Puzzle of skyrocketing food prices in spite of cheap imports

National Assembly Trade Committee members inspect a shipment of rice at the KNTC warehouses. FILE PHOTO | POOL

Traders used the duty-free window to import in under six months quantities of rice equivalent to what Kenya normally ships in in a year, but still failed to cool the skyrocketing prices in the country.

Fresh data from the Kenya National Bureau of Statistics (KNBS) show that despite the increase in supply, retail prices of rice have barely gone down with a five kilogramme of the cereal nearly doubling from the beginning of the year.

Cheaper sugar and cooking oil imports also failed to soften food prices, raising fears that some stocks may have been hoarded.

In a rush to use the duty-free importation window opened by President William Ruto’s government, traders imported 701,743 tonnes of cheaper rice in the first half of this year, according to the official KNBS data.

The quantity of rice majorly imported from Pakistan and India, valued at Sh39.7 billion, is more than what the country imports in a year and points to possible flooding of the local market with a cereal that is grown in 23 counties.

Rice and sugar farmers are braced for cut-throat competition, with fresh data pointing to increased shipment of the commodities in the first half of 2023.

Read: May inflation climbs to 8pc on rising food, energy costs

In the review period, the country imported 211,006 tonnes of sugar valued at Sh16.4 billion. This is nearly 70 percent of what the country imports in a year.

However, retail prices of the sweetener have doubled in the past few weeks, with a Cabinet dispatch blaming it on acute cane shortage in the country.

Sugar prices have hit a high of Sh490 per two-kilogramme packet for the brand of Ndhiwa Sugar Company whose kilogramme currently retails at Sh250.

The government has since approved the extension of duty-free importation of sugar to bridge the supply deficit.

Dr Ruto said last week that Kenya would import 100,200 tonnes of sugar outside the Common Markets of East and Central Africa (Comesa) region following a shortage of the sweetener.

The country produces about 600,000 tonnes of sugar per year against an annual consumption of 800,000 tonnes.

However, inflation has since come down, with consumer prices rising at an average of 7.3 percent which is within the Central Bank of Kenya’s target of between 2.5 and 7.5 percent.

Prices of food items such as beans, potatoes, tomatoes and cabbages dropped in the month of July compared to June.

The national statistician has attributed this to better harvests due to favourable weather.

Manufacturers of edible oils have decried the shipment of palm oil, critical for the making of cooking oil, under the duty-free programme being undertaken by the Kenya National Trade Corporation (KNTC), which falls under the Ministry of Trade.

The duty-free scheme came to an end on August 6, in effect ending the free inflow of commodities that fell under the scheme including cooking oil, wheat, rice and beans.

The scheme was started last September by the government as a means to bring down the retail prices of critical staples and lower the cost of living.

Food prices were aggravated by a debilitating drought last year and the disruption of global supply chains due to the Russia-Ukraine war.

The data seen by the Business Daily also point to an oversupply of sugar and palm oil, another item that was exempted from import duty under the scheme that is being implemented by the Kenya National Trading Corporation (KNTC).

By the end of June, the country had bought 379,206 tonnes of palm oil, mostly from Indonesia and Malaysia, which works out to close to half of what the country shipped in last year.

The Kenya Revenue Authority (KRA) issued an exemption on duty to KNTC for the importation of 125,000 tonnes of cooking oil, 25,000 tonnes of rice, 80,000 tonnes of beans, 200,000 tonnes of sugar and 150,000 tonnes of rice.

Read: Inflation defies rising food prices to hit 16-month low

Seven companies were contracted for the importation of these food items, with Makram Imports and Export Limited being awarded a Sh1.88 billion tender for the supply of Indian raw white rice.

Dr Timothy Njagi, a research fellow at Tegemeo Institute, a public policy think-tank, faulted miscommunication among different State departments for the oversupply.

“Nobody monitors. Even the time of maize, it turned out that we over-imported,” said Dr Njagi.

At the same time, global supply shocks have increased the prices of Kenya’s critical staples, including rice, wheat, maize, sugar and onions.

Protectionist decisions in India and Eastern Europe to lock stocks of food within their borders are likely to disrupt the supply of rice and wheat into Kenya, even as poor weather hinders the supply of onions from neighbouring Tanzania.

Wheat prices are also likely to come under pressure after Russia, which is at war with Ukraine, recently pulled out of an agreement which allowed the export of Ukrainian agricultural goods via a safe channel through the Black Sea, putting Africa’s food security at risk.

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