Africa Business Communities

[Column] Bob Koigi: Rethink Africa fertilizer distribution models to address cost and accessibility constraints

The recent declaration by fertilizer producer YARA fertilizer in Tanzania that it would reduce the cost of fertilizer by up to 40 per cent following the construction of a fertilizer rail transport system is indeed music to millions of farmers in that country.

Fertilizer, a key agricultural input for any farm, eats up to 40 per cent of the farming expenditure. Still it isn’t readily available. It is a story that resonates across many African countries where Agriculture is a key income earner for many households and a mainstay of many economies. It is estimated to provide about 25 per cent of many country’s GDP.

Two things are at the heart of the fertilizer debate in Africa; accessibility and cost. Yet the two are intertwined. Late delay of fertilizer creates ripple effects including delay in planting and subsequently harvesting fanning a hunger cycle. But even when distribution is timely, the cost is so prohibitive that farmers make do without, further affecting yields.

Majority of governments have actively been involved in the business of fertilizer distribution, which sadly has never worked. The idea of subsidizing fertilizer to ensure as many farmers as possible get it in time, has and will never work effectively.

In Kenya for example where government subsidy programme has been running for years has been every farmer's nightmare. For starters it is never delivered on time and has been the cause of delayed planting, which has had catastrophic effect on food security.

In fact a report by Bridgenet Africa places delayed fertilizer distribution to farmers as among the causes of the 2009 drought that placed over 10 million Kenyans under food relief and led the then President Mwai Kibaki to declare it a national disaster.

Then there is the nagging problem of greedy middlemen and cartels who buy the subsidized fertilizer then repackages it and sells it exorbitantly to unsuspecting farmers. In a shocking revelation recently farmers in the country's food baskets said they have never seen or come across any subsidized fertilizer and in fact had decided to buy their own following multiple delays in planting as they waited for the government subsidy.

The subsidy has never benefitted the very same people it set out to benefit; the small holder farmers. The litany woes by the farmers just goes to show how the government should never be involved in the purchase of fertilizer or subsidizing it. It has been counterproductive, defeatist and unsustainable.

This therefore calls for some naked truths. Does government really need to be involved actively in the fertilizer markets? History has shown how liberalizing the markets allow easier access to this prized input.

In early 90's after the elimination of retail price controls, import licensing quotas, foreign exchange controls, and the phase-out of external fertilizer donation programs that disrupted commercial operations, Kenya has witnessed rapid investment in private fertilizer distribution networks, with over 15 importers, 600 wholesalers and 10,000 retailers now operating in the country.

Full liberalization would now mean elimination government involvement in the fertilizer supply chain and letting the market forces and healthy competition prevail which ultimately benefit the farmer.

What government needs to do is play a facilitative role and create incentives and favourable environment for investors and private companies, especially local ones to be actively involved in the supply chain. Countries like Malawi and Ghana where government has a hands off approach in the supply chain but create legislation and capacitative policies to allow for a freer market has yielded tremendous fruits.

In Malawi, after government invested in assisting local companies in fertilizer supply, food production shot up by a whopping 50 percent within one season and the food insecure people went down from 5 million to 3 million within one year.

In Tanzania, government, by building the rail system ensured that private sectors could take advantage of the infrastructure to get the input to farmers cheaply and faster. Farmers enjoy the fruits of government creating a conducive environment.

Yet fertilizer costs in most African countries like Kenya are higher than in Latin America and Asia mostly due additional transport costs related to under-developed physical infrastructure. This shouldn’t be.

Which is why the government should have its work cut out.

Multiple award winning Kenyan journalist Bob Koigi is Chief Editor East Africa at Africa Business Communities


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