Kiplimo(moi university kenya) nairobi presentation copy

Overview of fertilizer supply chain in Kenya
Bernard Kiplimo Lagat, PhD
CEC Member Trade, Investment and Industrialization
County Government of Nandi
IMPROVING THE EFFECTIVENESS OF POLICIES AND STRATEGIC
INVESTMENTS IN THE FERTILIZER SUPPLY CHAIN
Venue: Sarova Panafric Hotel, Nairobi
December 7, 2017
Bernard Kiplimo Lagat, PhD CEC Member Trade, Investment and Industrialization County Government of NandiOverview of fertilizer supply chain in Kenya

Overview
Objectives
Background overview
Fertilizer policy and regulatory environment
Trends and evolution of imports, exports, consumption
quantities and prices
Conclusions

Objective of the project
Main objective: to provide a comprehensive and detailed
overview of the fertilizer supply chain in Kenya.
Speciﬁc objective: to provide an in depth description of the
market structure, practices and outcomes along the supply
and distribution channel in Kenya(e.g. at the
production/import level, wholesale level, and retail level).

Scope
Focus on main fertilizer(s) used (e.g., CAN, DAP, Urea,and
NPK)
Identify main market centers and distribution channels in
Kenya;
Estimate the number and type of sellers (e.g.,
public/private) at each point in the supply chain
(producers/importers, wholesalers, retailers);
Prices and volume of sales both across and within each point
in the supply chain;
Dispersion among sellers and distance to closer (upward)
supplier, among others;
Characteristics of business entities;
Collection and analysis of secondary data and primary data
from interviews and small surveys,

Introduction
Post liberalization fertilizer policy regime in Kenya is
considered a success story in SSA [Kibaara, 2009].
During the SAPs in 1990s, fertilizer markets were liberalized,
government price controls and import licensing quotas were
eliminated, and fertilizer donations by external donor agencies
were phased out [Ariga, 2008].
Pre-reform period had been characterized by state-run
agencies or private farmer organizations (with heavy state
intervention in their management) in input and output
markets for import and export, distribution, and retailing.

Introduction
The aim of Abuja Declaration of 2006 was to address inherent
bottlenecks along the fertilizer supply chain in Africa.
Market access among the resource constrained farmers remain
the single most reason why fertilizer use is remarkably low
During the last decade most SSA countries registered positive
progress in fertilizer production and consumption.
However, according to FAO’s report on world fertilizer trends
and outlook to 2016; the share of SSA in world consumption
of fertilizer is 1.5% with a growth rate in demand of 3.6%

Introduction
Share of Kenya’s fertilizer market
Figure 1: Source: Fertilizer Facts: www.fertilizer.org
Kenyan fertilizer consumption need to nearly double from 0.5 to
0.9 million MT to meet the agricultural growth targets set in the
CAADP country investment plans [IFDC, 2012].

Introduction
In 1991 the GoK liberalized fertilizer industry by eliminating
1 import licensing quotas, 4
2 foreign exchange controls,
3 retail price controls and
4 large-scale subsidy programs.
Consequently, there was an increase in the number of fertilizer
merchants importing and distributing fertilizer through a
growing network of agro-dealers.
This is attributed to the stability in the policy environment
in the country.
A bulk of fertilizer is imported as raw materials for blending
locally.
There are initiatives to produce fertilizer locally.

Introduction
Private sector controls a larger share fertilizer imports while
Government agencies notably KTDA NCPB control about a
quarter of the market share.
Import duty is zero rated with no VAT charged on imported
fertilizer, except the VAT charged on the services along the
value chain of fertilizer distribution (GoK, 2016).
The major bottleneck on the supply side of the fertilizer is the
capacity and eﬃciency of the port of entry (IFDC, 2012).
Fertilizer consumption in Kenya is estimated at 650,000
metric tonnes per year.
In order to meet the agricultural growth targets set in the
CAADP country investment plans, Kenyan fertilizer
consumption needs to nearly double from 0.5 to 0.9 million
metric tons (mt) (IFDC, 2012).

Introduction
Both the financial crisis and the pev of 2008 in Kenya
prompted reintroduction of subsidized fertilizer by the
government.
In 2008 fertilizer prices rose from Ksh 2,500 to over Ksh 6,500
per 50 kg bag of DAP which became unaffordable to most
farmers.
The subsidized fertilizer quantity is set at a maximum of 30%
of the total annual national demand of 650,000 metric tons,
while the private sector meets the rest.
A bulk of the fertilizer subsidies is distributed by NCPB.
The bulk procurement fertilizer subsidy program by the
government is however very inefficient.
Delay in planting occasioned by the delay in procurement is
often attributed to the poor harvests due to delayed planting.
The cost of access to the government facility may also
outweigh the benefits the farmer derives from the subsidized
fertilizer.

