State monopoly in marketing farm produce bad for business- World Bank

In Summary

•World Bank says State’s role in marketing leads to poor allocation of resources and crowding out of the private sector

Some of the State interventions in the agriculture sector result in double subsidy to farmers

HARVEST: Farmers gather their maize in Weiwei Farmers store, Central Pokot
HARVEST: Farmers gather their maize in Weiwei Farmers store, Central Pokot
Image: FILE

The government’s mammoth role in marketing Kenya’s crop produce is creating a leeway for public officials to loot taxpayer funds.

Although President Uhuru Kenyatta has continuously pledged that graft kingpins will pay dearly for every pocketed shilling, the World Bank believes the State’s role in marketing agriculture produce is leading to poor allocation of resources and crowding out of the private sector.

According to the World Bank, this creates an opportunity for greedy public officials and political elites to misappropriate funds and resources.  

 

“These interventions result in undue fiscal pressures, misallocation of resources from other potentially high productivity expenditures (extension services) and dis-incentivize to private sector participation,” the global lender said in its Kenya Economic Update released on Tuesday.

The World Bank called out National Cereal and Produce Board (NCPB) which has been buying maize at a premium above the price offered by the market resulting in double subsidy to farmers who also received subsidized fertilizers.

Last year, the government had to subsidize imported maize due to a price spike caused by shortage of the crop in the country following a prolonged drought.

The same year, NCPB was reported to have lost Sh1.9 billion over the alleged irregular purchase of maize that led to unscrupulous traders raking in millions of shillings at the expense of deserving farmers.

This was one among multiple scandals that rocked the country last year. Adding salt to injury, details also emerged on how traders and National Cereals and Produce Board officials made billions selling adulterated fertiliser to farmers.

“Despite market liberalization reforms of the 1990s, the government retains an outsized role in marketing agriculture outputs, especially maize through the NCBP,” World Bank said.

The state also came under fire last year when it was revealed that Kenyans were consuming contaminated sugar. This was after government issued a gazette notice on May 12 allowing millers to import the commodity duty-free to mitigate a shortage resulting from the drought.

 
 

Although the country has about 12 millers, more than 370 unlicensed importers took advantage of the open gazette notice to flood the sugar market.

The bad sugar scandal coupled with rice and fertilizer scandals are estimated to have cost taxpayers well over Sh10 billion.

“The government’s market intervention measures are not only causing fiscal strain but also creating disincentives for the private sector to participate in maize marketing activities,” World Bank said.

Agriculture currently accounts for about 51 per cent of GDP- 26 per cent directly and 25 per cent indirectly through its linkage with other sectors with at least 56 per cent of total employment coming from the sector.  

“Despite market liberalization reforms of the 1990s, the government retains an outsized role in marketing agriculture outputs, especially maize through the NCBP,” World Bank said.

The state also came under fire last year when it was revealed that Kenyans were consuming contaminated sugar. This was after government issued a gazette notice on May 12 allowing millers to import the commodity duty-free to mitigate a shortage resulting from the drought.

Although the country has about 12 millers, more than 370 unlicensed importers took advantage of the open gazette notice to flood the sugar market.

The bad sugar scandal coupled with rice and fertilizer scandals are estimated to have cost taxpayers well over Sh10 billion.

“The government’s market intervention measures are not only causing fiscal strain but also creating disincentives for the private sector to participate in maize marketing activities,” World Bank said.

Agriculture currently accounts for about 51 per cent of GDP- 26 per cent directly and 25 per cent indirectly through its linkage with other sectors with at least 56 per cent of total employment coming from the sector.