Determinants of the Maize Milling Firms’ Decision to Import or Purchase Locally Produced Maize in Kenya; A Bivariate Probit Analysis

Abstract

Cyclical shortages in the supply of maize in Kenya have significantly affected operations of commercial maize milling firms in the country, forcing some to shut down. Most of the firms have been compelled to import maize from other regions, which is expensive. A dilemma therefore arises among the firms whether to import maize or use domestically produced maize and which alternative best maximizes their incomes. This study aimed to assess the determinants of the maize milling firm’s decision to import or use locally produced maize. A total of 106 commercial maize milling firms that produce packaged maize flour were surveyed. Data collected was analyzed using Bivariate Probit model. Results indicate that employee skill level, average sales per month, licenses, government subsidies and purchases through NCPB were significant in influencing both the firm’s decision to use locally produced maize only and the decision to use both locally produced and imported maize. Daily production capacity was found to influence the firm’s decision to use locally produced maize only but had no significant influence on the decision to use both locally produced and imported maize. Based on the findings, the study recommends that micro, small and medium milling firms be sensitized to adopt advanced milling technology in their operations. Further, commercial maize milling firms should build the capacity and skill set of their employees through on-job training, employee workshops and performance appraisal programs. This will enhance production efficiency and enable firms increase their production capacity and purchase more maize from both local and import sources.

Keywords: Maize milling, Bivariate probit model, Maize, Import, Kenya

DOI: 10.7176/JESD/15-7-03

Publication date: July 30th 2024