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Kenya's Cereal Sector Reform Programme: managing the politics of reform
EWORTHMANN
Food Policy, Vol. 20, No. 6, pp. 573-584, 1995 Copyright (~) 1995 Elsevier Science Ltd Printed in Great Britain. All rights reserved 0306-9192/95 $10.00 + 0.00
0306-9192(95)00050-X
Kenya's Cereal Sector Reform Programme: managing the politics of reform Peter M. Lewa and Michael Hubbard 1
School of Public Policy, The University of Birmingham, Birmingham B15 2 TT, UK The political aspects of reform have been underplayed in structural adjustment programmes. The problematic and inconsistent implementation of Kenya's Cereal Sector Reform Programme (CSRP), it is argued here, is substantially the result of failing to manage the politics of reform. Good political management of the reform process would have included ensuring a clear understanding by interest groups of the likely consequences of liberalisation, and full involvement of the President and Cabinet from the outset in order to create an ongoing reform culture.
Keywords:cereals, Kenya,marketing, adjustment, milling, politics
This paper examines the reform of the maize milling industry of Kenya under liberalisation of the maize market. Maize market liberalisation has been implemented under the auspices of the EC sponsored Cereal Sector Reform Programme (CSRP) from 1988. 2 CSRP is one of a number of reforms within the overall framework of structural adjustment programmes (SAPs). Kenya's implementation of the CSRP has been inconsistent and problematic owing to political interest groups who have influenced the reforms (Gibbon et al., 1993). When policies of SAPs began to be advocated in the early 1980s, the discussions of the political aspects were not on the formal agenda (Toye, 1992). Yet politics is a key factor in the reform process (Krueger et al., 1991; Mosley et al., 1991; Krueger, 1992, 1993; Bates and Krueger, 1993), as the CSRP experience bears out. The main contention of this paper is that the inconsistency in implementation of the CSRP is substantially the result of neglect of the political dimension in the reform process, with no culture of reform being developed in the pre-reform period. Specifically, it is suggested that if the designers and managers of the CSRP had taken the trouble to provide adequate information on the expected benefits of the reforms, the process would have received more consistent support. This is JThe authors are both from the School of Public Policy, University of Birmingham. The research upon which this paper is based was funded by the European Commission. The views are those of the authors alone. 2The EC had the largest component in the reform of the maize market but other donors such as the World Bank, the IMF and U S A I D were also involved.
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evident from the behaviour of market actors, particularly the sifted maize millers and politicians with stakes in maize milling and the food distributive trade, who opposed reforms initially but later supported them. The paper does not suggest that real conflicts of interest resulting from the reforms are absent, nor that all consequences of the reform were predictable. But absence of full backing by the President and Cabinet, and lack of understanding by all interest groups of the likely benefits and costs, did create uncertainties and conflicts of interest which turned out to be more apparent than real. These contributed to inconsistent implementation and avoidable conflict between donors and government. It is suggested that managing the politics of reform is a task that was neglected and should be explicitly incorporated in such programmes.
