Does Kenya really have a working agricultural policy?

By Shadrack Muyesu

Agricultural policymaking is exclusively a national government function. One thing that the food crisis and the maize importation saga have proved is the fact that Kenya is marshalled by a reactionary government with no clear long-term plan of guaranteeing food security.

It’s also telling on the quality of our economic plan, the Vision 2030 blueprint and the fickle-mindedness of Kenyans, which makes lying such an easy task for government.

The Vision 2030 Economic Blueprint, in its first Medium Term Plan (MTP), overlooked agriculture and tourism to prefer public expenditure on infrastructure as the foundation for national transformation. Even without legal obligation to do so, the blueprint has informed budgetary allocation since. The results have been catastrophic. A negative export-import balance, the consumption of a large government courtesy of the Constitution of Kenya 2010 and a bloated public service, wastage and an unbalanced wage structure have led to budget deficits, leaving government with little option but to rely on debt finance for her grand projects.

The management of the little cash allocated to agriculture has been equally ill thought. Money is wasted in a consumer-based approach, which transports the sector into the realms of impotent recurrent expenditure. Where focus should be on subsidising production, sourcing markets for produce, setting in place import ceilings to meet market demand whilst encouraging domestic production, eliminating middlemen, buying grain for national reserves at market value and paying farmers on time, government prefers politically valuable solutions of unsupervised bailouts, increasing the minimum wage, capping interest rates, subsidising consumer goods, taking advantage of cheap imports or altogether decreeing prices. And these suffocate the sector.

Raising the minimum wage within demand-pull inflation, for instance, doesn’t boost purchasing power. It increases production costs, forcing employers to lay off workers. Subsidising consumer goods, while politically correct, takes away money from government, creating wider and wider budget deficits. To continue with the subsidies as well as finance her ambitious projects, government is forced to depend on expensive loans. Reliance on cheap imports stifles domestic growth. In a form of colonialism Vladimir Lenin christened the economic dependency theory, it leads to the socio-economic and cultural dominance of external entities. The government should instead focus on importing expertise for the training and empowerment of locals, who can then spearhead domestic production. In fact this was the principle behind the meteoric rise of eastern manufacturing states.

Our society is predominantly rural, with agriculture accounting for more than 30% of our net foreign income. And as Robert Bates argues, when a society is predominantly rural, the surplus necessary for industrialisation must come from the rural sector; this means the commercialisation of agriculture and the export of finished products as opposed to raw materials.

Our government is defined by what Michael Lipton called Urban Bias instead. In his book Why the Poor Remain Poor, Lipton explains that the city determines government action as it contains a higher population of educated persons – which translates to a host of policies that prioritise city concerns while overlooking the villages. Since food prices have to be affordable in the city, the cost of production is dumped with the rural poor- the farmers. Meanwhile, scarce resources, instead of going into “water pumps to grow rice, is wasted on urban motor ways”.

And Theodore Schultz (1990) agrees. He notes that agricultural prices are highly distorted in Africa. Why? To “ease the cost of living” the prices of goods are determined more by legislative action rather than by market forces, leaving us with many subsidised commodities. But the reality is, subsidised consumer commodities means that the farmers cannot get value for their product. As such, they cannot produce enough for consumption and surplus for export, driving the cost of production upwards in the process.

Where focus should be on subsidising production, sourcing markets for produce, setting in place import ceilings to meet market demand, government prefers politically valuable solutions of unsupervised bailouts, Increasing the minimum wage, capping interest rates, subsidising consumer goods, taking advantage of cheap imports or altogether decreeing prices. And these suffocate the sector

There is also the enduring question of the whereabouts of the proceeds of the Eurobond. Whether or not the money was misappropriated depends on who one asks. Trusting government is however difficult when interest rates continued to spiral and loans remain beyond the reach of Wanjiku – which phenomena the bond was meant to cushion Kenyans against. The promise of the bond was the reduction of the external debt-GDP ratio, and the chance to fund infrastructure from within. That promise has now been deflected to a time beyond the completion of the Standard Gauge Railway.

Uncertainty of prices leaves the average large-scale farmer reliant on debt. A properly invested bond would have made such loans more accessible. Unfortunately with the ill advised move to cap interest rates, many farmers are forced to consider alternative sources of cash as banks turn to the more stable clients for busines.

Three kinds of lies: lies, damned lies and statistics. (Benjamin Disraeli)

A lot has been said about a 5.8% economic growth and our growing reputation as an investment hub. The truth is, heavily punctured by corruption and weighed down by non-production; the economy is headed towards the cliffs.

The first illusion was the redefinition of the country as low middle-income economy through rebasing. Rebasing meant that we no longer qualified for some of the benefits enjoyed by underdeveloped and low income developing states. Among others, we would be no longer capable of negotiating preferable terms of payment on loans from international finance institutions – and this brings into question the true value of our external debt!

The second is the one by which we are currently drunk – the definition of economic growth by expenditure and not development. In other words, Kenya is doing well because she is spending so much on her credit card! Kenya is producing less and less and wasting more and more. With sectors beyond infrastructure barely functional employers are either closing shop or relocating.

