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To export or not to export? Why question has plagued macadamia trade for years

By James Wanzala | August 30th 2016 at 00:00:00 GMT +0300

Macadamia

NAIROBI: Seven years is long enough for people to forget many things. However, the debate on macadamia trade has defied this test of time.

In 2009, then Agriculture Minister William Ruto declared the exportation of raw macadamia nuts illegal.

The idea behind this was to enhance the capacity of local nut processors, create jobs and help farmers earn more from the crop.

But the petition to review section 43 of the Agriculture, Fisheries and Food Authority Act 2013 (AFFA) to lift the ban on the export of macadamia is once more gaining momentum. AFFA introduced regulations to implement Mr Ruto’s ban.

According to those pushing for a reversal, the ban has hurt the once-lucrative crop. Farmers in Tharaka Nithi, Embu, Murang’a and Kirinyaga counties have protested over a lack of market for macadamia, which they say has been caused by the ban.

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The ban, which was extended to cashews, pistachio and oyster nuts, was driven by the idea that exports were denying local processors the opportunity to add value in processing and packaging the nuts.

It was argued that adding value would result in higher foreign exchange earnings that could be passed on to farmers, and create local employment.

MACADAMIA’S SIGNIFICANCE

When Dr Sally Kosgei replaced Ruto and temporarily lifted the export ban in May last year, she created a 90-day window to “facilitate the mop-up of excess raw nuts with farmers”.

But traders in the macadamia industry rejected the temporary window, saying it had come too late. They said they had already amassed enough stock for the season following a bumper harvest, and the remaining yield was not economically viable, in terms of quality and quantity, for export.

Macadamia is of significance to the economy as Kenya is ranked third in the world in production of quality nuts, after South Africa and Australia. The country’s climate favours the crop.

However, local macadamia has a low kernel recovery of 14 per cent, against Australia’s 32 per cent and the USA’s 30 per cent.

According to industry reports, with best practices, a single macadamia tree can yield up to 140 kilos of nuts. Yet, the average yield in Kenya is just 25 kilos.

Last year, farmers earned Sh2.5 billion from the crop, but with better agricultural practices, experts argue it is possible for earnings to double to Sh5 billion.

Critics of the ban add that it is has denied farmers the chance to profit from higher nut prices in international markets.

They also argue that since coffee earnings have been decreasing and macadamia output has been on the rise, the country should shift its focus and support to this ‘new green gold’.

Against this backdrop, Maragua MP Peter Kamande recently petitioned Parliament to reconsider the ban.

SPIRITED EFFORTS

In representing macadamia farmers seeking a repeal of section 43 of AFFA, Mr Kamande argued that the entry of foreign investors in the sector in 2014 and 2015 had led to a rapid increase in prices to Sh130 per kilogramme. Back in 2004, the nuts fetched Sh10 a kilo.

But despite the price hike, the MP said, the prices are still below what international traders offer.

Further, in supermarket shelves, processed and packed macadamia nuts retail at an average of Sh890 for a 500-gramme pack. This works out to Sh1,780 per kilo, creating a huge gap between what farmers earn and what consumers pay.

“The prohibition on the exportation of macadamia is making macadamia farmers in the country suffer, and the macadamia industry is on the verge of collapsing,” Kamande said.

According to South Imenti MP Kathuri Murungi, who supported the petition, macadamia is a viable option in regions where coffee thrives.

“Currently, coffee is on its knees. The only crop that has been assisting people where coffee is grown is macadamia,” said Mr Murungi, whose sentiments were echoed by Tongaren MP Eseli Simiyu.

Macadamia is grows in similar ecological zones as coffee, pays better and requires fewer inputs.

But despite the spirited efforts from lobbyists against the ban, players in the macadamia sector who are against a review of the Act still carry the day.

Parliament threw out the petition to have the ban on the sale and export of raw macadamias lifted. The House’s agriculture committee rejected the petition on the grounds that it is not in the interests of the industry.

It, however, recommended that the Ministry of Agriculture encourage the licensing of more nut processors in the market to encourage competition.

According to Charles Muigai, a consultant with Nut Processors Association of Kenya, the challenges and threats facing the crop need to be addressed first before the export ban is lifted.

He wants the Government to provide a million seedlings in the next five years to streamline the industry and position macadamia as a Kenyan brand.

He also rejected claims that the local industry lacks the capacity to process macadamia nuts locally due to financial constraints.

“The Government should instead address Chinese traders and their chain of brokers who perpetuate pre-mature harvesting and stripping of nuts from trees,” Mr Muigai said.

A field manager at Jungle Nuts added that his firm “currently cannot get enough nuts” and is ready to buy macadamia from farmers and pay instantly.

“I don’t need to belabour the benefits of processing within the country, like job creation and technology transfer. The most obvious gain to farmers, however, is the growth of the industry,” he told Business Beat.

VALUE ADDITION

According to Raymond Kahindi, the head of nuts at the Agriculture and Food Authority, there are 23 licensed processors in the country, with a combined processing capacity of 80,000 metric tonnes of nuts, against local production of 35,000 metric tonnes.

And there has been steady growth in local consumption of macadamia.

“We look forward to Government support in value addition, addressing taxation and costs of power, investing in physical infrastructure, and ensuring warehousing and information systems are available,” Muigai said.

Data from the sector shows that about 180,000 farmers are engaged in farming macadamia in an industry that employs about 13,850 people in activities such as industrial drying and cracking.

Jungle Nuts, for instance, says it has about 1,500 workers on its payroll at its factory, with 30,000 farmers connected directly to it.

Despite the challenges, Kenya’s macadamia production is expected to increase over the next decade. Embu County is the biggest producer of the nuts in the country, followed by Nyeri, Kiambu and Kirinyaga, with Laikipia offering seeds to farmers to grow macadamia. The bulk of the country’s macadamia trees were planted between the 1960s and 1980s.

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