The skyrocketing food prices and the electioneering environment that Kenyans find themselves in presents an opportunity to have an important national debate that has been ignored for quite a while, the role of government in the economy.
Last week the government issued a 6 billion shilling subsidy to maize millers. This subsidy intends to bring the price of unga to the below market price 90 shillings per 2-kilogram packet.
In the same week, Mumias sugar was seeking 3.4 billion in bailout funds from the Treasury. In the last two years, the Kenyan government has sunk over 3.1 billion shillings in Mumias to stabilize the sugar miller.
At some points in time, the government has caved into protests by maize farmers in North Rift and purchased bags of maize at prices above market prices. There was also the 1 billion shillings for Miraa farmers in Meru.
Well, this habit of government subsidies on various facets of the Kenyan economy should stop. These subsidies are not only a reward for inefficiency, but also allow the government to pick winners and losers in the market place.
Right, now there is discontent that grain millers are laughing all the way to the bank, the argument is that the 6 billion shillings in subsidies is more of subsidy to the millers than it is on consumers.
It is no surprise that the word “cartel” is being bandied around. Every economic malaise that happens in this country is blamed on “the cartels.” So much so that a Nairobi gubernatorial candidate is running on a platform of dismantling the cartels. This is not surprising at all; the structure of the economy and governance as is, allows cartels to play a disproportionate role in the country’s economy.
See, cartel is another word for “crony.” Cronies being individuals that receive preferential support from the government.
Herein lies problem, because the government’s hand is in almost all sectors of the economy, politicians in government can either choose the cartels they like or cartels can align with politicians they like. In either situation, everyone else save for the cartels and the politicians are losers.
For example, a 2013 Presidential Taskforce on Parastatal Reform identified at least fifty-five commercially oriented government owned entities. These government entities are in sectors as diverse as energy, agriculture, and many others.
These fifty-five entities deny would-be legitimate business to thrive, whereas at the same time allowing well-connected cartels to prosper at the expense of the entire economy.
Whereas a case could be made for some strategic government agencies, the same cannot be said of others. Some government run agencies bring entire industries tumbling down to the mud with them.
In the sugar sector, for example, it would be foolhardy to expect private millers to compete with inefficient and over subsidized state millers, with no other motive other than rewarding politicians and their cronies.
The same Parastatal Reform Taskforce revealed the National Produce and Cereals Board makes loses, year in year out. Now, the NCPB is in charge of Kenya’s now synonymous Strategic Grain Reserve. The rather important responsibility of stocking the country’s food produce rests with the Strategic Grain Reserve. It is rather imprudent to leave the important task of feeding a nation on a loss-making enterprise.
Nations have been feeding huge populations without subsidy and Kenya should be no exception. Besides, greater government control in agriculture quite as disastrous, as evidenced in the great Chinese famine in the late 1950s and early 1960s.
The politicians have lost the plot and the argument. The most important thing during this subsidy debate seems to have been whether the ship set sail from Mexico or Durban. Shouldn’t the debate have been about reducing input costs and increasing yields in maize and other agricultural production?
The important question during this election ought to be, whether Kenyans want more government inefficiency running or ruining their lives, and not the daily dose of theatrics that Kenyan politicians deliver without fail.