A visit to Kitengela, Athi River and other peri-urban areas reveals ghost estates wasting away uninhabited while developers fall further into debts they can’t pay. At The Hub, the few tenants available are paying half rent in a bid to entice them stay so as to attract other customers. The same phenomenon reverberates through Upper Hill, parts of Westlands and Parklands – beautiful houses and office spaces that developers can’t sell in return for their investment. In Riat Hills and the Milimani areas of Nakuru and Kisumu, estates have turned into holiday resorts with an unreliable investment turnover.

In Sasaki, Delta Company with its 400 housing units are doing all they can to hold on to the council of governors as their anchor clients. Apart from a few other occupiers, the rest of the units are empty. A beacon of success in the industry, the Cytonn bubble nears bursting too. Having sprinted to the top on the back of selling to people from the Diaspora, reality is dawning it would take 33 years to recover an investment of Sh20 million from building a house in Syokimau. In short, Kenyans have no income, they can’t borrow and they are short of things they can afford…not just food.

Artificial shortages

In spite of all these, it is difficult to judge government mismanagement as anything beyond a deliberate attempt at market manipulation with profit as the main goal. After all there was sufficient warning from the weatherman and some schooled advice (I believe) from the president’s economic planners.

Historically, elections have come with shortages and price surges, with incumbent trying to raise money for their campaigns. Shortages have also been used as a tactic for controlling the population. Elements within the state will horde produce, creating acute shortages that will demand the import of subsidies. These will be paid for at grossly inflated prices before being distributed to desperate citizens on the cheap. With maize prizes amongst the highest in eastern and central Africa, greedy elements could also just sell to millers at a profit without breaking sweat in planting and harvesting. In the end, politicians come off as heroes and richer.

To cushion the public against perennial crises caused by, among others, extreme weather, parliament enacted the Contingencies Fund and County Governments Emergency Funds Act, 2011. Through receiving annual budgetary allocations in the excess of Sh10 billion, use of this fund remains a mystery.

The most notable legacy of such ad hoc allocation was the wastage of Sh16 billion El Niño money – Sh50 million of which was curiously allocated to the National Cereals and Produce Board (NCPB) as“ agency and management fees”. The rest went to, Sh1.1 billion for the re- construction of 7,000 classrooms “expected to be destroyed” as well as the purchase of bar soaps at Sh37,000 each. That the fund was established without the guidance of an implementer law was always going to create an opportunity for mismanagement.

Through The Strategic Grain Reserves, government allocates money to NCPB for the purchase grain, which it stores on behalf of government as buffer against food insecurity.

With more than ninety-six (96) silos spread all over the country The NCPB silo network, one could argue, is the only evenly distributed national resource in this country. Each designed to store 880,000 90kg bags of grain; it will take 1 million Kenyans consuming 88kg of grain each in a year, one year of daily feeding to clear the contents of one depot. Operating optimally, the reserve alone can feed Kenyans for 2 years.

With the Sh1.3 billion allocated to it in the financial year 2016, The NCPB was supposed to procure and maintain an SGR stockpile of up to 4 million bags of grain. This stock was to be upgraded to 8 million bags. At the behest of government, it is this grain that it was supposed to release into the market when the current crisis first reared its head. This stock was never released. Appearing before Parliament’s Public Investment Committee in June 2016, NCPB Managing Director Newton Keter revealed that most of the maize in their stock had been contaminated after SGR Trustees and top honchos at the ministries of Interior, Treasury, Special Programmes and Agriculture, had periodically delayed to order its release. Indeed, some of the stock had overstayed the recommended depot shelf life by over 6 years. Simply, the entire SGR system needed an overhaul.

Meanwhile, the maize importation saga rages on. Even without details of procurement, the scheme stinks of corruption. The Sh10 billion spent on purchase is double the amount maize farmers in rift valley had initially demanded. At that time, government cited a lack of funds leading to mass rotting of grain. According to reliable sources, the maize being distributed is actually from the strategic Grain Reserve and not from South Africa or Mexico or Mauritius – which report is confirmed by the shipping schedule and the cargo catalogue of the vessel in question, IVS Pinehurst.

In its defence, government cites a blue market economy that allows private speculators to patrol the seas of crisis-laden economies waiting for an opportunity to sell. The truth of this position, more than anything, demonstrates the utter incompetence of its crisis management agencies. If government’s promise to subsidise maize meal consumption in close to 9 million households at a cost of Sh60 per packet of unga till September goes through, assuming that on average a household consumes a 1/2kg packet on a daily basis, Kenya stands to lose Sh6 billion to private millers. Add that to the initial purchase price and we are staring at Sh16 billion shillings – greater than Anglo Leasing and Goldenberg combined!

And what became of the Galana-Kulalu irrigation project? Touted as the final solution to the perennial problem of food shortage, it was aimed at bringing 1 million acres of dry land under irrigation. Two years down the lane, Sh7 billion shillings spent and with the project having been scaled down to 10,000 acres, there is no maize. But that’s not even the problem. Galana was really an Israeli government project. Apart from being a minority shareholder, the Kenyan government was only a lessor of land. Densely populated and largely arid, it’s not uncommon for Asian states to enter into such agreements for the benefit of their local populations – China alone possesses close to one third of southern Sudan in leases.

The unsustainability of bailouts presents government with business prospects. This could be the reason why it so favours them. It’s a tried and tested capitalist ideal – create the problem then come in handy with the solution.