Regulation alone not the answer to poor crop performance

Regulation alone not the answer to poor crop performance

Kenya News

Production and marketing of some key crops shaky despite many governing laws

Your favourite breakfast beverage is likely made of products from the most regulated agricultural produce in Kenya.

Sugarcane, tea, coffee, Irish potatoes, millet, maize, rice, sorghum, and wheat, defined by law as scheduled crops, require compulsory certification throughout the crops’ value chain, according to the Crops Act of 2013.
Since independence, various Acts of Parliament have controlled the planting, processing, importation, handling, and sale of sugarcane, tea and coffee. These crops accounted for the highest production in 2018 of 5.3 million, 493,000 and 36,800 tonnes, respectively.

However, with the production and profitability of the three constantly plummeting, there is little to show for the controls.

While sugar is the most regulated crop, with the law mainly defining directives on roles of out-growers, pricing, registration of millers and rights of growers, coffee leads in the number of prohibitions and restrictions with 11 laws. All phases of coffee production have a clause limiting dealings to registered individuals or companies. The restricted aspects include planting, importation, purchase, storage, processing pulp, transportation, marketing, branding and uprooting the crop. Each of these steps requires either a licence of operation from the Coffee Board of Kenya (CBK) or notification to the local co-operative society.

In 2001, Parliament repealed the Coffee Act Cap 333 and enacted the Coffee Act No. 9 of 2001, establishing the CBK as a statutory body under the Ministry of Agriculture, solely to regulate the coffee industry.

Before 2001, the CBK served as a regulator and the sole marketing agent for all the coffee in Kenya. The Coffee Act of 2001 liberalised the industry and limited the CBK’s mandate to regulation and on the other hand created new laws for managing marketing agents. Currently, there are two marketing systems, the auction system offered by the Nairobi Coffee Exchange (NCE) where coffee sales follow competitive bidding, and direct sales where marketing agents negotiate with buyers outside the country and register sales contracts with the CBK.

Under the Coffee (General) Regulation of 2015, the Coffee Directorate has the responsibility of developing and promoting a coffee certification policy of Kenyan coffee in consultation with county governments and coffee growers.

All the certification schemes operating in the industry are required to register with the directorate for vetting and approval. There are six primary coffee certification and verification standards set by the International Federation of Organic Agriculture Movements (IFOAM) that apply in the country. Certification standards mainly seek to protect the soil and health of plants in order to ensure such resources can be utilised by future generations.

Small-scale growers form 450 co-operative societies and grow 60 percent of Kenya’s coffee. The industry contributed, on average, 60 percent of the country’s foreign exchange earnings in 2002 before it fell to 25 percent. The slump prompted liberalisation of the market and further controls to sustain the export market. Coffee fetched Sh23 billion in 2018, a small growth from Sh19 billion in 2014, according to the Economic Survey 2019. However, production volume has continued to drop despite the statutory changes introduced in 2002, as shown in the diagram below.

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Following the upsurge of coffee theft in 2016, Parliament amended the Crops Act to require millers to obtain insurance against theft of coffee in their possession. Compliance with this statute adds to the cost of production.

The Coffee (General) Regulation, 2018 requires co-operative societies to insure coffee against loss and damage while at the station and in transit and reinforce the security of the station to guard against theft. A provision in the law also requires coffee millers to take out insurance cover against fire, theft and other risks for all coffee in its custody. The same stipulation applies to warehouses.

So far, there are no indications that the new pieces of legislation will eliminate loss of produce and turn around the dipping fortunes in the coffee sector, a fit that can only be achieved by significantly improving production.

Tea has the second-highest number of prohibitions. The Tea Industry Regulations of 2015 prohibit the sale, importation, exportation, processing, setting nursery, operating warehouse, and marketing of tea without a licence. Growers need to register before plantation. Additionally, the tea sector has had the most number of extra legislation covering seven different years controlling the manufacture, packaging, export, transportation, cultivation, election of leaf collection centre officials, with the latest in 2012 requiring tea exporters to provide information on consignments and accompanying receipts as proof of payments.

The tea industry operates under the Tea Act (Cap 343) and Agricultural Act (Cap 318), playing administrative and supervisory roles, respectively in overseeing the process of production.

Small-scale tea farming in Kenya is supervised by the Kenya Tea Development Agency (KTDA).

Returns to the small-scale farmers have historically remained lower than those for the plantations and other big producers due to high management fees charged by KTDA and the high cost of production. Even though tea collected Sh138 billion in 2018, a big jump from Sh94 billion in 2014, production has been shaky as shown in the chart below.

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In September 2014, Mbita constituency (now Suba North) MP Millie Odhiambo and Nandi Hills MP Alfred Keter called for the disbandment of KTDA due to low bonus payments to farmers. Subsequently, in 2015, Parliament passed additional regulations on the tea industry. The new controls add to compliance costs in the value chain and hence depressed returns to farmers.

Going by the dwindling production and the general chaos that have characterised the sugar, tea and coffee sectors despite the many regulatory laws, it is evident that it takes more than policies and laws to promote agricultural production.




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