The Future of Smallholder Farming in Eastern Africa - Uganda ...

Lack of capital and credit hampers the entry and expansion of private trade. It affects
transport operations, storage capacity, and the general efficiency of the entire maize
marketing system. As Jones (1998) has observed, the limited capacity of the small-scale
private sector to deepen and expand its operations beyond small-scale processing and
assembly, wholesale, and retail activities points to the need for effective systems of credit and
input supply, as well as market regulation to promote supply of public goods such as
information and contracts. This is a key policy issue that has emerged across a wide range of
countries. Credit, therefore, is a critical area of public support. The state must take into
consideration the particular needs facing the large number of small-scale private sector
participants by, for instance, designing group lending schemes.
3.3.6: Government Policy
This section considers the role of the government in facilitating private maize trade, the role
of the NCPB in a liberalized market, and the problems associated with actions of government
that traders have been facing in the liberalized maize market.
Apart from the itinerant open-air maize traders who pay a market fee to the local authorities,
maize traders and processors are required by law to have a trading license. The fee paid to
acquire a trading license varies depending on the scale of business. Small-scale traders pay a
license fee of approximately KSh. 500 per year, whereas the large-scale maize traders and
processors pay more than KSh. 10,000 every year. Traders perceive the trading license
requirement as an impediment to entry and expansion in the maize trade. Many small traders
consider licenses costly and difficult to obtain owing to opaque requirements. Not only must
traders go through a cumbersome bureaucracy, but also often have to bribe officials in order
to acquire the license. The licensing procedure needs to be simplified and requirements
publicized to ease the licensing process.
3.3.6.1 Traders Perception of the New Role of NCPB
Before the reforms in the cereals sector, the bulk of the marketed maize surplus in Kenya
went to the NCPB. This study seeks to determine whether the private traders understand the
role of the NCPB under the new marketing arrangement. About 78 percent of the sampled
private traders said that they know the role of NCPB in the post-liberalization era. Of the 176
respondents on the question “What are the roles of NCPB in maize marketing” about 55
percent said that under liberalization it is supposed to act as a buyer and seller of last resort,
and about 45 percent saw it as a body that is supposed to maintain strategic maize reserves.
On the question of whether the private traders find the NCPB an impediment to their
participation in maize trade, 70 percent did not see it as an impediment, 24 percent saw it as
an impediment, and 6 percent reserved their comments. Those who saw the NCPB as an
impediment to their maize trade argued that the NCPB does not pay promptly for maize
delivered. Also its requirement that maize of high quality be properly dried with a moisture
content of less than 13 percent is perceived as very stringent.
We also asked traders how famine relief maize, given out by the government and other food
relief agencies, affects their maize trade. Seventy-two percent of the sampled respondents
reported no effect, whereas 28 percent talked of some negative effects , such as increased
cheap supply that depressed prices. In some instances the relief maize is clandestinely
diverted to the market, once again maize prices to decline. Relief procurement procedures
should be restructured to give farmers the opportunity to sell surplus to the relief agencies for
subsequent delivery to deserving areas when needed.