Fertiliser subsidies are impoverishing farmers, claims global financier

Government-driven subsidies for fertiliser for large-scale producers, especially those who grow maize, are responsible for poor agricultural output, according to the World Bank.

According to the 2018 World Bank Kenya Economic Update, the subsidies only benefit wealthy farmers and companies that supply fertiliser, rather than small-scale farmers.

“Targeted input subsidy programmes that are able to raise smallholder crop productivity remain critical to raising overall productivity in the agricultural sector,” the report said.

“In Kenya, studies show that the current untargeted and regressive fertiliser input subsidy scheme, apart from being costly, disproportionately benefits large and medium-sized farmers and crowds out private investment in the purchase and distribution of fertilisers.”

MAIZE SUBSIDY

The report also painted a not-so-rosy picture of the maize subsidy, which it blames for further impoverishing small-scale farmers.

The subsidies, the report added, also hurt the consumers as it leads to high taxes.

“Studies show that price support to maize farmers is regressive as it benefits large and medium-sized farmers. The artificially higher maize prices, induced by the producer subsidy, also serves as a tax on consumers, including poor households, many of whom are net buyers of maize — the main staple food,” the update observed.

The maize subsidy, according to the report, would hamper one of the Government's ‘Big Four’ agenda items; food security.

ADVERSE INCENTIVE

The artificially high prices of maize, it said, create an adverse incentive structure, encouraging farmers to grow maize on marginal lands where drought resistant crops might have been more suitable, thereby depleting natural resources and compromising food security.

Despite being one of the signatories of the United Nations Malabo Declaration that required sub-Saharan Africa countries to commit at least 10 per cent of their budgets to agriculture, Kenya is among the countries that set the least amount of money to agriculture, with expenditures to the sector averaging two per cent.