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Kenya Background: Kenya has around 40 million inhabitants, and its main food crops are maize (production around 3 million tonnes according to FAOSTAT) and sugar cane (5.2 million tonnes), while pulses (600,000 tonnes), wheat (350,000 tonnes) and potatoes (about 1 million tonnes) are also significant. The main export cash crops are coffee, tea and fresh vegetables. Kenya is generally deficit in maize and beans, and supplements domestic supplies with imports from Tanzania and Uganda. When the maize deficit exceeds 300,000 tonnes or thereabouts, it normally imports from countries further afield, notably South Africa. The post-election violence of early 2008 and high fertiliser prices during the same year greatly depressed maize production in the grain basket of Western Kenya, and the deficit has had to be filled by imports exceeding 1.2 million tonnes between November 2008 and July 2009. There has also been a reduction in maize consumption adversely affecting nutrition. Government is expecting a similar large deficit in 2009/10 due to rain failure. Attempts to establish a regulated WRS have focused on maize, which has a less organised market than the main export crops, and is mainly produced by smallholders. Most maize goes for direct human consumption, about one third of this being processed by large-scale roller mills, mainly for consumption by better-off urban consumers, while small-scale posho mills (decorticators + hammer mills) handle the rest. TABLE 1: RECORDED MAIZE & BEAN EXPORTS TO KENYA & RWANDA in ‘000 tonnes Crop from to 2004 2005 2006 2007 2008 Maize Beans Uganda Kenya Tanzania Kenya Uganda Rwanda Uganda Kenya Tanzania Kenya 76 89 10 54 2 125 77 32 77 9 161 55 33 128 9 85 121 56 57 8 Average 53 100 85 85 74 41 107 84 3 6 Source: RATIN trade information service; this captures a large part, but not the totality, of the (mainly informal) trade flows concerned 30
Kenya is in some ways suited to follow South Africa’s example in organising market institutions, having: a large urban population; a significant commercial farming sector; an active Cereal Growers Association (CGA) that brings together large-scale producers and a core of commercially-oriented smallholders; large-scale and relatively quality-conscious food processors, and; a strong and innovative banking sector. Kenya moreover has companies like Lesiolo Grain Traders Ltd. of Nakuru, and Grain Bulk Handlers of Mombasa, that are already providing storage services to the public. The parastatal National Cereals and Produce Board (NCPB) has around 2.2 million tonnes in storage capacity, much of which is underutilised and could be leased or sold to commercial warehouse operators. However, public policy has proved something of a deterrent. Government intervenes in the maize market through NCPB and border controls, notably by lowering the rate of duty on imports from countries which are not zero-rated (notably South Africa). Intervention is largely driven by immediate political concerns, particularly during the last two years, as exemplified by the raising of producer prices prior to the December 2007 elections, and efforts to moderate consumer prices in late 2008, in the aftermath of the post-election deficit and high world food prices. The following account, from trade sources, describes the latter events. As the harvest approached, the market price was KSh 2,200 – 2,300 per 90 kg bag 18 , but Government then announced an NCPB buying price of KSh 1,950, stipulating that other parties could not sell above this price. It then announced that it would sell the grain it bought to certain millers at KSh 1,750 per bag. However farmers and traders would not deliver to NCPB, and simply sat on their grain or continued trading in a limited fashion. NCPB then imported from South Africa at a price estimated at around KSh 3,000 per bag and sold to the millers at KSh 1,750. Seeing that they were not going to work, Government dropped this set of policies in early 2009, eliminating a 50% duty on maize and allowing the private sector to import. The market price then stabilized at import parity levels. Overall, this has been a volatile policy environment which has not encouraged farmers to