Kenya’s largest suppliers of fertiliser have come under sharp spotlight for allegedly using their grip on the market to overprice the essential farm input by up 142 percent, raising the cost of agricultural production.
The Comesa Competition Commission has flagged Yara and ETG for using their controlling market position to gouge prices and unfairly raise mark-ups.
“The large companies appear to work closely together, sharing shiploads at times and appear to prepare monthly cost build-ups using standard costs from benchmarks. The companies are able to track market shares quite closely, appearing to reflect high levels of information exchange in this concentrated market,” the watchdog wrote in a report on fertiliser markets in East and Southern Africa.
“The market outcomes reflect prices which have not reduced in line with international prices and increased mark-ups to Kenyan buyers. A similar trend was observed in 2012.”
An investigation by the Comesa market watchdog found that farmers were buying a metric tonne of urea, a top-dressing fertiliser, at an average of $1,200 (about Sh156,000 or about Sh7,800 per 50-kilogramme bag) from agro-dealers in 2022, 59.4 percent more than $753 average international prices.
The cost for urea, however, remained elevated, selling for more than $800 per tonne in May 2023, 142.4 percent more than international prices, which had since fallen to $330 per tonne.
Subsidised fertiliser
Yara and ETG, which together control as much as 80 percent, source fertiliser in bulk from Russia, Norway, Romania and the Middle East before bagging it at facilities near to the port of Mombasa.
The bagged fertilisers are then sold to small traders, who then sell the key farm input through networks of agro-dealers across the country.
The remainder of the fertiliser import market is controlled by the OCP Group.
“The position of the two leading suppliers has also been reinforced by being the only firms contracted under the fertiliser subsidy programme to supply large volumes,” the report states.
“In addition, there are substantial barriers to being an effective supplier related to being able to source large volumes in shiploads and organise the finance and logistics to offload in Mombasa and bag for supplying onto agro-dealers.”
The fertiliser subsidy programme was at the top of President William Ruto’s agenda when he took power in September 2022, at a time when the country was grappling with record high prices for the staple food maize meal.
This was largely due to a biting drought, estimated to be the worst in four decades, and disruptions in global supply chains following Russia’s brutal war in Ukraine, which pushed up the global fertiliser prices to record levels.
The government's price cushion helped cut the cost of a 50-kilogramme bag of subsidised fertiliser from a high of Sh6,500 to Sh3,500 initially before falling to the current level of Sh2,500.
“This year we have procured and through e-vouchers distributed seven million bags of both planting and top dressing fertiliser to boost food production across the country,” Dr Ruto said when he delivered the State of the Nation Address on Thursday.
“This intervention will see a projected increase in maize production to a record of 74 million 90kg bags. We have also concluded long-term agreements with eleven suppliers of assorted fertiliser so as to make this commodity available all year round.”
