product of historical circumstances that placed the Kikuyu at an advantage in work skills and entrepreneurial ability. Moi set about creating ethnic balance in government organs by appointing more people from other communities. Eventually, Moi’s Kalenjin tribe dominated the civil service and this evoked resentment among other Kenyans.

Unlike Kenyatta’s appointees, Moi’s tribesmen had little training for their new jobs. Matters were worsened by Moi’s tendency of picking individuals from lowly positions, transforming them into overnight power brokers and later dumping them when they became too big-headed for their own usefulness. Because of this, Moi had neither permanent friends nor permanent enemies. He was loyal to nobody but himself – a true Machiavellian characteristic.

Moi’s most serious challenge was the coup attempt of 1st August 1982. The poorly planned coup attempt by junior officers of the Kenya Airforce was crushed by Army and paramilitary units within a matter of hours. However the coup is said to have awakened Moi to the risks of power and from that day onwards, he took on a higher measure of political self-preservation. After the coup attempt, the security forces were purged of Kenyattaists who were replaced by Moi loyalists. In subsequent elections, politicians whose allegiance was doubtful lost their seats through political machinations engineered by the President’s henchmen.

Between 1982 and the early 1990s, Moi was determined to keep a tab on the opposition and resorted to tactics varying from detention without trial, torture, electronic surveillance, intimidation and outright thuggery. There has never been any direct evidence personally linking Moi with any of these acts and its possible he was misinformed about threats to his administration.

Moi’s political maneuvres provoked a backlash against the ruling Kenya African National Union (KANU). Moi, eager to strengthen the party, had talked Parliament into enacting a constitutional amendment that made KANU the only legal political party. By the late 1980s there were demands for reintroducing multiparty democracy from the growing ranks of politicians seeking alternative avenues for contesting political office. Demands for multipartyism, coupled with pent-up frustration with Moi, led to riots in Kenya’s major towns in July 1990.

The riots were crushed; several dozen people lost their lives. International financiers and Western nations pressurized Moi to open up the political frontiers. Monetary assistance was scaled down – a devastating blow for a government that had 30% of its budget financed from foreign assistance. The international media went on a feeding frenzy and described Moi as a typical African dictator. In December 1991, Moi asked Parliament to amend the constitution and legalize opposition parties for the first time in ten years.

It would be another ten years before opposition parties could win power but only because Moi was no longer a candidate in the 2002 elections. Moi was unbeatable because his opponents often underestimated his intelligence by virtue of his rural-poor origins and heavily accented English.

Among the reasons Moi gave for opposing multipartyism was incitement to ethnic nationalism. Soon after the opposition was legalized, tribal clashes erupted in the Rift Valley and persist to this day. The clashes were sparked by Cabinet Ministers who declared the Rift Valley – Moi’s home province – out of bounds to the opposition. Ethnic groups thought to be sympathetic to the opposition were attacked by Moi’s Kalenjin tribe, houses burnt and farms forcefully occupied. The clashes caused major economic losses as property was destroyed, trading activities disrupted and agricultural production ruined.

Upon the re-introduction of multipartyism in 1992 until the close of his presidency in 2003, Moi stopped being development conscious. Moi devoted his time and energies exclusively to politics because of legalized competition for his job. Political intrigues intensified as politicians sought presidential patronage – and the cash that went with it. Financial scandals became routine in Moi’s government throughout the 1990s as his cronies devised means of acquiring wealth in the shortest possible time.

Moi turned state functions into full time campaign rallies and these were held, not only on weekends, but at anytime during the week. Cabinet ministers and members of parliament, eager to win the favor of the president, tagged along wherever he went. The result: possibly one of the longest Presidential motorcades of an African president. A typical motorcade accompanying Moi consisted of at least 50 limousines with cabinet ministers, heads of state corporations, security chiefs and several diplomats.

Among the notable successes of the Moi presidency was reform of the education system. By the early 1980s, a Canadian educationist said that education should stop producing white-collar graduates. The educationist said the future of labor was one of uncertainty, making it necessary to equip graduates with practical skills that are easily transferable across different work environments. Despite criticism, Moi went ahead and implemented the recommendations.