Vision 2030
Kenya Vision 2030 identify key investment initiatives aimed at
reducing fertilizer cost in order to improve productivity of key
crops and livestock in the country.
It recognizes the role of increasing cost of fertilizer in the
country in the low consumption levels.
Three-phase cost-reduction strategy are identiﬁed to reduce
cost and boost consumption:
1 improved coordination of bulk purchasing,
2 provision of incentives for local blending of fertilizer, and
3 exploration of long-term opportunities for domestic production
of fertilizer.

Vision 2030
Figure 2: Three-phase fertilizer cost-reduction strategy
Source: Kenya Vision 2030

Vision 2030
Currently there are new two major entrants into Phase II
segment:
MEA LTD
Toyota Tsusho
The government’s plan is to give incentives to blenders and to
take part in initial bulk ordering with the aim of penetrating
into the regional market.
In phase III the strategy is to establish local fertilizer
production near the sources of raw materials and sourcing of
raw materials from the neighboring countries and control the
over USD 300 M regional fertilizer market.

Targeted Subsidies
Currently, the government is piloting a market ”smart”
subsidy program which is an electronic fertilizer subsidy
management system where farmers are to access fertilizers
from accredited private agro dealers countrywide GoK, 2015.
Market smart subsidies can afford farmers subsidies without
compromising the market development.
The traditional subsidies discourages growth of the private
fertilizer market which is more efficient compared to the State
Corporations.
In response to the Abuja declaration, Kenyan Government,
through the Ministry of Agriculture, proposed a three year
input subsidy program in 2006, targeting 2.5 million resource
poor small scale farmers owning one (1) hectare or less of
land.
The NAAIAP is a smart subsidy program that was
implemented with the primary objective to improve access to
farm inputs (fertilizer and seeds) and to afford increase usage
by smallholder farmers Sheahan et al 2014.Bernard Kiplimo Lagat, PhD CEC Member Trade, Investment and Industrialization County Government of NandiOverview of fertilizer supply chain in Kenya

Policy and regulatory environment
Fertilizer market is regulated under the Fertilizers and Animal
Foodstuffs Act CAP 345 and
the Fertilizers and Animal Foodstuffs (Amendment) Act No
20 of 2015.
The Act establishes the Fertilizer and Animal Foodstuffs
Board of Kenya.
Beside regulation of animal foodstuffs, the key functions of
the Board include;
regulation of the production,
manufacturing,
packaging,
importation and
marketing of fertilizers and
promoting the manufacture of fertilizers

Policy and regulatory environment
Specifically, the board is established to advise both the national
and county governments on
1 the procurement, importation and, efficient and timely
distribution of subsidized fertilizers
2 establishment of retail outlets of fertilizers and animal
foodstuffs in the counties; and
3 development of policies related to the manufacture and
distribution of fertilizer
4 The law also mandates the Board to inspect and test the
fertilizer to ensure the standards of quality and safety, to
promote research on fertilizer and to license manufacturers,
distributors and retailers of fertilizer GoK 2015.
5 Despite its enactment, however, implementation and
enforcement of the law remain the most significant challenges.

The amendment
This was meant to cure the shortcomings inherent in the
legislation with regard to
1 quality standards,
2 definition of fertilizer types,
3 marketing and pricing,
4 stakeholder participation and
5 environmental protection
There was a need to streamline the roles of the key
institutions such as KEBS and ) and KEPHIS who are
responsible in the analysis, inspection and regulation of
different kinds of fertilizers
There was also a need to redefine clearly the fertilizer types to
include both organic and inorganic fertilizers.
The amendment was also intended to provide a legal
framework for testing and analysis of locally manufactured
and blended fertilizers GoK, 2016.

National Agricultural Soil Management Policy
In the year 2016, the Ministry of Agriculture, Livestock and
Fisheries launched the National Agricultural Soil Management
Policy GoK, 2016.
The aim of the policy is to operationalize the Fertilizer and
Animal Foodstuﬀs ACT (Amendment), 2015 and
To fully implement the three tier cost reduction strategy
envisioned in the Kenya Vision 2030.
The delays in the bulk procurement of the subsidized fertilizer
persists, leading to low productivity in the sector.

