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World Bank's COVID-19 Assistance to Kenya Benefits Multinational Agribusiness and Agrochemical Firms

Thursday, July 2, 2020
By: Frederic Mousseau and Andy Currier
Image: Kenyan tea farm. Image: Samuel Phillips
Image: Samuel Phillips

 

The World Bank and International Monetary Fund (IMF) have committed billions of dollars in loans to help countries respond to the ongoing COVID-19 pandemic. While some of these loans will be used to strengthen the capacity of health systems, the funding appears conditioned on countries adopting policies favorable to the private sector. World Bank President David Malpass has explicitly laid out the types of policy shifts that will be necessary for countries to receive support, stating in March, “For those countries that have excessive regulations, subsidies, licensing regimes, trade protection, or litigiousness as obstacles, we will work with them to foster markets, choice, and fast growth prospects during the recovery.”

“Kenya offers a striking illustration on how this conditionality materializes for a mostly rural economy in Africa…”

Kenya offers a striking illustration on how this conditionality materializes for a mostly rural economy in Africa, where the Bank is behind significant reforms and deregulation in the agricultural sector. On May 20th, the Bank approved US$1 billion to support the second phase of the country’s Inclusive Growth and Fiscal Management Development Policy Financing (DPF) Program. Hailed by the Bank as a timely response to the ongoing economic shock, the DPF loan aims to support affordable housing and expand access to agricultural inputs with a subsidy program that will allow farmers to purchase fertilizers, “improved” seed, and agrochemicals through electronic vouchers (e-vouchers) sent to their mobile phones.

While the proportion of the DPF loan that will be spent on the e-voucher program remains to be confirmed, the Ministry of Agriculture, Livestock, Fisheries and Irrigation announced before the onset of the pandemic that approximately US$500 million would be allocated to the input program. As of March 2020, the first round of the DPF e-voucher subsidies reached 86,000 farmers and the second phase of the program aims to reach 150,000 by 2021.

Kenya’s Policy Changes to Secure the Loan

According to the Bank, Kenya secured the financing by undertaking “policy reforms that directly benefit many low-income Kenyan households,” including measures related to housing legislation and changes to its agriculture input subsidy program. Since 2010, under the Bank’s guidance, Kenya has implemented an Agriculture Development Strategy with the stated goal of instituting “policy, legal and regulatory reforms so that individual farmers are encouraged to shift from subsistence to market-oriented production, and adopt greater use of modern farming practices.” Through these reforms, Kenya has committed to the Bank’s doctrine of private sector led development by creating an enabling environment conducive to industrial commercial agriculture.

Historically, the public sector played a key role in distributing inputs in Kenya as the National Cereals and Produce Board (NCPB) used to procure and distribute fertilizer at subsidized prices through its 180 depots. Starting in the 1990s, Kenya undertook several reforms to liberalize the sector, eliminating price controls and phasing out fertilizer distribution programs. As a result, Kenya has seen the role of the private sector steadily increase.

The two World Bank DPF programs have now effectively eliminated the government’s role in procuring and distributing fertilizer. The DPF program was initiated with the goal of “reducing” the role of the government in input markets to help crowd-in private investment. The same day the World Bank approved the second phase of the program, the Ministry of Agriculture announced that the government would no longer buy or sell maize seeds and fertilizers. With the new “smart” e-voucher system, farmers will be able to access inputs at the nearest private agrodealer rather than from the public depots.

Who Benefits from the E-Voucher Input Subsidies?

With the e-vouchers, Kenyan farmers will have to buy their inputs from the handful of corporations active in the sector. Regarding chemical fertilizers, which constitute the bulk of the inputs, Yara East Africa, MEA Limited, and Export Trading Limited – the largest importers of fertilizers in the country – are likely to be key suppliers of the program. MEA Ltd’s subsidiary Fertiplant  is in the process of completing a factory expected to produce 100,000 Metric Tons (MT) of fertilizer per year. Other notable fertilizer players that are likely to benefit from the program are Toyota Tshusho, who completed a blending plant in 2016 with a production capacity of 150,000 MT and Mavuno Fertilizers, another large producer.

