Greedy traders, rich farmers fight for control of NCPB billions

On April 17, the National Cereals and Produce Board (NCPB) carried a small advert in the local dailies. Few readers noticed it. Even fewer appreciated its enormity. But a scandal was brewing.

NCPB, the Government’s store for maize and wheat, was offloading 653,496 90-kilogram bags of maize to millers at a price of Sh2,300. This, said the NCPB, was part of a “grain refreshing exercise.” Perhaps it was, perhaps it was not.

But it certainly was a smoking gun to the frothing rot at the Government’s store. When it exploded, about four officials including NCPB’s Managing Director Newton Terer were out of work. Regional managers at Nakuru, Eldoret and Kisumu also went home.

The conspiracy of silence that bound greedy brokers, connected large-scale farmers and corrupt officials at the NCPB could not hold. One of the parties to this scheme- a skewed scheme that benefits the rich at the expense of thousands of poor smallholder farmers, had been slighted.

It all started last year, or in late 2016, when the skies refused to open. A crippling drought that depressed harvests for the better part of 2017 saw the Government throw open the country’s borders, allowing for duty-free entry of white, non-GMO maize from as far as Mexico, South Africa and Uganda.

According to official figures, between April and December 2017- the period when the maize subsidy programme was implemented - some 15 million bags of maize valued at Sh39.6 billion was imported taking up all the space in the 39 NCPB depots around the country. The uptick was unprecedented.

“During the review period, the quantity of maize imported increased almost nine times due to reduced production of maize, in the country,” said Kenya National Bureau of Statistics (KNBS) in The Economic Survey 2018.

Maize production declined by only 2.4 million bags, and the Government must have accurately projected this when they unveiled the subsidy programme.

“Through monthly county field reports as well as field assessment by national government, a shortfall of five million bags of maize was projected for importation by May 2017. The importation would be required up to end of August 2017 when early harvest crop is expected, especially from parts of Nyanza, Western and South Rift Regions,” said the Ministry of Agriculture in a report to Parliament.

The Government did extend the subsidy window to December, expecting an additional 3 million bags to be imported.

Although most of the imported maize was absorbed by millers, a good chunk of it remained in the Government stores. Experts have questioned the validity of these figures as given by KNBS but signs of a maize glut were unmistakable.

As soon as the subsidy programme came to an end, it was the turn of local farmers to take their produce to the Government stores. Spurred on by an irresistible offer of Sh3,200 per bag from the Government, large-scale farmers loaded their produce onto trucks, others hired more lorries and went round mopping up much of the harvests from their poor neighbors who had no muscle to reach the nearest NCPB depot.

Meanwhile, a few opportunistic brokers, not registered with NCPB, hastily crossed the Kenya-Uganda border to Western Uganda where they snapped up any grain of maize they could lay their hands on.

Of the total cost of maize purchased by NCPB, Sh376.8 million of Sh3.5 billion payments had failed vetting and was not supposed to be paid, according to an audit. Despite not being registered, their maize was accepted, faster and furiously than that of registered farmers with title deeds or leasehold.

Most of the depots, already filled with maize from Mexico and South Africa, were fast running out of space. But the queues outside of the 39 depots around the country were getting longer and longer. NCPB panicked. They needed to create more space if they were to avert any fall-out.

NCPB enticed millers with a price of Sh2,300 per 90-kilogram, an attractive offer reminiscent of that of the subsidy period- only now the deal would be even sweeter for millers as the cap on the price of maize flour had been removed. The Government had fixed the price of a kilogram of unga at Sh47 while that of two-kilogram was Sh90.

Millers, reasoned NCPB officials, would be enticed by the decent margin as they would be buying cheaply and selling expensively. Unfortunately, the scheme floundered. Millers were not interested. They already had more than enough stock of imported maize in their stores.

Kenya Farmers Association Director Kipkorir Menjo, says that a cornered NCPB is only going after “well-off” Kenyan traders who have perfected the art of doing business. These traders, says Menjo, hire lorries, then bought maize from small-holder farmers and sold it to NCPB. “The real cartels,” says Menjo, “imported maize last year between October and December, 2017 from Mexico.”

Menjo’s narrative that the Government is targeting genuine local traders is the defense of the mother of three daughters accused of supplying maize worth Sh600 million to NCPB without the right documentation.

“I delivered part of the maize from the 1,600 acres I tilled last year, then as a businessperson, farmers who had lined up for weeks as they waited to get to the stores approached me and I started buying their maize because many needed money for school fees and other commitments,” said Victoria Rotich, the mother of Celestine Chepchirchir, Caroline Chepchumba and Rodney Kimutai. They were each paid Sh333 million, Sh96 million and Sh2.2 million, respectively, according to the audit which showed their status as traders and not farmers.

Players in this sector are also not buying into the narrative that it is the maize from Uganda that is distorting the market. “Traders have been getting maize from Uganda. It is not so significant to distort the market,” says Menjo, insisting that beneficiaries of imported maize who have already been paid, are the problem.

Millers, however, have been quoted saying the Government was yet to pay them for the maize imported under the subsidy programme. Before paying about Sh1 billion, millers had put the money owed them from supplying maize under the subsidy scheme at Sh4 billion.

Timothy Njagi, a research fellow at Tegemeo Institute, an agricultural policy think-tank affiliated to Egerton University, feels that the current NCPB structure “creates a huge incentive for corruption.”

Dr Njagi explains that because the Government is always giving a price that is higher than the market price, it creates a situation where everyone wants to cash-in, including those who are not farmers.

He does not understand why the Government has not been keen on changing this structure. “Why doesn’t the Government, for example, want to buy directly from farmers?” he wonders. “There is no political goodwill to try and change the current structure,” says Njagi, noting that the subsidy programme has failed to live up to expectations.

Throw-away price

Even as large-scale farmers and traders continue to fight for the billions from NCPB, smallholder farmers who make up about 80 per cent of the country’s total supply, the poor remain onlookers not benefiting from both subsidy of fertilizer to ease their cost of production or their harvests fetching better prices as one given by NCPB.

A report on cost of production done last year by Tegemeo Institute, found that for small scale farmers who cultivate less than 10 acres of maize, their production costs are high not only because they have not commercialised their farming activities, they also buy fertiliser expensively from the market and sell their maize, at a throw-away price, to traders.

Large scale farmers with at least 50 acres, with a highly mechanised farming, they get subsidised fertiliser from the Government and sell their maize to NCPB and millers. “The present NCPB structure does not even benefit ordinary farmers,” says Njagi.

President Uhuru Kenyatta last year allocated the NCPB a massive Sh6.5 billion, kicking off a mad-rush that saw everyone want to supply the Government. Dr Njagi says it creates the notion that the Government is about to mop up every maize from the market. Some farmers believed the Government was supposed to pay them about Sh3,600 for a bag of maize.

The current system, says Dr Njagi, creates a culture of dependence. For example, last year, even when the rains had started, most farmers delayed planting as they waited for cheap fertiliser from Government. “The Government has to choose whether to subsidise from the production side or market side,” he said. “Or they can subsidise consumers, which is easier to implement,” said Njagi.

The internal auditor at Ministry of Agriculture has recommended for stern action to be taken against those guilty of wrong-doing.

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