Primary data

Secondary data
Import and export of fertilizer was obtained from the MOAFL
Time series data on fertilizer prices from the International
Fertilizer Corporation, Nairobi.
Data on the distribution of agro-dealers was obtained from
both AGMARK and Agri Experience Ltd in Nairobi.
Data on some price data were also collected from NCPB
regional oﬃces in North Rift.
Additional information was obtained through stakeholder
meeting held in KARI Headquarters, Nairobi.
Tegemeo Agricultural Policy Research and Analysis
(TAPRA)panel data was used to estimate the fertilize use
intensity.

Trends in Production
There is one single manufacturing company in Kenya
producing upto 40,000 MT of fertilizer annually 1.
Kenyan government signed an MOU with Toyota Tsusho in
2014 to manufacture fertilizer.
In 2015, Toyota Tsusho established Toyota Tsusho Fertilizer
Africa Limited (”TTFA”), a wholly owned subsidiary, and
proceeded to construct a fertilizer blending plant.
In collaboration with Moi University, TTFA is currently
conducting experimental tests at some 200 farms in the four
major agricultural counties in Kenya to produce a balanced
nutrition blended fertilizer suited to Kenyan soil and crops.
The Company has now developed new brand called ”Baraka
Fertilizer” now retailing in the market.
1
KEL Chemicals Limited Company located in Thika Kenya, produces Single
Super Phosphate (SSP) termed KELPHOS

Trends in Imports
Figure 4: Trends in imports in Kenya 1997-2016
Source: KNBS Economic Surveys

Streamgraph of Evolution of fertilizer imports
Figure 5: The evolution of quantity of imports and country of origin of
fertilizer imports in Kenya from 2006-2016
Source: MOALF Data

Trends in Export

Trends in Consumption
Figure 6: Fertilizer Consumption in Kg/ha from 1961-2014

Fertilizer use intensity

Evolution of aggregate prices
Figure 7: Trend of Ksh/50 Kg prices of various fertilizer types in Nairobi,
Kisumu and Embu between 2012-2015(monthly)
Source: IFDC Kenya

Figure 8: Trend of Ksh/50 Kg aggregate price of fertilizer in Nairobi,
Kisumu and Embu between 2012-2015(monthly)Bernard Kiplimo Lagat, PhD CEC Member Trade, Investment and Industrialization County Government of NandiOverview of fertilizer supply chain in Kenya

Figure 9: Trend of Ksh/50 Kg prices of various fertilizer types in North
Rift Region between 2006-2017 (annual)

Price margins

Import share of fertilizer in Kenya

Summary from of Agro-dealers

Cont.

Changing fertilizer market structure

Key constraints along the supply chain
Adulteration of fertilizer in terms of quality and quantity
standards;
Unhealthy competition from the Government subsidized
fertilizer through NCPB.
Seasonal availability of fertilizer of various types demanded by
farmers at all times;
High price volatility and supply;
Seasonality in demand for fertilizer especially during the
harvesting season.
Transport cost due to distance to the port of entry;
Cartels in fertilizer distribution controlling the availability of
fertilizer;

Key constraints along the supply chain
Corruption in tendering of fertilizer distribution by
government;
Limited storage space due to bulkiness of fertilizer.
Delay in import and distribution of fertilizer.
Limited access to fiance and credit due to high interest rates;
Hoarding by unscrupulous traders to create artificial shortage;
Compatibility of supplied fertilizer with the soil conditions of
the farmer;
Lack of small packaging for the small scale farmers;
Counterfeit fertilizer brands;
Insufficient research in the fertilizer sector to promote
recommendation of appropriate fertilizer types to farmers;
Fertilizers sales on credit leading to bad debts;
Competition from established traders.

Role of Government
One major threat to the development of the fertilizer supply
chain in Kenya is the increasing participation of the
government in the fertilizer market.
The government share of imports of subsidized fertilizer has
increased steadily from an average of 1.4% to 11% currently.
The continuous traditional government subsidies in the
fertilizer market crowds out the private sector players thus
hindering the growth and development of the sector.
Adulteration of fertilizer has also emerged as one another key
challenge in the fertilizer industry in Kenya.
The unscrupulous traders colluding with government oﬃcials
have been alleged to repackage or adulterate the government
procured fertilizers during the distribution targeting the
subsidized fertilizer.
This put into question the eﬀectiveness of the government to
monitor the distribution of the fertilizer to reach the intended
farmer.

