State to Sell Cheap Goods in Shops via Sh24bn KCB Deal

In an effort to reduce living expenses, the State has obtained support from the KCB Group in the amount of Sh24 billion for the importation of inexpensive commodities to be distributed through 120,000 stores.

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 nation 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 government 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 a 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 stabilisation,” Pamela Mutua, managing director at KNTC.

“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.

In order to cut down on the lengthy value chain that ultimately drives up the price of the products, the State agency will sell these commodities straight to the stores that have been identified with the aid of three distributors.

Technology companies Twiga Foods, iProcure, and Market Force are among the distributors. According to Ms. Mutua, the three companies were chosen due to their extensive distribution footprint and last-mile delivery expertise.

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, the Kenya Revenue Authority granted KNTC a tariff exemption.

This is in addition to the prior tariff exemptions that were granted in November of last year for 100,000 tonnes of sugar, 100,000 tonnes of rice, and 900,000 tonnes of maize.

Letters of credit eliminate the need for upfront payment by KNTC by allowing the State to pay suppliers after recovering cash from corner shops.

In November, the Cabinet gave its approval to use a “government-approved bank” to get financing for the importation of the necessary commodity.

Letters of credit and comfort to suppliers are expected to generate fees for KCB.