State steps in to sell cheap goods in shops amid high cost of living
State steps in to sell cheap goods in shops via KSh24bn KCB deal amid high cost of living in the country
State steps in to sell cheap goods in shops via KSh24bn KCB deal amid high cost of living in the country.
In an attempt to lower the cost of living, the government has obtained support from the KCB Group in the amount of Sh24 billion for the importation of cheap foodstuffs to be distributed through 120,000 shops.
Kenya National Trading Corporation (KNTC), a state-owned company, announced on Wednesday that it had obtained a letter of credit from the bank to support the duty-free importation of 100,000 tonnes of household goods.
A letter of credit is a guarantee that a seller will receive payment from a buyer on time.
It has identified 120,000 retail locations across the country where low-priced imported items would be stocked as the government works to reduce the cost of living, which in February drove inflation to 9.2 percent.
With the state stepping in as the de facto controller of the cost of necessary commodities, the import scheme aims to pressure other producers into lowering their prices for fundamental goods.
In an effort to control the escalating cost of items on the shelf—which has seen a two-kilo packet of sugar sell for Sh312 and the same amount of maize flour go for Sh200—the KNTC will establish the retail pricing of goods including cooking oil, sugar, rice, and beans.
“The RRP (recommended retail price) will be managed by supply and demand forces. This will not collapse the market but increase competition. It will also ensure other traders manage their pricing achieving the overall objective of price stabilization,” Pamela Mutua, managing director at KNTC, told the Business Daily on Wednesday.
“We have been financed by KCB 100 percent and we are still in talks with the other international banks for more support,” said Ms. Mutua, adding it has opened talks with the Egyptian Bank Afreximbank and Trade Development Bank for financing.
The State agency with the help of three distributors will sell these commodities directly to the shops that have been mapped out, reducing the long value chain that eventually makes the goods expensive.
The distributors include technology firms Twiga Foods, iProcure, and Market Force.
Ms. Mutua said the choice of three companies is based on their vast distribution coverage and experience with last-mile delivery.
The Kenya Revenue Authority 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.
Under letters of credit, the State will pay the suppliers later after recovering cash from the corner shops, avoiding the need for upfront payment by KNTC.
The KNTC used to thrive and only had relevance in the ‘70s and ‘80s when Kenya was still under the regime of the command economy, price controls, and foreign exchange allocation committees.
At least seven companies have been contracted by the KNTC to import various duty-free commodities, including fertiliser.
Ruto’s plan to end fuel monopoly hits first hurdle after oil marketers challenge his deal
Former Treasury CS Ukur Yatani responds to 15B looting claims, implicates DP Gachagua
Senate ratifies new plan to compel US to compensate victims of 1998 Nairobi bomblast
However, questions have been raised about how the agency contracted the seven firms.
Fears abound in Parliament that there was no competitive bidding as provided for under the Public Procurement and Asset Disposal Act and that the contracts were simply dished out to favoured entities.
A document filed in the National Assembly shows that the KNTC has contracted Multi Commerce FZC for Sh8.12 billion to supply vegetable oil and Indian white rice.
Standard Petroleum won a KSh5.5 billion deal to supply rice, red kidney pinto beans, cooking fat, and fertiliser.
Lamar Commodity Trading will pocket Sh2.7 billion to supply NPK fertiliser (quantity is not stated), while Charma Holdings Limited has a KSh2 billion tender to supply edible vegetable oil.
The others are Makram Imports and Export Limited with a KSh1.88 billion tender for the supply of Indian raw white rice, Shehena Company Limited to supply jerry cans of edible oil at Sh1.33 billion and Nutrivine Sh187.5 million to supply rice.
State estimates show the cost of basic food commodities will decrease by at least 30 percent under the duty-free import scheme.
Also read,
Kenya? President Suluhu chides East African country ‘begging’ her for forex reserves
Ruto’s first strike at Kenyatta’s business as he suspends importation of milk powder
Petroleum Outlets Association responds to claims of fuel shortage
Follow us