Role of Government
During the stakeholders meeting in November 2016, at
KARLO HQ, two major challenges were identiﬁed as key
constraints in the supply chain:
high fertilizer standards developed by Kenya Bureau of
standards (KEBS) and
limited access to soil testing recommendations for farmers.
Emerging fertilizer import destinations with relatively cheaper
raw materials have a challenge in meeting the standards set
for the imports 2.
2
KEBS developed standards in order to promote safe use of fertilizers, fair
trade practices and ensure safety of consumers. When setting the standards,
KEBS pay special attention to the environmental aspect associated with
fertilizer raw-materials. They set the limits for heavy metal contamination of
Arsenic (As), Cadmium (Cd), Mercury (Hg), Selenium (Se) and Lead (Pb).
http://www.puntofocal.gov.ar/notific_otros_miembros/ken250_t.pdf

Other concerns
inadequate knowledge by extension service providers and input
suppliers on the importance of soil testing,
inadequate/un-aﬀordable soil testing services leading to
inappropriate use of fertilizers and
inadequate awareness, knowledge and skills in sound soil
management by farmers
high cost of fertilizer, despite lack of VAT on fertilizers in
Kenya, the cost of the fertilizer remain at unacceptably high
making it unreachable to farmers.
The current rates of application is estimated at 10 kg/ha
compared to the recommended 125 kg/ha (GoK 2016).

Conclusion
The market structure in Kenya has improved tremendously
during the last decade with the number of players in the
industry increasing by more than half in number.
Fertilizer importers and the proﬁle of origin of fertilizer
imports changed drastically during the last decade.
Fertilizer importers increased from an average of 60 to an
average of 90.
There was a shift within the last ten years in the countries of
origin from western countries to Middle East and Asian
countries.
Increasing competitive structure of the fertilizer market is also
outstanding downstream with the decreasing market margins
among the retailers, although the margins of the wholesalers
remain at unacceptably high possibly due to transportation
cost.
However, the growing share of the government subsidy could
erode the remarkable gains made in supply chain.
The current rate of fertilizer consumption stands at anBernard Kiplimo Lagat, PhD CEC Member Trade, Investment and Industrialization County Government of NandiOverview of fertilizer supply chain in Kenya

Conclusions
Ineﬃciency in the distribution is the one other key driver of
the high cost of fertilizer along the chain.
The government commitment to improve the transport
network and the eﬃciency of the Mombasa Port will play a
key role in reducing the cost of fertilizer handling and thus the
ultimate price paid by the farmer.
Adulteration and distribution of counterfeit of fertilizer
products in the market is increasingly becoming a major
challenge
There is increasing need to also monitor and test the quality
of distributed fertilizer downstream the chain to ensure that
the right quality and standard of fertilizer reach the farmer.
The government should also reduce its role in fertilizer
importation and distribution and embrace the ”market
smart” (input vouchers) subsidies as a sustainable solution.

Acknowledgment
Mr Edwin Oseko from MOALF, Input Division,
Dennis Mose, Database Administrator & Web Specialist at
IFDC, East and Southern Africa Division in Nairobi,
My colleagues in Agricultural Economics Department at Moi
University, Eldoret
Julius Rotich of OCP Kenya
Manuel Hernandez
Garcia Martinez, Mariana both of Markets, Trade and
Institutions Division at IFPRI in Washington DC.

J. Ariga and T. Jayne (2008) Kenya Fertilizer Policy Success Story:1990 to
2008. http://fsg.afre.msu.edu/kenya/Jayne_Tech_Convening_Addis.pdf
Joshua Ariga and T. S. Jayne (2008) Fertilizer in Kenya: Factors Driving the
Increase in Usage by Smallholder Farmers. http://siteresources.worldbank.
org/AFRICAEXT/Resources/258643-1271798012256/YAC_chpt_16.pdf
Betty Kibara, (2009) Trends and Patterns in Fertilizer Use by Smallholder
Farmers in Kenya, 1997-2007: A Success Story? Paper presented at the Future
Agricultures Consortium Workshop Fertiliser Subsidies: Lessons from Malawi and
Kenya Panafric Hotel, Nairobi 10 February 2009
IFDC, (2012) Kenya Fertilizer Assessment https://ifdcorg.files.wordpress.
com/2016/05/kenya-fertilizer-assessment-ifdc-2012.pdf
Mary K. Mathenge, (2009) Fertilizer types, availability and consumption in
Kenya. Paper presented at the 6th National Fertilizer Conference in Kenya, on
Towards Increased Use of Fertilizer and Improved Seed for Food Security and
Economic Growth, KARI headquarters, Nairobi, Kenya, August 20-21, 2009
http://fsg.afre.msu.edu/kenya/6th_Fertilizer_Conference-Tegemeo.pdf

Asante sana!

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