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Title: The Kenyan Maize Sub–Sector Performance and Its Implications for Food Security Policy Dialogue
Authors: Odhiambo, Mark Ollunga
Keywords: Food security, Corn industry, Kenya
Issue Date: 9-Sep-2012
Publisher: Moi University
Abstract: Maize is the most important staple food crop in Kenya and is therefore widely grown in the country and features prominently in the diets of the majority of the people. Although the crop is believed to have been introduced at the Coast during the 16th or 17th century, it was not until the beginning of 1900s that it became adopted by the colonial white settlers as a cash crop. They found it an easy crop to grow since it required fewer skills and gave quick returns compared to other plantation crops which were being introduced at that time like tea, coffee, pyrethrum and sisal. The African labour force working on the European farms were fed on maize and soon began not only to admire it but also developed a high taste preference for it. The production of the crop then spread among the African population in many parts of the country and it soon got accepted as a major food crop in the country. Maize soon became both a large scale and smallholder crop. Successive governments in Kenya starting from the colonial times and even after independence in 1963 have always maintained a policy of rigid control over the distribution, marketing and pricing of maize. During colonial times, the control was meant to safeguard the European large scale growers who produced the crop initially for export and later for the domestic market. After independence the control system was maintained by imposing maize movement restrictions and government price fixing resulting in pan-territorial and pan-seasonal pricing of maize and maize products in the country. During the control policy regime, the maize marketing was dominated by the National Cereals and Produce Board (NCPB) and its predecessor parastatal organizations which controlled the official or formal marketing system. A parallel informal marketing system also developed to cater for rural areas covering small scale farmers and consumers who had no access to the formal NCPB market. During control, the formal NCPB dominated marketing system handled about 40% of marketed maize in the country or about 20% of total production. About 70% of NCPB maize came from the large scale farms while 30% came from smallholders. The informal marketing system handled about 50-60% of maize traded in the country and about 70% of smallholders sold their maize through the channel. Government control system though well intentioned to protect farmers during glut and the consumers in times of shortages, soon ran into criticism from policy analysts, donors and some industry stakeholders for being inefficient. It impeded free trade and lacked transparency. Prices in the informal marketing system tended to vary spatially and seasonally unlike the pan-territorial and pan-seasonal prices maintained by government in the formal NCPB dominated marketing system. The question arose whether the controls were meant to only protect the urban and elite consumers who depended on the formal system for their maize and milled flour supply. The government of Kenya gave in to the critics and accepted to carry out maize market reforms, and after a series of partial liberalization and successive policy reversals, the maize market was liberalized in 1993 and both the formal and informal marketing systems merged into one marketing system. Traders, millers and other market participants were free to buy and sell maize of any quantity and move it to any part of the country and at any price. However, the NCPB was not privatized but was instead restructured to carry out commercial maize trade and also to remain the government agent carrying out the social functions of market stabilization and being the custodian of the country’s maize Strategic Grain Reserve (SGR) of 6 million bags. In its market stabilization and commercial functions, the NCPB is expected to be the buyer and seller of last resort. In this respect it is expected to compete with other traders, run efficiently and make profits so as not to depend on Treasury subventions as used to be the case before liberalization. In its social functions, the NCPB is expected to stabilize the market by protecting farmers at harvest time by offering remunerative prices at the time when traders and millers tend to offer low prices. Secondly, NCPB is expected to protect consumers by selling maize from its stock and from SGR into the market when shortages occur and prices rise above normal. The NCPB has also the social function of sourcing, storing and allocating relief maize to be distributed in areas affected by drought or famine crisis as may be directed by the government. Despite many doubts about the government’s commitment on the market liberalization, the system remained a free market from 1993 until the year 2011 when the Essential Commodities Prices Control Act of 2011 was introduced to include new control of other commodities including maize and maize meal. This new development has triggered new policy debate on the maize sector. Is the price control the right policy given that the domestic maize production in bad years cannot match consumption demand, and that the country has to resort to imports to meet demand? With production now oscillating between 20-36 million bags when the population is now standing at 41 million and growing fast, Kenya will soon become a permanent importer of maize unless drastic steps are taken to reverse this trend. In the debate, policy analysts, donors and other stakeholders in the industry are wondering how and why the Control Syndrome has come back 18 years after it was regarded as dead and buried and therefore a non-issue. In concluding this lecture, it is recommended that price control is not the wise way to go. Rather, the government should embark on policies of strengthening the NCPB operations in its commercial trade and to act as the buyer and seller of last resort to protect both farmers and consumers in the market. In addition, the government should redirect its policies towards strategies for increasing maize production through investments in irrigation, promoting research, extension services and crop diversification. A proper incentive structure including provision of farm credit, fertilizer subsidy, certified seeds, infrastructure development, market access, good governance and legal environment for maize production and marketing is needed.
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