State seeks strategic investor for Sh38bn fertiliser plant


A farmer applies fertiliser to his crop. The government is seeking an investor to build and operate a Sh38 billion fertiliser factory that will lower the price of the commodity and meet high demand in the region. / Picture: Anthony Kamau

The government is seeking an investor to build and operate a Sh38 billion fertiliser factory that will lower the price of the commodity and meet high demand in the region.

The Ministry of Agriculture on Tuesday advertised an international expression of interest (EOI) for the project expected to kick off before March and be complete in 2015.

The call confirms the government’s resolve to exclude its Tanzania and Uganda counterparts from the project which was initially planned as a joint regional venture based on the availability of raw materials in the bloc.

East Africa imports all its fertiliser following the collapse of plants in Tanga (Tanzania) and Tororo (Uganda) which used to supply the region.

This has resulted in fluctuating supply and prices which hurts farmers. Other plants in Malawi and Zimbabwe closed down too. “Agricultural production in Kenya is hampered by low level of inputs use and this is particularly the case for fertiliser whose price is generally high and unaffordable for small-scale farmers who constitute 70 per cent of food producers,’’ states the Agriculture ministry PS, Dr Romano Kiome, in the EOI advert.

A feasibility study by the Maxwell Group estimates that the factory will meet the region’s demand of 1.26 million tonnes of fertiliser by 2030, if implemented as planned.

Di Ammonium Phosphate (DAP), Calcium Ammonium Phosphate (CAN), and a range of NPK fertilisers will be manufactured at the factory.

Project bidders are required to demonstrate ability to undertake the project by giving details of past clients and projects as well as successful past partnerships.

They will also have to furnish the government with plans on how they will finance the project, their proposed ownership stakes, construction timelines and expectations from the government during period. It is unclear whether the government intends to own a stake in the factory or whether the partner investors will fully own it.

Kenya’s fertiliser demand is the highest in the region. Its 2010 demand of 446,800 tonnes is expected to rise to 543,258 tonnes in the next eight years, a 21.5 per cent increase.

The Economic Survey 2011 shows that Kenya imported 522,200 tonnes of the commodity, a 51.3 per cent increase from 344,986 tonnes in 2007.

The value of imports over the same period jumped from Sh8 billion to Sh23 billion last year, a 187.5 per cent increase. High local fertiliser demand, and cases of shortages such as the one experienced in March when thousands of bags were delayed at Mombasa port, affect farming activity in the country and inflate prices.

Currently, the National Cereals and Produce Board (NCPB) is distributing subsidised government fertiliser to farmers at Sh1,600 for a 50kg bag of CAN.

A similar bag of DAP is retailing at Sh2,500 while private stockists sell it at about Sh5,000.

“The overall objective of the assignment (EOI) is establishing a fertiliser plant in the country thereby bringing down costs to the farmer and also exploits the vast potential market that exists in the East African region,” adds the EOI advert.

Legislators have been pushing the government to fast-track construction of the facility, saying that it would lead to a decrease in prices of the commodity in the country.

“The committee concurs with the public that the price of DAP should not be more than Sh1,600 per 50kg bag and that of CAN should not exceed Sh1,000 per 50kg bag,” noted the Agriculture parliamentary committee in March.

“Small-scale farmers should also be given farm inputs including seeds and fertiliser free of charge Construction of the plant is the country’s second attempt at having an operational local plant after a failed attempt in 1975.

The government at the time entered into a deal with N-Ren –an American firm – to set up KenRen Chemical and Fertilisers Ltd that was to produce fertilizer for both the domestic and export market.

The factory, of an annual capacity of 220,000 tonnes, was, however, liquidated three years later and government is to date making payments to Austrian and Belgian financiers owed over seven billion shillings.

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