The Strategic Food Reserve (SFR) was established in 2015 and tasked with the responsibility of ensuring Kenyans have sufficient food stocks. The regulations governing the operations of the SFR are espoused in the Public Finance Management (Strategic Food Reserve Trust Fund) Regulations, 2015 (LN No 15 of 2015). The object and purpose for which the fund was established was to provide an SFR in physical stock and cash equivalent, where the ‘Strategic Food Reserve’ includes maize, beans, rice, fish, powdered milk, and canned beef. Specifically, the fund was expected to stabilize the food supply levels and prices in the country, arrange for procurement, storage, and sale of food commodities, maintain adequate strategic food reserves in physical stock or cash equivalent at any one given time and mobilize resources to support strategic food reserve-related activities. Subsequently, the Strategic Food Reserve Oversight Board (SFROB) was established under the same PFM Act (2012) and the SFRTF regulations of 2015 and mandated to provide oversight and policy direction to the fund.
The National Cereals and Produce Board (NCPB) had been established earlier as a State corporation under an Act of Parliament (Cap 338) of 1985 for related purposes. The logical argument to advance therefore is that the establishment of the SFR was informed by the inherent inefficiencies and poor governance at the NCPB, which then necessitated establishment and operationalization of a truly independent entity to effectively manage the country’s SFR. Consequently, and with a view to eliminate duplicity of effort, the SFR was expected to execute its mandate as outlined above while NCPB acts as its agent for purposes of storage and distribution. Surprisingly, the government last month embarked on the process of disbanding the Strategic Food Reserve Fund, advancing the argument that there was no point in having SFR and NCPB run as parallel entities. Treasury Cabinet Secretary Ukur Yatani, upon Cabinet’s approval and based on a recommendation of the Agriculture ministry, set the disbandment wheels in motion after publishing legislation revoking the laws establishing the food reserve fund, “The Public Finance Management (Strategic Food Reserve Fund) Regulations, 2015.
The proposed Public Finance Management (Strategic Food Reserve Trust Fund) (Revocation) Regulations, 2020, is now pending approval by the National Assembly. From an initial capitalisation of Sh2.2 billion at inception, the SFR has today accumulated a whopping Sh10 billion in its reserve account at the Central Bank. Logically, the SFR is one of the few profitable and justifiably sustainable government entities. One, therefore, cannot help but question the rationale for the Agriculture ministry’s recommendation to dissolve the SFR while proposing that its role be taken over by a moribund and notoriously inefficient NCPB, whose life history is a classic case of poor corporate governance. However, this move has sparked disquiet among integral stakeholders. The SFROB is outrightly opposed to the proposed dissolution, instead proposing strengthening of the trust fund into a full corporate body with a Chief Executive Officer to be managed under policy direction from the National Treasury or Office of the President as a national food security matter. The board’s argument is further aided by the fact that SFR is a key ingredient in the government’s food security thematic area of the Big Four agenda. Other stakeholders have also expressed fears that the proposed disbandment has been unduly influenced by cartels who have hitherto created artificial food shortages and subsequently benefited immensely from unscrupulous grain imports.
One anomaly is that the Agriculture CS is the administrator of the fund, yet the ministry itself is also represented on the SFR Oversight Board, which perhaps creates a fertile ground for conflict of interest. In a working legal framework, the administrator should not authorize the spending of a single cent without approval of the board. The proposed disbandment of the SFR comes amidst information filtering into the public domain that there has been a growing conflict and disquiet between the SFR on the one hand and the Ministry of Agriculture and NCPB on the other. For instance, in March 2020 the SFR sounded an alert that the country faced a looming famine because it was running out of maize, thereby necessitating import. This position was, however,” disputed by the Agriculture ministry. Ironically, we are now facing a looming famine due to depleted stocks — the SFR, which they now disbanded, was right after all. The SFR usually maintains a stock of about four million bags per year, which was already released into the market before the commencement of planting this year. As a matter of fact, the millers only had stocks that would last up to mid-April 2020. Ostensibly, the shelves would sooner than later be out of packets of maize meal. The situation has been worsened by the Covid-19 pandemic and the floods currently ravaging the country, which have led to a total collapse of the cereal/grain supply chain.
With the lockdown, both internally and across borders, the movement of food has been tremendously impaired. Consequently, we are already witnessing food price distortions in the market where some traders are taking advantage of the situation to charge exorbitant prices. The Ministry of Agriculture should focus on its core functional mandate of policy formulation, research, and dissemination of technologies, leaving the SFRF to be managed by a truly-independent oversight board and with the pre-requisite independence to effectively execute its mandate. The SFR should also be adequately funded to the extent that at any given time, it has in its possession either the minimum level of food reserve or its cash equivalent. The NCPB should continue acting as an agent of the SFR for purposes of storage and distribution.
Mr. Owalo is a Management Consultant specializing in Strategy formulation, implementation, and control