Kenya is mulling a credit guarantee scheme to encourage farmers to raise production as 26 countries move to eliminate cross border barriers on goods.
Vision 2030 director-general Julius Muia said the loan guarantee framework being worked out will target export producers, especially those eyeing the Tripartite Free Trade Area (TFTA).
“The loan guarantee scheme framework is aimed at upscaling production since it would form a good base for industrialisation through agro-processing and product diversification,’’ said Dr Muia.
Due to agriculture’s dependence on unpredictable weather and volatile markets, traditional risk-averse financial institutions have over the years scaled down their lending to the sector.
The state-guaranteed loans are expected to finance production and cross-border integration of value chains. The TFTA launched last year comprises the East Africa Community (EAC), the Southern Africa Development Community (SADC) and the Common Market for Eastern and Southern Africa (Comesa).
All the 26 member states of the TFA have undertaken to accord no special treatment to agriculture trade, allowing farmers to sell freely in the 632 million-people market.
The countries — stretching from the Cape of Good Hope to the Mediterranean Sea — are also banking on cross-border infrastructure development to reduce the cost of doing business and facilitate the movement of goods, people and services.
Philip Makheti, director of markets development at the Agriculture ministry, said there was need for member states to upscale their capacity to reap full benefits of the expanded market.
“Adopt grades and standards to streamline trade in agriculture produce as well as use market intelligence information systems such as G-Soko to inform players on real-time market dynamics,” he said at a recent TFTA regional dialogue forum held in Nairobi.
The forum was organised to take stock of progress of ongoing negotiations aimed at merging EAC, Sadc and Comesa into a single custom union.
The grain sector players see a single custom union stretching from Port Alexandria on the Mediterranean Sea to Port of Cape Town in South Africa as an import market for their produce.
A study by the Eastern Africa Grain Council (EAGC) shows that intra-Africa trade among the 26 counties increased by 140 per cent over a five year period, from Sh6.2 trillion ( $62 billion) in 2008 to Sh9.8 trillion dollars in 2013.
The report, dubbed ‘‘Agribusiness Policy Environment in TFTA Member States in the Context of Risks and Opportunities in the TFTA Focusing on Grain Value Chain’’ was tabled and discussed.
Play an active role
EAGC executive director Gerald Masila called on value chain players to position their investments and play an active role in policy formulation.
“This would guide and protect your investment with the goal of boosting trade and economic wellbeing for residents, who are producers and consumers in the expanded TFTA market environment,” he said.
TFTA held its inaugural tripartite summit in October 2008, which resolved to work towards accelerating economic growth, poverty reduction and economic development sustainability.
Earlier, during its third tripartite summit in June 2015, members signed the declaration launching TFTA, resolving to prioritise on a roadmap towards industrial and infrastructure development pillars.
TFTA is different from previous attempts to have a single custom union as it brings together countries that are already implementing the free trade area (FTA).
Another factor making it different is its aim of addressing key challenges facing Africa such as overlapping memberships, alleviating poverty and sustainable economic growth.
Among outstanding issues in the TFTA agreement to date include low ambition on tariff liberalisation, trade remedies and rules of origin.