Promoting seamless grain food trade across the region

Kiambu, Thursday April 27, 2023

KNA by Wangari Ndirangu

Stakeholders involved in Grain Trade in the East African Community have converged in Kenya for a two-day meeting to dialogue on issues affecting grain trade across the region.

The meeting that has brought governments, private sector, farmers and also traders from Kenya, Uganda, Tanzania, Rwanda, Burundi, Botswana, Zambia and Democratic Republic of Congo (DRC) are set to propose ways of unlocking the identified bottlenecks and interventions that will promote seamless grain food trade across the region in order to spur development.

Speaking during the forum, East African Grain Council (EAGC) Executive Director Gerald Masila said that trading in the region is mostly informal with approximately two-thirds of food trade done through informal channels.

Trade, he further said is also unstructured with multiple layers of value chain players, which leads to relatively high transaction costs, pricing is also not underpinned by market fundamentals and thus being highly speculative at all levels.

“Solutions to local trade will have to look at issues such as regulations, logistics and also scale as this is the only way to bring down cost of trading locally and also get much more from local trade”, Masila said.

He noted for example the reason maize importers in Kenya are not able to access white non –GMO maize that would help reduce the cost of “unga’ is that globally there is more GMO maize produced than the non –GMO.

“The government allowed for duty free importation of maize to bridge the gap and to bring down the cost of maize flour but on Tuesday Agriculture CS reported that despite issuing the import licenses, less than 10 percent has been brought in.”, he said

Masila said that sourcing maize out in the market, particularly non-GMO maize, is a challenge because there is a serious shortage in the world.

“Globally there is more yellow maize produced than white maize and also there is more GMO maize being produced globally than non-GMO. So, the importers are only sourcing the non-GMO maize which is difficult to get.  The availability is low and even when you find it, it is a price premium and this is why it has not been possible to bring down the cost of maize through the duty-free imports “, he said

African regions, the CEO confirmed, produces more than it consumes and thus the need for solutions such as investing in large scale for commercial production of grains such as maize is necessary.

"Members at EAGC are ready to deploy resources to invest to produce maize in the available land through partnership arrangements,” he said adding that what is hindering this is lack of a framework on how the private sector can engage with the government to invest in large scale commercial production of grains.

“We have been told that there are available millions of acres of land from what is in Galana Kulalu to other lands that are sitting with various Government agencies and ministries that can be deployed and utilized into food production,” he said.

A mechanism in which the private sector can access that land purely for production without buying but just to get into partnership to be able to do commercial production of grain would be very ideal and can address the challenge, the EAGC CEO said.

“Getting into large scale commercial production and being able to implore the smallholder farmers to become out growers for the large-scale commercial producers is the only way we can be able to increase production, reduce cost of production, mechanize and address the gap that we are having,” Masila said.

With regard to the imports to the sub regions and the country, he said the country imports close to four million metric tons which is almost 90 percent of what we consume.

The country, he therefore noted, is producing very little and giving an example of rice which, the country is importing in millions of tons and producing less than 20 percent of what we consume saying this balance of trade is negative.

Masila further noted that the country is also not able to import maize outside the EAC because there is a 50 percent common external tariff that one has to pay when they import maize outside the EAC.

“We need trade in Africa instead of aid. We need to look at how Africa can start producing and for Africa to produce properly, we must adopt commercial large-scale production. This is what other regions are doing and this ensures scale and when you are able to do scale, then you can reduce your unit cost which can help one become competitive,” he said.

Mathews Wanjala, a senior programme manager in charge of market systems at Trade mark Africa (TMA) explained that currently Malawi and Zambia are harvesting maize while East African countries of Kenya, Somalia and Djibouti has a deficit and all this boils down to the constraints and barriers along movement of food from one country to another.

“As conveners of this meeting, TMA through support from USAID and other partners, we are working with stakeholders to address the barriers and constraints that block movement of food and other commodities along the different corridors in the region”, he said

The biggest barrier especially in the East Africa Corridors, Central Africa Corridors and the South Africa corridors, is adherence to standards under Sanitary and phytosanitary (SPS) measures, the logistics and transportation which is quite expensive and also the issue of common currency.

The Common Currency is a major challenge especially for the East African region that has hindered the trade due to multiple conversion of the denominations thus making losses.

“Movement of goods and grains across borders has become expensive and although we have the East Africa protocol on common currency that is being pushed and is targeted to be adopted in 2032 in order for us to trade in one currency. West Africa countries have already adopted and are using “Franc’ as a common currency among them while South African countries are using the ‘Rand””, Wanjala said

Regarding production, the TMAs marketing manager said governments in the region have to look at lowering and subsidizing not only on the production part but other components such as electricity, fuel, labour and even wages.

He explained that the USA and other countries have been subsidizing production of the farmers at primary commodities. ‘Maize, Soya beans and Wheat produced in America was shipped to East Africa and landed in Kajiado and it was cheaper than maize produced within Kajiado and this without transportation, so the question is how come?”.

The answer, Wanjala said, is because of those governments having subsidized production from all productive resources including giving their farmers loans that are interest free, saying only this will be able to bring down cost of food and be competitive in the region.

Joseph Kimote, Cereals and Produce Board (NCPB) Managing Director said that the government has gazetted the National Food Reserve (NFR) regulations which will pave way for establishment of Strategic Food Reserve (SFR) fund that will provide an opportunity for NCPB to stock food in the country.

‘This is going to happen in the next harvest season towards the end of this year. Once the fund is in place and available, part of that food reserves goes to relief supplies while the rest is utilized for market innovation programs in the country”, he explained.

Kimote acknowledged that the country has deficit of cereals but noted that they had requested for Sh 15 billion to stock in excess of 3 million bags of maize and although it was not factored into the supplementary budget, they are negotiating within government to get the funds through the treasury in the next budget.

The marketing and trade of agricultural products plays a critical role in the spatial distribution of produce from production areas to markets. However, trade of most agricultural products, more so staple foods, is generally not well organized and is often subjected to many state regulations when it comes to intra-regional cross-border trade.

Courtesy; K.N.A