By Kenneth Kwama

Local farmers are paying the price of corruption as syndicates in Government corridors fiddle with the supply of fertiliser.

Fertiliser is now retailing at three times the acceptable international prices — thanks to a conspiracy involving policymakers and a web of cartels.

The twin vices have colluded to keep the price of fertiliser sky-high even when global prices are favourable.

The country spends close to Sh18 billion annually to import up to 500,000 tonnes of fertiliser and it is estimated that farmers have lost a cumulative Sh60 billion in over charge costs in the past five years.

Fertilisers used in the country are procured from several parts of the world depending on global market prices and financing arrangements.

A large proportion of the imports come from Russia, Romania, Ukraine, Middle East, and South Africa. New sources of special fertilisers for horticulture are India, China and Singapore.

Parliamentary Agriculture Committee chairman John Mututho says committee members stumbled upon the sad facts while on a visit to Russia and Ukraine — two of the largest suppliers of fertilisers used in Kenya, in 2009.

"We realised that if all costs were added up and businesspeople allowed respectable margins, a bag of fertiliser then retailing at Sh6,000 per bag of 50kg could actually cost no more than Sh2,000," says Mututho.

According to Mututho, procurement of fertiliser in Kenya has been marked by short-term political focus and a bias in favour of traders’ interests.

The traders have historically wielded influence over Government and policymakers and as a result of the fiasco, farmers have been paying higher prices than necessary.

While acknowledging that there is a problem in fertiliser business in the country, Mr Saulo Busolo, a director at Kenya Sugar Board (KSB) says despite the shoddy deals, there has been no shortage of fertiliser in the country.

"What has happened is that poor farmers are unable to access fertiliser because of the high prices," says Busolo.

Fertiliser sales are seasonal with close to 90 per cent of sales occurring between March and April each year.

This explains the recent standoff over fertiliser that was being held at the port of Mombasa.

The consignment was held following a dispute reported to the Public Procurement and Oversight Authority (PPOA) by a leading fertiliser dealer, Mea Ltd.

The Authority has since ruled over the matter although it acknowledged irregularities in the award of the import tender by the National Cereals Produce Board (NCPB).

Public interest

It allowed Export Trading Company to proceed with the importation citing public interest.

The ruling has since been criticised by MEA, saying the fact that the tender was found to be have been awarded irregularly is reason enough to cancel the whole process.

Di-ammonium phosphate (DAP) fertiliser accounts for roughly 30 per cent of total consumption. Its cost including freight (CIF) has increased from a mean of Sh13,861 per tonne during the early 1990s, to Sh20,501 per tonne during the 2002-2005 period.

The cost has continued its upward mobility and the same now goes for between Sh26,560 and Sh30,000.

Some of the largest importers of fertiliser in Kenya are Kenya Tea Development Authority (KTDA) that supply their members, most of whom are small-scale farmers participating in tea, coffee, and sugarcane out grower schemes.

The large volume of fertiliser imported annually into the country is divided among large and small merchants then sold loose in small packages or large packs from one kilogramme up.

It is believed that the fertiliser merchants have divided the market through collusion with suppliers who are also farmers or government officials. The collusion is said to have affected all types of fertilisers used in the country.

"Some of the farmers who buy fertilisers are actually traders. There is nothing wrong with a trader who is trying to make a few shillings by selling fertiliser. What we ought to be addressing are our procurement laws, which I believe are partly to blame for the current quagmire," Busolo says.

Spiralling fertiliser prices are being attributed to the presence of the fertiliser cartels that are collectively working towards increasing the prices.

The economic theory in the mix is that in order to maximise their profits when the chips are down, cartels must collude. They have also divided the market and restricted output in order to manipulate prices.

Food security

Mututho says there is need for Government to keep a closer look at the sector to protect farmers and guarantee food security.

The increasing influence of cartels has made it harder to make them accountable, since they lobby support from policymakers.

As a result, the consumer and new entrants to the industry have been affected by malpractices.

In 2009, President Kibaki said DAP fertiliser would be sold at a reduced price of Sh2,500 while CAN fertiliser was to retail at Sh1,650 per 50kg bag from a high of Sh6,000.

It is for this reason that the Government took over procurement of 40 per cent of the national fertiliser requirement valued at Sh6.2 billion, excluding tea fertiliser that was bought by KTDA for Sh1.6 billion.

In total, the Government and KTDA procured 163,000 tonnes of fertiliser that year.

Both Agriculture minister, Dr Sally Kosgei and the NCPB Managing Director, Dr Gideon Misoi, said distribution of the fertiliser begins today although it will still not be sufficient to satisfy the country’s needs.

Other traders have embarked on importation of fertiliser although this is not expected to change the situation much.

Last week, a ship christened MV Crux shipped in about 30,000 tonnes while another vessel, MV Thebes, is expected to deliver 23,719 tonnes of fertiliser this week.

The on-going manipulation of fertiliser prices flies in the face of concerns raised over the failed bid to construct a fertiliser plant.

Taxpayers have been repaying billions of shillings towards a non-existent Ken-Ren fertiliser company debt. By 2015, the country will have repaid Sh5.1 billion to a project that never took off.

The Ken-Ren fertiliser factory was a joint venture entered into in the mid-1970s between the Government and a now bankrupt America firm known as N-REN Corporation, to form a local company registered as Ken-Ren Chemical and Fertiliser Company at Changamwe, Mombasa, to manufacture fertiliser for domestic use and export.

Original loan

It was to be located near Kenya’s oil refinery and would use the refinery by-products to manufacture fertiliser. But the deal turned sour when the American partners turned out to be fraudsters.

The original loan of Sh350 million has attracted huge interest rates yet there is nothing on the ground to justify payments.

Mututho says the Government should seriously consider negotiating with the project initiators so that the remainder of the huge interest accrued on the loan is cancelled.

He says Kenya seriously needs a fertiliser factory because the commodity is fundamental and key to achieving good food security status.