Op-Ed: Kenya – Kenyatta takes the wind out of opposition sails with maize subsidy

by Jared Jeffery and Jacques Nel, NKC African Economics 0

On Wednesday, May 17, the government’s subsidised maize flour (locally referred to as unga) became available in supermarkets at KSh90 for a two-kilogramme pack – down from KSh150 previously – just in time to halt opposition momentum on the issue of rocketing prices on the campaign trail. Customers are limited to two packs each.

Prices of milk and sugar have also become a concern for the public and import duties have thus been removed for milk powder and sugar in addition to maize.

Minister of Agriculture Willy Bett announced on Tuesday, May 16, that the government would subsidise maize to the tune of KSh6.5bn. This amounts to around 44% of the cost of a 90 kg bag of maize to millers – selling imported maize that costs KSh3,600 per 90 kg bag to millers for KSh2,300 (locally-produced maize reportedly costs KSh4,620 per 90 kg).

The subsidy is expected to stay in place until the end of July – elections are scheduled for August 8.

The rising cost of food has threatened to give the opposition the boost it needs to take President Uhuru Kenyatta’s Jubilee Party (JPK) on on the campaign trail after a late start due to wrangling over who would head its alliance.

On May 14, presidential candidate for the opposition alliance, the National Super Alliance (Nasa), Raila Odinga tweeted “We have heard your cries. The cost of living has become unbearable. Just 86 days na mambo yatabadilika [and things will change].” But with the government’s maize subsidy, things have changed sooner and the wind has been taken out of the opposition’s sails somewhat.

With this being said, the latest polling data from Radio Africa Group, published in The Star, shows that Mr Odinga’s support has increased since March.

The poll showed that 40% of respondents would vote for Mr Odinga compared to 24% in March.

While this appears to be a big bump in his numbers, it should be kept in mind that he was only formally announced as Nasa’s flagbearer in April, so the increase was expected as previously-undecided voters waiting to hear who would head the opposition threw their support behind him – the proportion of undecided voters dropped from 20% in March to 10% in the latest poll.

Mr Kenyatta, meanwhile, saw his support drop slightly from 51% in March to 49%.

Polling by Ipsos in February had indicated 47% of voters would cast their ballots for Mr Kenyatta and only 30% would choose Mr Odinga, but again that was prior to the latter being announced as the opposition candidate.

 

The maize subsidy is only the latest in a number of developments Mr Kenyatta hopes will improve his chances – including abolishing fees for title deed searches, cutting duties on vehicle parts to boost employment in the automobile industry and paying government doctors the salaries that had been withheld during their 100-day strike.

On May 1, he announced that the minimum wage would go up 18%.

The largesse can be expected to continue right up until polling stations open – much to the dismay of those keeping a wary eye on the country’s budget deficit.

Fiscal policy remains a concern in Kenya, with the government attempting to reconcile an ambitious infrastructure investment programme with fiscal consolidation efforts.

While the 2017/18 budget proposal is generally considered a departure from recent expansionary budgets, with official projections putting the 2017/18 budget deficit at 6% of GDP compared with government expectations of a 9% of GDP deficit this year, the expenditure profile will see a significant transition away from development spending towards recurrent spending – a reduction in development spending while maintaining an elevated recurrent expenditure bill is not the ideal form of fiscal consolidation.

Government finances will remain a salient source of macroeconomic risk due to the inability to hit fiscal targets and the numerous channels for potential fiscal slippages.

The devolution process remains a concern, and the upcoming elections could hamper efforts to improve government financial management, delay fiscal consolidation plans, and potentially lead to perceptions of political instability – thus increasing borrowing costs and perhaps necessitating a reorientation of spending.

In February, Ipsos’ opinion poll showed that the high cost of living and corruption were considered the most serious problems facing the country.

Since then, food prices have increased sharply and the US has cancelled aid to the health ministry citing worries over corruption – graft in the health ministry is closely linked to Mr Kenyatta due to his sister and cousin being accused of unfairly benefitting from government contracts in the ‘HealthGate’ scandal last October.

This would suggest that the opposition would have the upper hand in campaigning.

However, voting in Kenya traditionally runs along ethnic lines rather than reacting to issues. Furthermore, what the recent maize subsidy clearly illustrates is the advantage of incumbency that Mr Kenyatta enjoys.

Next month he is expected to cut the ribbon on the Mombasa-Nairobi line of the Standard Gauge Railway – a great photo opportunity for his campaign.

Another significant factor aiding JPK is that voter registration in its strongholds was higher than in the opposition areas.

Thus, we still believe Mr Kenyatta is the favourite to take the election.