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A modernised grain trade, empowered small farmers

Saturday August 29 2015
maize

Grain farmers lack improved storage facilities, which affects the quality of their produce and, ultimately, their returns. PHOTO | FILE

Smallholder farming, milling, trading and processing form the lifeblood of the African economy. Smallholder farmers also contribute the largest percentage of the food that most East African citizens consume every day.

Maize, for instance, is a staple grain in Kenya; an average Kenyan consumes 98 kilogrammes of maize annually.

Each East African government should put the interests of its smallholder grain farmers at the centre of regional integration efforts but instead, grain farmers still have limited access to markets, technology, and information.

Grain farmers are forced to deal with high risks and accept the prices they are offered at the farm gate without adequate information; they lack proper quality assurance during transportation; they lack improved storage facilities — which affects the quality of their produce and, ultimately, their returns.

Farmers speak about unpredictable weather conditions, unscrupulous middlemen, high transport costs, poor warehousing infrastructure, and a lack of access to finance and insurance as factors that lock them in a circle of poverty.

Because it is a circle, the costs are transferred to the customers or consumers who pay higher prices for grain commodities. For example, maize prices in Kenya are among the highest in sub-Saharan Africa and Kenyan consumers just have to deal with it.

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Again, the result of the shortcomings in the grain value chain is inadequate investment in the sector, which act as a break on development and eventually widespread food insecurity.

New partnerships

With governments shifting from being subsidisers and providers to enablers, new partnerships are being formed between governments, the private sector and civil society, to provide inputs and extension services to farmers and link them to markets.

One new innovative food trade financing model, called the G-Soko platform, was launched at the beginning of August in Nairobi, bringing together grain farmers, millers, traders and banks from across East Africa.

Besides linking buyers to sellers of agricultural produce, through a network of certified warehouses, the G-Soko platform allows farmers to see the real grain prices in the country, then depending on whether they are pleased with these prices, they can choose to sell their  grain or store it safely, awaiting what they consider  favourable market prices.

Grain millers using this platform  are guaranteed quality grains, so have less or no hassle with the Kenya Bureau of Standards. They — like the traders — are able to use  the safely stored grain as collateral to access credit.

In the grain value chain, traders are a key stakeholder. If, for example, they are using G-Soko, they will end up with access to the regional market.

The G-Soko pilot programme in Kenya has engaged hundreds of small farmers, who have been loaned $3.5 million by five participating banks, and had 50,000 mega tonnes of grain traded through the system.

G-Soko’s aggregation centres and certified warehouses will store bulk goods, ensure quality, and provide storage and credit facilities.

In Uganda, where such a system is already in place, bulk buyers of maize can visit one market centre, rather than travel to different markets to pick up small amounts, as is the case in Kenya and Tanzania. As this demonstrates, regional integration is crucial in attracting financing for staple food trade.

The East African Community has developed 22 standards for staple grains across the region, which makes it easier for farmers to trade. Next, the establishment of commodity exchanges should be prioritised to attract private sector financing.

East Africa has all the ingredients to become a global agriculture powerhouse. Now the private sector, governments, and farmers are coming together to create innovative solutions like G-Soko.

With the support of the region’s leaders, we can modernise and grow our agricultural sector while empowering small farmers, millers, and traders.

Gerald Masila is the executive director at Eastern Africa Grain Council

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