The e-voucher program will also serve the interests of the multinational seed corporations, which are aggressively seeking to expand their control over Kenya’s seed market. Syngenta is planning to increase sales of its “high-quality” seeds and agrochemicals to 160,000 farmers. Monsanto, now owned by Bayer, continues to push for policy changes in Kenya that will favor the sale of the commercial seeds. This expansion of commercial seeds, financed and encouraged by the World Bank, is happening at the expense of informal seed systems that offer farmers diverse and resilient crop varieties in a reliable and affordable manner. There is ample evidence that such informal systems, reliant on sharing and saving diverse and locally adapted seeds by farmers, are more effective and should be strengthened instead of being undermined.

Input Subsidies: A Failed Approach

The Bank claims that the e-voucher program will increase food security as smallholder farmers gain increased access to chemical fertilizers and commercial seeds. Yet, despite some short-term production increases, evidence of improved welfare for farmers receiving input subsidies in the long run remains scarce, as the use of chemical fertilizers pollutes the environment and depletes the land’s nutrients – requiring more fertilizers each year to produce at the same level. This creates a dead-end for farmers across Africa, as incomes and food security don’t improve while their soil loses fertility overtime, requiring higher expenses on fertilizers every year.  As the climate crisis escalates, doubling down on the use of fossil fuel based synthetic fertilizers is simply not a sustainable approach. Furthermore, it is deeply disturbing that public money is lent to an African country so that it can be used to buy agrochemicals from corporations that pocket the funds while Kenya is driven deeper into debt.

“Numerous agroecological alternatives exist and have proven to increase yields and soil fertility in Kenya without the use of chemical fertilizer.”

If the World Bank and the Kenyan government truly wanted to support family farmers, they have a wealth of evidence demonstrating the effectiveness of agroecology to draw upon. Numerous agroecological alternatives exist and have proven to increase yields and soil fertility in Kenya without the use of chemical fertilizer. Nearly 200,000 resource-poor smallholders in East Africa who implemented an ecologically based “push-pull” system saw maize yields triple without relying on costly inputs. In another initiative, the Manor House Agricultural Center has trained hundreds of thousands of farmers in “biointensive” farming techniques, resulting in improved soil fertility and increased production, with fewer expenses on farm inputs. Investing in a model of agriculture centered on scaling agroecology and empowering farmers offers the only clear path forward.

Image: Farmers prepare compost
Farmers prepare compost, an alternative to chemical fertilizers that has boosted production sustainably in Kenya. Image: Manor House Agriculture Center

 

The e-voucher program benefits a handful of multinational input suppliers while little is done to create a sustainable, effective, and equitable model of agriculture in the country. Instead, farmers are left reliant on subsidies and the government falls further into debt, constrained from pursuing sustainable alternatives. Despite the unprecedented nature of the pandemic, the Bank continues to drive  “private sector solutions to development,” under the faulty assumption that catering to multinational companies will trickle down and benefit all. Kenyans deserve better and cannot be left stuck in the same cycle of debt, dependence, and poverty.

Author

Frederic Mousseau photo

Frederic Mousseau

Frédéric Mousseau is the Policy Director at the Oakland Institute where he coordinates the Institute’s research and advocacy activities on land investment, food security and agriculture. He has conducted numerous reviews and studies on food and agriculture and authored many reports and articles on these issues. Trained as an economist, Frederic has worked as a staff member and consultant for international relief agencies for nearly two decades, including Action Against Hunger, Doctors Without Borders, and Oxfam International.

Andy Currier headshot

Andy Currier

Andy is a Research Associate supporting the Institute’s work on land rights, food sovereignty and international development.

He holds a Master’s Degree in Public Policy from the UCLA Luskin School of Public Affairs with a concentration in Global Environment and Resources. Andy’s past research experience centers on evaluating strategies for developing countries to adapt to the impacts of climate change with a focus on agroecology and sustainable seed systems.