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Kenyan NCPB to be restructured amid shortcomings of current operations

03 October 2014

In June 2014 it was reported that Kenya’s National Cereals and Produce Board (NCPB) was failing to buy maize from farmers because of “Sh 5.9 billion owed to it by the government”. It was also reported in early July that Kenya’s strategic maize reserve stocks held at the NCPB had “dropped to half of the optimum level of five million bags”, given the absence of financial resources to replenish stocks.

In mid June, Newton Terer, Managing Director of the NCPB, announced government plans to restructure the NCPB, involving the creation of a Grain Corporation of Kenya with a more commercial orientation; the establishment of a National Food Security Agency “to replace Strategic Grains Reserve and focus on strategic food reserve”; and the creation of a commodity exchange (COMMEX) to strengthen trade in grains.

The creation of a grain sector regulator to “supervise and license market players in the grain industry” has also been proposed. According to Mr Terer, “the regulator will be important to farmers who have always encountered challenges while selling their produce to millers and NCPB, because they will be aware of the preferred market pricing.” The creation of a grain sector regulator is also intended to “ensure compliance with the standard rules and regulations” governing the sector.

Mr Terer maintained that the Board had faced “numerous challenges occasioned by the government’s failure to replenish the Strategic Grain Reserve on time as well as a dysfunctional warehouse receipting system”.

Representatives of the Kenya National Farmers Federation (Kenaff) and the Kenya Farmers Association both strongly implied that the failure of the NCPB to pay farmers for grain delivered last season was a critical factor behind farmers holding back maize sales. They considered that priority should be accorded to bringing stocks held by farmers to the market, and that these, along with stocks held by millers and the government, should be sufficient to reduce the need for imports. They implied that it was shortcomings in the functioning of the NCPB that had led the Kenyan government to seek maize supplies from regional partners (see Agritrade article ‘ Debate intensifies on Kenyan maize imports’, 4 October 2014). 

Editorial comment

The financing problems faced by the NCPB, along with farmers’ suspicions of the operations of private contractors, appear to have contributed to a breakdown in the smooth functioning of the cereals supply chain in Kenya.

Reform of the operation of the NCPB is now on the table. Critical issues will be not only the structure of the reformed entities, but also the resources made available to facilitate their effective operation.

In this context, questions arise regarding the importance that the proposed grain regulator will attach to strengthening the position of producers within cereals value chains, and how the regulator’s activities are to be financed without imposing additional costs on the cereals sector. Institutional questions also arise, such as how stakeholders will be represented in these new institutions and the role they will play.

Questions also arise regarding how the reformed NCPB will relate to efforts to strengthen the functioning of intra-regional cereals supply chains in the EAC. Institutional changes clearly need to take into account developments at the regional level, since resolving problems at national level without due consideration of regional cereal production and trade dynamics will only lead to partial solutions that might benefit certain value chain actors while disadvantaging others.

How, for example, will the commodity exchange being proposed under the reform of the NCPB work with that being proposed at the regional level?

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