Cereal Millers Association : Maize Allocation - The Facts

In response to an article appearing in the Sunday Nation on 14th December, 2008 'Millers make millions as Kenyans starve', our clarification is as follows:

'Min of Agriculture virtually giving 400,000 bags of maize, bought at taxpayers' expense free to a cartel of millers. 400,000 bags were to go to contracted millers to make the cheap flour'.

A statement released by the Prime Minister on 1st December 2008, directed the NCPB to release 1.2m bags of maize immediately to registered millers at Kshs 1750 per bag in an endeavor to reduce the price of maize flour within 5-10 days.

Due to time constraints the allocation committee comprising SGR trustees (PS Finance, Special Programmes & Agriculture), millers and the NCPB made a decision to immediately release and allocate 400,000 of the 1.2million bags to available millers. Of the 400,000, only 58,631 bags were allocated to toll milling at Kshs 200 per bag.

The balance 341,369 bags of maize, was sold at a price of Kshs 1750 per bag to the millers who would use this maize for their branded products and sell at Kshs 65 per 2kg pkt ex-factory.

There is no milling cost paid to mill this maize.

'Four millers so far are contracted to mill maize on the Government's behalf and give it back for distribution.

In the interim, the Government identified 8 millers with substantial milling capacities to contract mill in Nairobi and Thika as there was insufficient maize quantities at other NCPB depots in the country. The millers are Unga Ltd, Uzuri Foods Ltd, Mombasa Maize Millers (Nrb), Pembe Flour Mills, Kabansora Millers, Nairobi Flour Mills, Chania Flour Mills and Capwell Industries.

The Government was to introduce contract milling to other parts of the country once adequate maize supplies had been received.

'They will be paid Kshs 80 million for the job'.

The Kshs 200 per 90kg bag paid to the miller for contract milling is lower than village posho mills who charge Kshs 270 to mill a 90kg bag and whose production cost is significantly lower.

Cost of milling 58,631 bags for the Government would be approx 11.8 million shillings.

'the by-product makes up to 15% of every bag. For 400,000 bags, that would make 60,000 bags and 'in theory' translate into a Kshs 54,000,000 extra income for the millers'

The bran portion is 15% of the maize and is sold at a price of Kshs 10 per kg of bran, working out to approx Kshs 7.9 million for the 58,631 bags.

Journalistic prudence warrants the verification of facts before making unsubstantiated claims. The toll milling agreement was negotiated after careful consideration of all the facts and figures in the presence of the Prime Minister, Minister for Agriculture, PS Office of the Prime Minister, PS Agriculture, PS Special Programs, PS Finance, MD NCPB, Cereal Millers Association as well as representatives of individual millers.

To claim that all of the above jointly conspired to defraud the taxpayer and to assert that millers are making profits of Kshs 1.4 billion is not only ludicrous, it is unfair and undermines the efforts of all who have worked tirelessly to reduce the prices of maize flour to benefit the consumer.

Diamond Laji
Chairman - Cereal Millers Association - 16 Dec 2008

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3 Responses to Cereal Millers Association : Maize Allocation - The Facts

Anonymous said...

The facts are simple!!! Mombasa Maize Millers + Pembe + Atta form a milling cartel which controls 75% of Kenya's milling industry. All one has to do is take the the cost of wheat imported and the cost of wheat sold on the shelf to arrive at a close approximation of the Milling Cartel's profit margins. The millers enjoy profits margins of well over 150% while Kenyans starve!!!!! Kenya must break this milling cartel!!!! President Kibaki, where are you? Please investigate this milling cartel that is artificially keeping prices high and systematically starving Kenyans!!!!

Saggaf said...

What makes you say that these three companies are milling cartels?you think its just the difference of the cost and the price of the maize only?then your wrong,very wrong these companies are trying their best to reduce the prices for the benefit of mwananchi!! Some are fighting to bring down the costs by removing the monopoly enjoyed by Grasin bulk to create a competition that shall see the production costs go down.Bravo Pembe, MMM and Atta. These are the companies that take Kenyans into consideration.

Anonymous said...

Arriving at profit margin through a difference between cost of wheat (grain) and cost of wheat (flour) sold on the shelf shows a complete lack of basic understanding of pricing. Anonymous should know that several things occur between wheat grain arriving at Mombasa port and flour in a packet in your local Nakumatt or Tuskies. First of all wheat (grain) attracts import duties, customs charges and port charges - Wheat (grain) then needs to be transported to the mills - the miller then has to mill the grain (it doesn't just happen without costs, milling is energy intensive - try milling 1 kg of wheat grain and you will know!), not all wheat grain gets converted to flour, at best 100Kg of wheat yields 77Kg flour - it then needs to be packaged and then distributed to wholesale and retail outlets. Wholesalers and retailers each have to keep a margin, they are not operating the shops as charities. So please get your facts correct, the truth is millers in Kenya make at best 2-3% net profit margin on wheat flour. It is a high volume low margin business.