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October 23, 2008

Kenya fertilizer subsidy stokes fears of smuggling

As Kenya rolls out the largest import programme of fertilizer in years, massive diversion of subsidised input into Uganda, Tanzania and Rwanda is now feared.

This comes hot on the heels of Agriculture Minister William Ruto’s announcement that the government was planning to import more than 150,000 tonnes of fertiliser to be sold to farmers at a 40 per cent discount. The exercise is expected to cost the government more than Ksh11 billion ($157 million).

Fertiliser stockists are predicting increased activity in diversion especially through the North Rift districts of Trans Nzoia and Uasin Gishu, which border Uganda and around the Tarime area on the Kenya-Tanzania border. Traders say that the quantities being imported could be enough to destabilise the fertiliser business in the region.

The smuggled fertiliser business is going to be lucrative, especially in Uganda where prices have shot through the roof — rising by over 105 per cent in recent months.

Smuggling has been rife at the Kenya-Uganda border. In June, police arrested a number of traders who were reselling subsidised fertiliser from the National Cereals and Produce Board (NCPB) at huge margins. More than 800 bags of calcium ammonium nitrate used for top dressing were recovered.

“It beggars logic to hear our farmers complaining about increased fertiliser prices and other farm inputs when they buy and then resell them,” said NCPB managing director Prof Gideon Misoi.

However, the executive director of Tegemeo Institute of Agricultural Policy and Development James Nyoro said offering farm input subsidies and distributing free fertiliser to small scale farmers is the best ways to reduce poverty and “kick-start” productivity growth. But he pointed out that such programmes are always bogged down by the problem of effective targeting and may in the long run stymie the development of sustainable commercial input delivery systems.
“Their potential benefits for farmers are also vulnerable to being dissipated by corruption and divisive political battles.”

Fertiliser smuggling has been a major problem in the region. A month ago, a Rwanda Ministry of Agriculture employee was arrested trying to sell two tonnes of fertilisers illegally.

According to Mr Ruto, more than 60,000 tonnes of the imported fertiliser will be sold to tea farmers in South Rift, Central and Eastern Provinces. He says the government is already in talks with a mining company in Kenya for the construction of a fertiliser company in the country. The African Development Bank has already shown its intentions to finance the construction of the fertiliser plant, which is expected to serve the East African region.

Currently, Kenya’s annual demand for fertiliser stands at more than 370,000 tonnes a year, with maize, coffee and tea consuming the better share of it.

The government move to massively import fertilisers is expected to drastically reduce prices due to importation of additional tonnes of fertilisers.

“We expect the price of CAN fertiliser to drop from the current Ksh2,200 ($31) to Ksh1,700 ($24),” Mr Ruto said.

Already, the Ministry of Agriculture has purchased more than 80,000 tonnes of fertiliser from the local market, which was expected to be distributed from last week to farmers through NCPB depots countrywide.

Farmers will pay Ksh4,000 ($57) for a 50kg bag of di-ammonium phosphate instead of the current market price of Ksh6,400 ($91).

Mr Nyoro has however criticised the move to have NCPB distribute them arguing “NCPB has played a very marginal role in providing fertilizer or credit for fertiliser since 1990 in Kenya.

A survey commissioned by Tegemeo Institute on fertiliser distribution in Kenya reveals that less than one per cent of small-scale farmers obtained fertiliser from government parastatals — mostly tea farmers through Kenya Tea Development Agency.

Meanwhile, Kenya has received Ksh840 million from African Development Bank to help lower the cost of fertiliser to farmers ahead of the short rains planting season.

The bank said the money will be used to buy and distribute fertilizers to farmers to ease their food production costs during the current cropping season.

The East African

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