By John Oyuke

The Government is just one step away from fixing the perennial fertiliser shortage.

In a new policy, Government is seeking to attract investors to manufacture fertiliser locally in a bid to safeguard to food security.

It is estimated that Treasury spends close to Sh18 billion annually to import up to 500,000 tonnes of fertiliser. Moreover, farmers are said to have lost a cumulative Sh60 billion in over charge costs in the past five years.

A senior ministry of Agriculture official, who declined to be identified, said Government is analysing a feasibility study and interim reports on the study on local fertiliser manufacturing.

According to the official familiar with the development, the final report was to have been released before April 30 this year.

“A feasibility study on local fertiliser manufacturing has been conducted and a draft report on the same is being discussed,” a Senior Researcher at Tegemeo Institute, Egerton University, Francis Karin says.

The three-tiered report, dubbed ‘Streamlining of fertiliser cost and feasibility study’ looks at various options — including purchasing and supply chain improvements, blending as well as local manufacturing.

But even if the project takes off, this would not be the first time Kenya has tried its hands at setting up such a factory.

Kenren

The first attempt was in 1975, when the Government entered into a joint venture with N-Ren, an American firm, to set up KenRen Chemical and Fertilisers Ltd at the Coast.

KenRen was to manufacture fertiliser for domestic and export markets. It signed financing agreements with Austrian and Belgian banks and suppliers, with the Kenya Government as guarantor. The suppliers never delivered any equipment “except for some crates whose contents were not verified.” 

Three years later, the project collapsed, KenRen went turned out to be one of Kenya’s most enduring scandals. The Government, as a guarantor, became responsible for the debts, which have been the subject of investigations and heated debates in Parliament.

The rationale for building a local factory stems from the constant complaints by farmers over the high cost of fertiliser, which cuts into their revenue and reduces output.

But even with the renewed efforts, experts are now warning that the high cost of fertiliser is far from over. James Nyoro, an agricultural economist with interest in food security says the fact that the production of fertiliser would depend on imported raw materials means the sticky issues of pricing will remain.

“The tricky part in establishing the fertiliser plant is that it will have to rely on imported raw materials whose costing is beyond the control of any domestic policies,” Nyoro says.

“As long as we are importing some raw materials, we might not be able to bring down the prices as fast as we may be hoping,” he said.

While lauding efforts to set up a fertiliser factory, Mr Karin said such a move is only advisable if it can help reduce price of fertiliser.

“Before setting up the factory, Government must establish the viability of the venture in terms of access to raw materials,” he says.

“The expertise to run the factory in a sustainable manner and in a way that ensures returns to investment must be carefully considered.”

Regional approach

He called for regional approach to the problem of fertiliser supply and pricing.

“Partnership among Eastern African countries will be key to setting up a viable fertiliser factory,” Nyoro said.

“As it is, deposits of raw materials required for fertiliser manufacturing are scattered across borders and no single country in the region has adequate deposits of all the raw materials.”

Demand for fertiliser has been on a steady rise — outstripping supply — as more people take up farming. This situation has led to pricing problems, especially for a majority of the small-scale farmers.

A recent study by Tegemeo Institute shows that the average distance farmers travel to reach fertiliser retail shops declined from 8km in 1997 to 3km in 2007.

According to the study, this points to growing private sector involvement in importation and supply of fertiliser deep into agricultural villages.

However, the supply of the commodity in recent past has often been manipulated to push price upwards.

John Mututho, chairman of the Parliamentary Committee on Agriculture believes local farmers are paying the price of corruption as syndicates in Government fiddle with the supply of fertiliser.

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.

Added up

“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,” he said in a recent interview.

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.