Cash-strapped Kenya barters for maize

Small farmers: Offered 'in kind' deal for their maize

Kenya's National Cereals and Produce Board (NCPB) has initiated a radical 'in kind' payment system for small scale maize farmers after running out of money to pay them directly for their produce.

We have spent all the money we had to pay for deliveries. If we continue without paying the farmers then we will have a problem next year

Dr Julius Rotich
NCPB

Farmers will now receive seed, fuel and fertiliser directly from Kenya Seed Company, Norsk Hydro and Caltex Oil (Kenya) instead of cash.

"We came up with this interim support package where we have gone directly to suppliers of seed, fertilizers and fuel and agreed with them to supply (to farmers) on credit, which we would guarantee," Dr Julius Rotich, managing director of the National Cereals and Produce Board, told the BBC's World Business Report.

"When we get the funds, we will pay where farmers have incurred expenses."

Supporting farmers

In the past, the NCPB has always played an important role in the Kenyan farming community by buying the crops of small farmers at a guaranteed minimum amount.

The organisation then sells them on at a profit when prices are high and uses those profits to guarantee the minimum when prices are low.

"We have spent all the money we had to pay for deliveries," said Dr Rotich.

"If we continue without paying the farmers then we will have a problem next year."

The small farmers rely on the proceeds to buy seeds, fertiliser and fuel for next year's crop.

The board has already bought 2.6 million bags from farmers, out of which payment for only 1 million bags has been made.

The board has not yet raised the 1.5bn shillings (£13.5m) it owes to thousands of farmers.

Competition blues

The system was good for small farmers and it effectively prevented competition in this crucial industry, but liberalisation has changed all that.

The NCPB must now compete to buy crops and it faces stiff competition from private traders.

It comes just at the when a bumper harvest has created a surplus of maize.

"We have been trying to sell commercial stock but have not been able to because the market is down and the same customers who would buy from us are competing directly with us," said Dr Rotich.

As a result, the NCPB ran out of money because it could not sell its stockpile.

"The money is coming because the government is continuing to give us full support and we are trying to sell some of the stock we have and we should fill some orders next week," he said.