deposit their grains in public warehouses. The main initiative relevant to trade financing has been the establishment of the Eastern African Grain Council (EAGC), organised in the aftermath of the first African Grain Summit (held in Nairobi in October 2005), with the support of the US-funded RATES and the Kenya Maize Development Projects, COMESA and the East African Community. EAGC is a membership organisation, which aims to assist the development of the gamut of modern market institutions (including market information, grading, contracting/alternative dispute settlement, warehouse receipting and exchange trading 19 ), and to develop stakeholder advocacy in favour of market-friendly policies, including the facilitation of trade between countries of the Region and father afield. Its website www.eagc.org shows 54 members, of which 39 are ‘Active’ (farmers, traders or processors), 3 are ‘Affiliates’ (grain associations) and 12 are ‘Associates’ (bankers, input dealers, inspection companies). The breakdown of ‘active members’ by country is as follows: Kenya 22, Tanzania 9, Uganda 5, Zambia 2 and South Africa 1. Active members are divided into categories of producer, trader and farmer, 18 Note KSh 79 = US$ 1, hence KSh 2,200 - 2,300 per bag is about US$ 309 - $ 323 per tonne 19 There is already a Kenyan Agricultural Commodity Exchange (KACE), which currently concentrates on providing farmers with market information 31
Page 1 and 2: Review of Warehouse Receipt System
Page 3 and 4: CHAPTER 5: ALTERNATIVE APPROACHES F
Page 5 and 6: GLOSSARY OF ABBREVIATIONS Collatera
Page 7 and 8: SUMMARY Introduction The report is
Page 9 and 10: Category 3: Farmer-focused approach
Page 11 and 12: involvement in EAGC, its regional f
Page 13 and 14: Purpose and activities CHAPTER 1: I
Page 15 and 16: and ungraded, due to a chicken-and-
Page 17 and 18: CHAPTER 2: REVIEW OF INTERNATIONAL
Page 19 and 20: oversight system is funded by user
Page 21 and 22: Where implementation has failed or
Page 23 and 24: to the silo operator; or investors.
Page 25 and 26: CHAPTER 3: COLLATERAL MANAGEMENT AN
Page 27 and 28: CHAPTER 4: EASTERN & SOUTHERN AFRIC
Page 29 and 30: Malawi The main food crop is maize,
Page 31 and 32: Although the CECAM network has rece
Page 33 and 34: companies), who hold the processed
Page 35: curing companies), and the requirem
Page 39 and 40: to see it through its current initi
Page 41 and 42: decade 25 . The WRS Regulations of
Page 43 and 44: these are purely private initiative
Page 45 and 46: officials never accepted moving the
Page 47 and 48: eceipts, unreceipted third party st
Page 49 and 50: The networked MF system has certain
Page 51 and 52: TABLE 1: ALTERNATIVE APPROACHES FOR
Page 53 and 54: 3c. Technological improvements in r
Page 55 and 56: It is even more important to streng
Page 57 and 58: distrust of the unknown and interes
Page 59 and 60: FIGURE 2: CAUSE AND EFFECT IN THE D
Page 61 and 62: Of particular, but not exclusive, r
Page 63 and 64: BIBLIOGRAPHY Beaurre d’Augères,
Page 65 and 66: ANNEX 1: LIST OF PEOPLE INTERVIEWED
Page 67 and 68: South Africa - half-day meeting at
Page 69 and 70: ANNEX 2: ZAMBIA CASE STUDY Backgrou
Page 71 and 72: with other parties. USAID provided
Page 73 and 74: trading in the same, along South Af
Page 75 and 76: ANNEX 3: MALAWI CASE STUDY Backgrou
Page 77 and 78: uyers. The mere availability of mor
Page 79 and 80: operators who can offer a ‘one-st
Page 81 and 82: With this in mind the author has pu
Page 83: The CECAM (Caisses d'Epargne et de
Page 86 and 87:
TABLE 4.1: RATE OF PEPAYMENT BY CEC
Page 88 and 89:
duration of the loan; (b) by a tech
Page 90 and 91:
committee and carries out a classic
Page 92 and 93:
ANNEX 5: TANZANIA CASE STUDY Note:
Page 94 and 95:
While the Warehouse Licensing Board
Page 96 and 97:
which farmers in different district
Page 98 and 99:
TABLE 5.3: MAIZE & PADDY STORED, BY
Page 100 and 101:
Expenses directly related to storag
Page 102 and 103:
TABLE 5.5: FINANCIAL ANALYSIS OF ST
Page 104 and 105:
WFP’s involvement with ‘new mar
Page 106 and 107:
Work by David Tschirley (2009), of
Page 108 and 109:
ANNEX 7: QUESTIONS AND ANSWERS 1. W
Page 110 and 111:
and arbitrary basis, in order to me
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