School children were introduced to home science, business education, agriculture, arts, crafts and music. In high schools, students were taught power mechanics, electricity, accounting, metal work, carpentry, social ethics and sex education. Today, education experts acknowledge the wisdom of imparting practical skills on children, in a world where retraining and career shifts has become the accepted norm.

During Moi’s presidency, thousands of schools sprang up across the country while four additional public universities were built to create a skilled work force.

Regardless of what is said about Daniel arap Moi, the former teacher, legislator, cabinet minister, President and Member of Parliament has left his mark not only on Kenyans but also in international affairs. He initiated peace efforts across Africa most of which were successful. These include Namibia’s independence, Uganda’s civil war negotiations that began the Yoweri Museveni era and the Southern Sudan peace process. Moi’s advice was greatly sought by world leaders such as US President Ronald Reagan, British Prime Minister Margaret Thatcher and Chancellor Helmut Kohl of West Germany.

Moi’s presidency began in 1978 with a promise to follow the footsteps of Mzee Jomo Kenyatta. It can be said that Moi fulfilled his ambition of becoming a defining standard. “President Moi has made his own footprints in the sands of time,” said Mrs Thatcher.

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With references from Lee Njiru’s article: “The Making of a President.” Kenya Times, December 11, 1997
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Police death squads exposed in Mungiki war

A government human rights body has implicated Kenyan police in the abduction, torture and execution of at least 500 young men. Scores of others arrested from their homes cannot be found.

In its report, the Kenya National Commission on Human Rights says that top political leaders working with police commanders were aware of the death squads. Last year, Cabinet minister John Michuki, predicted that there would be “many funerals” of Mungiki members.

The report further accuses police officers of kidnapping, torture and extortion on the pretext of anti-Mungiki operations. For the unfortunate victims, payment of a ransom was no security against death. The commission has documented cases where individuals were hunted down and killed after paying ransom.

Mungiki, popular with disillusioned youth from the Kikuyu ethnic group, is calling for a return to traditional African spirituality. It despises Christianity as a colonial religion. In the teeming slums of Kenya’s cities and in rural squatter settlements, Mungiki has grown by providing casual jobs, protection, housing and other social services.

The Mungiki are calling for a generational change in Kenya to pave way for youthful leadership. According to Mungiki, Kenya’s current leaders are remnants of, “colonial home-guards.”

Since its beginnings in the 1980s, the group’s membership has grown to the lower millions. It has become a formidable political and quasi-militia force that has drawn the wrath of State security machinery. Kenya’s government declared war against the group in mid 2007.

The Kenya Police force, however, faces little condemnation for its actions. The ethnic affiliation of Mungiki has spawned fear of Kikuyu nationalism in the rest of Kenya’s tribes, especially after political and ethnic clashes earlier this year. Consequently, there has been no criticism of police tactics against Mungiki.

Mungiki’s leader and founder, Maina Njenga, is serving a five year jail term on weapons and drug possession charges. Mr Njenga says police falsified the charges against him. After his arrest, the state turned Mr Njenga’s mansion in Kitengela into a, “police station.” Kenyan police rarely confiscate property from criminal suspects.

Earlier this year, Njenga’s wife, Virginia Nyakio, was abducted, raped and beheaded by persons believed to be working for the state. Within a few days, two top officials of the Kenya National Youth Alliance – Mungiki’s party – were gunned down by unidentified people along the Nairobi – Naivasha highway. The two were on their way to see Mr Njenga in prison. One of the dead was a brother to Virginia Nyakio’s driver. According to eye-witnesses, the gunmen in the daylight shooting first identified themselves as police.

Mr Njenga has vowed not to allow the funeral of his murdered wife until the government drops all charges against him. Her body has been lying in a morgue ever since.

In April, Mungiki engaged riot police in national demonstrations to protest constant killings. Railway lines were uprooted and national highways blocked. The violence ended when Prime Minister Raila Odinga offered to negotiate with them. Police withdrew from Maina Njenga’s mansion in an apparent goodwill gesture from the government. Television footage showed the building suffering from extreme vandalism. Apparently police officers lit cooking fires on the living room floor.

