Nelson Maina: agricultural expert based in Kenya
The cost of living in Kenya has reached unprecedented heights, with commodity prices out of reach for many citizens.
This has been widely attributed to global shocks and the vagaries of the weather. The Russian-Ukrainian war and the sharp rise in fuel prices have been major reasons for the situation in which we find ourselves.
But these analyzes have remained largely silent on the shortcomings of the agricultural sector and how they fuel the current dire situation.
Kenyan food producers, most of whom are smallholder farmers, have had to deal with traditional threats to food production, including pests, diseases and climatic hazards.
Today, they face new challenges that are exacerbating food production shortages and ultimately fueling food insecurity and famine.
Critical agricultural inputs such as fertilizer sand seeds are crucial in agriculture and farmers are betting on them to achieve exceptional yields. Yet in a surprising move, fertilizer prices have risen from around Kshs 2,500 to around Kshs 6,000 over the past 12 months, keeping the vital commodity in dealer shops due to farmers’ inability to allow it. The result is the undesirable low yield and high cost of agricultural products due to the anticipated shortage.
Medium- and large-scale producers, meanwhile, are constrained by diminishing returns on investment and find it increasingly difficult to make a meaningful profit from the high cost of inputs. These could either stop using fertilizers or reduce application with the same effect – reduced production.
It is amidst this concern that the proposed amendment to the Value Added Tax (VAT) law to allow a 16% VAT charge on fertilizers threatens to raise the prices of agricultural inputs and reduce the affordability, but it also has the potential to raise food prices, a situation which would hurt an already overburdened population.
This will ensure that any disastrous consequences will be avoided and, more importantly, that Kenya will continue to ensure food security for all its citizens.
The cost and shortage of fertilizers is a global challenge right now for various reasons, mainly the war in Ukraine. Prices for the raw materials that make up the fertilizer market – ammonia, nitrogen, nitrates, phosphates, potash and sulfates – have risen 30% since Russia invaded Ukraine. In 2021, Russia was the world’s largest exporter of nitrogen fertilizers and the second largest supplier of potassium and phosphorus fertilizers, according to the Food and Agriculture Organization of the United Nations.
Proposals to scrap zero rates on fertilizers at a time when farmers cannot afford the already high prices have heightened fears that the country could exacerbate famine as smallholder farmers who make up the majority of producers plant without fertilizer due to high cost.
Farmers cannot afford to produce without fertilizer because the soils in our country have become tired and unproductive. But the rate of adoption and use of fertilizers has been dismal. Studies have indicated that the average rate of fertilizer application in various countries in sub-Saharan Africa, including Kenya, is dismal, which has had an effect on productivity and has more than tripled the food deficit.
A report by the African Development Bank shows that fertilizer use stands at 15 kilograms per hectare against the global rate of 137 kilograms and lagging behind the 2006 Abuja Declaration of 50 kilograms per hectare. The declaration was made by African leaders in 2006 to improve farmers’ access to affordable fertilizers and increase the level of fertilizer use.
Since the start of 2020, nitrogen fertilizer prices have quadrupled, while phosphate and potash prices have more than tripled
While farmers in developed markets have benefited from high agricultural commodity prices, helping to partially offset high input prices, demand destruction is increasingly likely due to high prices and supply shortages. .
Economies around the world are already facing historically high inflation due in large part to soaring food and energy prices. The United Nations Food and Agriculture Index shows food prices are at an all-time high, and Lawson suggested that a prolonged period of fertilizer shortages will affect long-term agricultural yields.
As Kenyan farmers grapple with many traditional and emerging threats including pests, diseases and climate change, access to critical inputs like fertilizer should be improved to ease their pain. The high cost of fertilizer means less planting and lower yields, which means more food imports and less local production, which will fuel food insecurity.
As the National Assembly begins to debate the Finance Bill 2022, it must be aware of the plight of farmers and reduce VAT on fertilizers to 0%, reduce import duties such as import declaration tax (IDF) and the Railway Development Tax (RDL) at 0 percent to save farmers.
But more importantly, the government should seek constant dialogue with actors in the agricultural sector, including farmers and the private sector, with the aim of finding sustainable and sustainable solutions that create an enabling environment for farmers to easily produce food and agriculture, the lifeline of the economy, flourish.