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The East African cereals sector: Recent developments and future challenges

12 August 2012

An interview with Mr Gerald Masila

Gerald Makau Masila is Executive Director of the Eastern Africa Grain Council (EAGC). His previous key posts included Head of Sales and Marketing at the New Kenya Cooperative Creameries, and then Managing Director of Kenya Wines Agencies Ltd, where he with KWAL won the award of Third Best State Corporation in 2008. He then served as Managing Director at Kenya Planters Cooperative Union, the oldest and largest coffee milling and marketing company in Kenya, before joining EAGC in 2011. 

Q. Which stakeholders are represented by the Eastern Africa Grain Council?

The EAGC represents grain stakeholders in the Eastern Africa region across the entire value chain. The EAGC is a membership, not-for-profit organisation for grain producers (grain farmers both large and small), grain traders, handlers, e.g. warehouse operators, storage companies, grain dryers and processors of grain into flour, other food products and animal feeds, and brewers that produce starch from maize and are increasingly turning to sorghum as a substitute for barley. There are three categories of membership: active, affiliate and associate.

Active members are directly involved in the grain industry – for example, farmers (producers), traders and processors. These are represented in the leadership of the organisation through the Board of Directors.

Affiliate members include other industry associations, such as the Cereal Growers Association, Cereal Millers Association and farmers’ groups.

Our Associate members are other stakeholders who either provide services – such as transporters, seed suppliers, insurance companies, fertiliser suppliers and international development organisations.

 The EAGC was established in 2006 and currently has a presence in 10 countries: 5 EAC members (Kenya, Uganda, Tanzania, Rwanda and Burundi), plus Ethiopia, South Sudan, Zambia, Malawi and DRC. Its headquarters are in Nairobi, which holds both the regional and country offices, and it has country offices in Tanzania (Dar and Arusha), and Kampala in Uganda. The EAGC is in the process of opening offices in Rwanda, Burundi and South Sudan.

Q. What are the main objectives and activities of the Eastern Africa Grain Council?

 The Council is focused on trade. It handles many challenges in the grain sector, from production, post-harvest, trading and processing.

Some of the Council’s achievements include development of standards – such as the EAC maize standards. Standards for 30 other staple commodities have also been developed. EAGC is working on the enactment of the standards at the EAC level. The EAGC has developed warehouse receipt protocols – the rules of trade, and a certification process for warehouses. Warehouse receipts create transparency and allow standards to be implemented. A number of warehouses have been certified. The warehouse receipts are now used and accepted by banks.

The EAGC has established a market information system, RATIN ( www.ratin.net) through which market intelligence is gathered and broadcast. EAGC is also building the capacity of members to participate in policy development through training at national and regional levels.

The Council is now recognised and consulted by governments and regional bodies. It has a memorandum of understanding with the EAC/COMESA and is recognised at AU level, and has made a lot of recommendations on grain trade.

Q: In 2011 there was considerable controversy over the use of trade measures in the East African Customs Union (notably the May 2011 cereals export ban). In addition, EAGC has identified many non-policy-based non-tariff barriers (NTBs) to trade within the EAC. What are the priority areas that the EAGC would like to see addressed in promoting the free movement of grains within the EAC?

Cross-border trade is a big problem. There is no flow of grain from surplus to deficit areas. There are some protectionist measures which are applied using a blanket approach. Take for example wheat. Only 40% is produced locally, yet it attracts high import duties, leading to a very high cost. The main mandate of the EAGC is to develop and promote a structured trading system, meaning a system that has a structure such that the whole value chain is integrated and there are clear rules, for example, on quality standards – a system with good market information so that stakeholders don’t suffer from information asymmetry, in which one group has more information than others.

A key building block of a structured trading system includes a proper legislative environment and clear policies for the whole value chain. Post-harvest handling facilities are also needed. A structured grain sector allows more investment in the agricultural sector. There are no barriers in Uganda but in Kenya there are import/export bans and very high import duties for grain. The same applies in Tanzania. There are no major barriers in Rwanda, Burundi or South Sudan. There is a need to address policies at regional level, and EAC has carried out a study. There is also a need to harmonise and domesticate standards in each of the countries.

Q: Developments in 2011 also intensified the debate on the functioning of the cereals supply chain in Kenya. Would the EAGC like to see policy initiatives launched to strengthen the functioning of cereals supply chains in the region to ensure a regular flow of grains to processors and end-consumers?

For grains, the intra-EAC trade should be ‘maize without borders’ because the region as a whole has different ecological zones. At any one point, there is somebody with a surplus and somebody with a deficit. EAC wants to see all barriers removed. All tariffs and NTBs, all business permits should be removed. There will be a larger market, better prices, and farmers will have better returns. Governments that work against these are retrogressive.

The sector needs to be supported through curbing post-harvest losses, while investors who bring in post-harvest handling equipment should not be charged duty. This will save a lot of food that is going to waste.

The grain sector needs harmonisation in research and extension. Agricultural production is still being carried out using the hoe. This is not competitive. Research needs to be supported. The process of grain farming needs to be taken as a business. There are serious challenges about inputs, e.g. fertilisers and pesticides, which are highly priced. There is also government interference. This is a big problem.

Implementing the Maputo Declaration is key. A minimum of 10% of national budgets invested in agriculture is not happening in Kenya. Only Rwanda has met this requirement. In developed countries, economic take-off came through modernisation of agriculture. Right now, 70% of the population in Africa are in agriculture but only produce about 20% of the GDP.

Q: Developments in 2011 saw a debate take place on the appropriateness of the EAC maize tariff policy. Does the EAGC have any perspectives on the debate on the appropriate tariff policy for the EAC as a single customs entity?

The CET should be harmonised to have EAC/COMESA as one region. It should be specific for groups of grains. The ones that are not produced here should be duty-free.

Q: In 2011, export restrictions were placed on Malawian maize exports, in a context where Kenya had recently been sourcing maize from this COMESA partner. What kind of cereals tariff policy would the EAGC like to see pursued within the COMESA FTA?

The EAGC would like to see removal of all tariffs. When Kenya zeroed maize tariff, maize came all the way from Malawi. There will be a lot of velocity and upsurge in volumes of trade. For example, Uganda is bimodal and harvests maize twice, while Kenya harvests once. There is already a trigger for trade.

Q: 2011 saw South Africa significantly increase its overall maize exports, while reducing maize exports to the Eastern and Southern Africa region, despite shortfalls in East Africa. In this context how would the EAGC like to see cereals sector tariff negotiations evolve in the trilateral FTA context?

South Africa is producing genetically modified (GMO) maize. The government should allow importation of GMO maize, especially that of yellow maize, for production of feed. There is too much pressure on white maize for human and livestock consumption.

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