Kenya Announces Warehouse Management Reforms to Ease Cereals Trading


By Rootooba Contributor, 28 May 2020

The government has announced reforms to address the perennial challenges facing agricultural production and trade by establishing a warehouse receipt council.

Agriculture Cabinet Secretary Peter Munya said Warehouse Receipt System (WRS) will now be an open trading platform that links buyers and sellers, and modelled along the stock exchange concept.

Warehouse Receipt System (WRS) is a new intervention by the government that will offer a platform whereby farmers will have an opportunity to store their maize and also monitor prices.

The establishment of the council now replaces the roles Government has been undertaking previously of buying, selling and setting maize prices, a scenario that has been characterized by unethical business practices leading to grand corruption.

Farmers have been depositing goods in an exchange for a warehouse receipt (WR) reducing the pressure to sell immediately after harvest when prices are normally low and hence enabling them to monitor the prices and sell when it is favorable.

According to the CS, the Warehouse Receipt System will remove the logistics burden and facilitate producers and traders to access agricultural credit against the deposit certificate.

“The Warehouse Receipting Council has now been appointed and we shall soon be inaugurating the Council which already has an appointed acting CEO “, Munya said.

He added that reforms will include enhanced private sector participation in the agricultural value chain, including storage, thereby creating a competitive food market and the efficiency that comes with it.

Other reforms the CS mentioned were revamping of the Food Balance Sheet Committee to oversee accounting and monitoring of the country’s food supply pattern, utilization and distribution. Included in the reforms will be elimination of overlapping roles that lead to conflicts between different government agencies, to better respond to changing food demand”, he said.

Munya who was speaking today on the restructuring of the National Food Reserve and Food storage management at the National Cereals and Produce Board (NCPB) offices in Nairobi said that to spearhead the implementation of these reforms he had appointed a Technical Working Committee charged with coordinating prompt and focused implementation of these reforms. The committee would further ensure that systems are in place to receive produce in the next four months.

“To encourage the early participation of the private sector, NCPB will release 7 million bags of space through competitive commercial leases. The release of designated storage space to private sector will proceed speedily and be completed by December 2020” he said.

Munya explained that in the next few days the government was taking measures to invigorate the NCPB Board and to inject the required expertise for oversighting the revamped functions of NCPB.

“To better ensure that NCPB as an organization executes more effectively and devoid of historical burdens, I direct the Technical Committee and NCPB Board to immediately undertake capacity and suitability vetting of all the serving officers”, he said.

He also stated that soon, his ministry would undertake a legal review on policy geared towards the harmonization of mandates of various agencies under the agriculture sector and aimed at enhancing their complementarity.

CS Munya said that from September this year, the Agriculture and Food Authority (AFA) in collaboration with the counties would undertake the registration of farmers, dealers, and the licensing of primary warehouses, and the Warehouse Receipt Council would be responsible for warehouses trading in the Commodity Exchange (KoMEX).

On the issue of strategic food reserve, the CS noted that NCPB dominates the grain storage with a capacity of around 1.8 million tons compared to 173,000 and 58,000 tonnes operated by private sector and other agencies

He noted that the practice where maize was bought at above market prices and released at lower than market prices undermined the functioning of the food market and sustained manipulation by cartels, a situation that was undesirable and unsustainable.

“The situation disadvantages producers and undercuts both the commercial and strategic food reserve system” CS Munya said. He noted that resource allocation by the ministry of agriculture was inclined towards short terms interventions and in the process, drew away attention from the broader and more strategic actions for improving food and nutrition security.

There are four options for contributing to food and nutrition; physical food, managing stock volatility, stimulating food production by using of incentives and increasing stable food trade, he noted.

Up until 1980, Kenya produced basic food to feed its population and reached a surplus of 20 percent surprisingly, since then agricultural production has fluctuated year after year.

The food deficit of maize, rice, Irish potatoes, wheat and sugar continues to widen and by 2017, Kenyans’ basic food production could regularly feed 72 percent of the population while the rest had to be supplemented by imports.