The report by the Kenya National Human Rights Commission accused police of using unmarked vehicles to abduct Mungiki youth, most of whose bodies have been found in woodlands outside the capital city. Police deny they are involved in the killings. However, in parts of Central Province and in the slums of Nairobi, young men live in fear of abduction.

Public opinion in Kenya is split between those calling for dialogue with Mungiki and those insisting on tough measures. Majority of Kenyans associate Mungiki with extortion, crime and murder.

Numerous scholars and journalists have attempted to analyze Mungiki. The explanations of the Mungiki phenomenon are as varied as the number of papers and press articles about the group.

However, all agree that the Mungiki is a product of a dysfunctional society and without a change in the way Kenya is governed, Mungiki is likely to become a much bigger and dangerous phenomenon.

Munyes destroys NSSF goodwill

Within a month, Labour Minister John Munyes has single-handedly laid to waste NSSF efforts to redeem its image.

A consistent public relations campaign by NSSF (National Social Security Fund) in the past several years had succeeded in changing Kenyans’ perception of the state-controlled pension fund.

By the middle of this year, NSSF was winning awards for good performance. For the first time in history, the Fund published its financial reports in the press. Also for the first time, an Annual General Meeting was held, bringing together workers, trade unions, the government and the media. In short, the Fund had recovered from the legacy of past corruption.

Then along comes John Munyes. With one sweep of his ministerial powers, Munyes has sucked NSSF into the political black hole. Since dismissing Managing Trustee Rachel Lumbasyo, and replacing her with an acting Managing Trustee, things have changed at NSSF. Decision making has been hindered as two antagonistic camps have emerged within the Fund.

Politicians have joined the fray as billions of shillings contributed by Kenyan workers present easy pickings. Not forgetting the possibilities of jobs for relatives and lucrative procurement tenders.

The ODM-PNU coalition tussles have reared their head at NSSF as either side is claiming the post of Managing Trustee as its fair share of the 50-50 Grand Coalition deal.

This month alone, NSSF has received lots of damaging publicity thanks to Munyes. As any marketing strategist will tell you, it takes a long time to build trust but only a few minutes to tarnish a reputation.

By the mid 1990s, NSSF was virtually bankrupted by extortionist deals made by well-connected personalities. Individuals would use their proximity to President Daniel arap Moi to get public land almost for free. Within days, the same plots of land would be sold to NSSF for hundreds of millions of shillings. Considering the political climate at the time, NSSF had little choice over the matter.

That explains why NSSF ended up purchasing abandoned quarries at Embakasi. However, the Fund managed to sell the plots to city residents eager to invest in housing.

Prominent lawyers made millions of shillings by providing legal services to the Fund. Whether by design or accident, the lawyers were assigned cases related to fellow well-connected individuals, mostly from Moi’s KANU party.

During the late 1990s, with the Fund facing a financial crisis, the government decided to employ professional managers in a bid to secure workers’ contributions. Individuals such as David Masika and Jos Konzolo played a key role in stabilizing NSSF finances. From the year 2000 until the present moment, there was a dramatic reduction in financial scandals at NSSF. The only major scam was a Shs250 million deposit with Euro Bank which led to the dismissal and prosecution of former Managing Trustee Ben Mtuweta.

With time, NSSF has improved its payment record and retirees get their cash within days from district offices. Information Technology capacity has been enhanced, though there’s room for progress.

The Fund’s financial situation is vastly improved with steady income from its investment in shares, real estate and government securities. NSSF is a significant shareholder in Kenya Power & Lighting, National Bank and other well-known companies.

Recruitment for a new Managing Trustee is underway but with the Labour Minister itching to exercise his powers, whoever gets the job will continually be seeking approval before making key decisions.  For millions of Kenyan workers painstakingly saving for retirement, developments at NSSF cannot be good news.

The fall of Thabo Mbeki

Many within the African National Congress (ANC) believed that Thabo Mbeki was an inveterate plotter, and they had the scars to prove it. Now he has been made to pay the price.

The former South African president’s alleged role in plotting against Mr Jacob Zuma, his former deputy, was the last straw.

While serving as deputy president under Nelson Mandela, it was Mr Mbeki who chaired the key committee that negotiated the controversial $5bn (£2.7bn) deal to modernize the country’s defence force.

Read more on Thabo Mbeki from the Famous people news magazine >>