Agriculture reforms kick into high gear as State confronts cartels
Last year saw many reforms brought forward in the agriculture sector as the government tried to rid the sector of cartels.
Agriculture Cabinet Secretary Peter Munya came out with radical reforms to transform the tea and coffee sectors, but no sooner had the changes been laid out than they were met by a number of court cases and general resistance from some stakeholders.
The agriculture sector has for a long time been beholden to entrenched interests by powerful cartels, which have ensured that any changes that affect them are not implemented, rendering efforts by successive agriculture ministers to execute reforms unsuccessful.
This time however, Mr Munya had the explicit backing of President Uhuru Kenyatta to streamline the coffee and tea sectors, and crucially, the farmers were also loudly backing the reforms.
In the last couple of months Mr Munya has initiated reforms in coffee, tea and grain sectors with pundits arguing that he means.
Egerton University-based Tegemeo think tank senior research fellow Timothy Njagi said the reforms recommendations have taken long to be implemented, given that some of them had been put forth by different taskforce as early as 2007.
Dr Njagi said some of these reforms require political goodwill and buy-in of other parties such as the private sector. President Kenyatta pronounced himself on coffee and tea issues, adding impetus on Mr Munya’s quest to transform the sub-sectors.
The reforms momentum started with the revamp of Kenya Planters Cooperative Union (KPCU) in 2019. The governmnent followed the move by bringing in new directors under the New KPCU, which took over from the defunct body (KPCU) that was dissolved.
The New KPCU has since been purchasing coffee from farmers and sought for direct markets for farmers.
The ministry also gave New KPCU the role of distribution of cherry advance fund to farmers in form of loans.
However, the distribution was soon met by opposition and this is what exactly happened in the midst of reforms.
A group moved to court to stop the New KPCU from issuing the cherry fund. They secured a court injunction in April but the ministry moved on with the process notwithstanding, terming the group as enemies of progress.
“The work of distributing the funds has already begun after we received all the funds from the Treasury. I want to warn the cartels who are trying to frustrate our efforts that we are not going to stop,” said Mr Munya.
In April, the High Court stopped the New KPCU from administering the funds but Kilimo House argued that there was a group of cartels trying to stop the revival of this coffee body.
In an earlier interview with the Business Daily, Cooperative Principal Secretary Ali Noor said the process of issuing the funds was ongoing though it had been affected by the Covid-19 pandemic.
The cherry advance levy was announced by Mr Kenyatta in March 2019 and it is aimed at helping farmers in meeting their financial obligations after harvesting their crop.
Normally, farmers harvest and sell their crop through cooperatives but have to wait for over a month before they get their payment.
In the new systen, the government will recover the funds after farmers have sold their produce by deducting the amount that would have been advanced to them plus a three percent interest rate.
These reforms are designed to boost production, reduce the cost of processing and milling as well as transaction costs at the auction market.
Of all the sectors, tea has achieved the biggest milestone in terms of reforms, with the icing on the cake being the decision by the Senate to pass the Tea Bill 2020 and being signed into law by the Mr Kenyatta.
The reforms announced by the government sent shockwaves in a sector that is mainly dominated by the traders, at the expense of smallholder farmers who make up majority of the producers.
The reforms have far-reaching effects that will cut on the margin of the service providers such as Kenya Tea and Development Agency (KTDA) while increasing on the earnings of farmers.
The process of reforming the tea sector, started in April when Mr Munya spelt out a number of measures. The CS subjected the recommendations to public views and by May 21, he had already submitted the regulations to Attorney-General’s office for gazetting.
The reforms directly impacted on KTDA earnings, which controls 60 percent of the Kenyan market.
Mr Munya said the reforms were addressing the governance challenges embedded in the tea value chain that include conflict of interest in the operations of KTDA and its subsidiaries and the auction process.
In the regulations, it was made official that the agency would cede one percentage point of the management fee that it charges factories, which translates into billions of shillings that KTDA will forfeit.
The agency has been charging factories it manages 2.5 percent of the total income as management fee.
The reforms also included changing the way tea factory directors are elected, bringing in a system where all farmers would have equal voting rights.
For the longest time, directors have been voted in based on the share that they have in the company and the volume of tea that they bring to the table.
KTDA objected the move and together with other agencies in the tea sector, rushed to court to stop implementation of the reforms.
And as was the case with the coffee reforms, Mr Munya came out fighting.
“This is a move aimed at locking out the small farmer so that the agency can pick people who will comply with what they want,” said Mr Munya.
KTDA lawyers in turn argued that the agency is a private company owned by farmers and not a parastatal and that the only way that the government can own it is through buying it from growers.
“If the government is interested in taking over the business of KTDA… is to buy-off by negotiating with the farmers; but to just come in and frustrate a private business is something that is akin to compulsory acquisition through regulations and is not allowed whatsoever in law,” said the lawyers.
They also argued that the regulations infringed on the constitutional right to own property and challenged the government to follow the right procedures should it have interest in owning the property held by tea farmers under the ambit of KTDA.
East African Tea Traders Association, which has also been on the receiving end from the government, opposed some of the regulations.
Price discovery mechanism
Other reforms brought about by Mr Munya include the transitioning of the current trading manual platform of coffee and tea auctions into digital ones to encourage price discovery mechanism.
For long, National Cereals and Produce Board (NCPB) had been a den of corruption with cases of graft bedevilling every sector of the grain handler.
With an exception of 2019, there had been cases of fertiliser theft and irregularities in purchasing of maize that saw farmers miss out on subsidised fertiliser or fail to sell their crop to the board.
To tame this vice, Mr Munya appointed a taskforce that will vet afresh all the employees of the NCPB to ascertain their suitability.
The CS also said that the board members will undergo vetting as the government seeks to bring in fresh blood aligned to the work of NCPB.
The ministry has also disbanded Strategic Food Reserve (SFR) with the function of purchasing maize now left in the hands of the private sector.
However, the SFR board moved to court and managed to stop its dissolution but it remains unclear whether it will perform its function given that the Ministry of Agriculture still insists that it is an illegal entity.