Background Attempts to open the grain market in Kenya to private trade go back to 1944. Such attempts have always been beaten back by political opposition at the highest levels of government (The Courier, No. 114). The World Bank, in the early 1980s, had pressed for maize market reform without much success (Mosley and Smith, 1989; Mosley et al., 1991). 3 The official maize marketing arrangements in Kenya constitute a wellestablished interest of large farmers, including the President (Toye, 1992). The large farmers are an important part of the President's agricultural power base (Mosley et al., 1991).4 The National Cereals and Produce Board (NCPB) has been long established at the centre of the maize marketing system, controlling the purchase of maize from farmers and sales to millers. It has been a source of political patronage for various interests (in farming, transport and milling) and persistently resisted reform attempts to abolish its maize monopoly (Financial Times, 1 November 1993). The liberalisation of the maize market amounted to a challenge to deeply entrenched interests for it meant loss of patronage and loss of rents that accrue from the Board's existence (Weekly Review, 25 November 1994; Gsaenger and Schmidt, 1977; Schmidt, 1979). The main attraction of CSRP for GOK was the promise it held of reducing the heavy budgetary costs of running the strategic grain reserve. From the outset, the Office of the President (OOP) and hence the Cabinet were not fully involved in planning for the CSRP, since it was left to the Treasury, Ministry of Supplies and Marketing (MSM), and the NCPB. 5 When the CSRP began to be implemented, the Board used its power to prevent any moves it considered not workable. It could get away with this because high level support for the reform, through active participation by other key ministries and departments as well as the Cabinet, had been lacking at the beginning. 6 3Other donors such as the USAID also pushed hard for reform of the maize market in the 1980s. 4Other vested interests such as bureaucrats, ruling party supporters and NCPB are also important in Kenya's agriculture (Heyer et al., 1976; Cowen, 1985; Bates, 1981, 1989; Lofchie, 1989; Mosley et al., 1991; Toye, 1992). 5The government had never publicly supported reforms. Support was officially publicly given by President Moi in 1995 and subsequently by the ruling party. This political support came 15 years after the first structural adjustment loan (SAL) was given. Political support had, thus, been lacking all the time since SAPs began in Kenya in 1980. 6Other key ministries and departments, such as the Ministry of Cooperatives and the Central Bureau of Statistics (CBS) were incorporated into the Technical Committee of the CSRP long after the programme had started.
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The constitution of a High Level Committee (HLC) of the CSRP in 1988, consisting of the Permanent Secretaries of key ministries, was important for the support of the programme. However, the ongoing support of the Cabinet was not strictly speaking involved, as the NCPB closed other parties out of the decisions to decontrol the maize market through its management of the CSRP. Indeed, NCPB and the MSM steered CSRP forward almost to the exclusion of the other ministries and departments. 7 The agreement on the implementation of CSRP, signed between the Government of Kenya (GOK) and the EC, did not explicitly address the reform of the maize milling industry, as is evident from the omission of the milling industry from the agreement. There was an assumption that once NCPB was reformed then the milling industry (the NCPB's captive market and the largest buyer of officially marketed maize), would automatically be reformed. Permitting millers to procure maize directly from the private sector, thereby bypassing the NCPB, was the most contentious area of policy reform (Smith, 1993), with politicians having stakes in maize milling opposing the reforms. This opposition began to die out once benefits of reform began to be realised, as discussed below.
The components of the CSRP Three key CSRP components address maize market liberalisation and hence the reform of the maize milling industry. These are decontrol of the maize market, restructuring of the NCPB, and market development. Each of these is briefly examined below. Decontrol of the maize market Decontrol of the maize market involved raising the number of bags that could be moved without a permit. 8 The limit to be moved without a permit was raised from 2 to 10 bags of 90 kg each in September 1983, lowered to 2 bags in 1984 during the severe drought of that year and due to donor pressure raised to 44 in February 1991, then to 88 bags in June 1992. 9 Even though maize millers were free to buy directly from farmers and private traders during periods of decontrol, the NCPB required those supplying the millers to do so on the basis of permits so that the supplies could be monitored (Argwings-Kodhek et al., 1993).1° Millers suspected of accepting maize from other sources were threatened with deregistration and many others were refused permits to enable them to buy maize 7The above experience is similar to that of the World Bank initiative in the early 1980s. At that time, a triumvirate of three enthusiastic bureaucrats, the Central Bank Governor, Permanent Secretary Treasury and Permanent Secretary-OOP, pushed for reform, almost making the Cabinet redundant (Mosley et al., 1991). It was left to the President, without the vital support of his Cabinet, to sanction policy which the three proposed. 8Farmers, private traders and consumers had been allowed, since the beginning of controls in 1940, to move up to two bags of maize out of the district of origin without a permit from the district commissioner (Mosley et al., 1991). 9Movement of maize was banned in October 1992 before the multiparty elections of December 1992 and was not lifted until the end of the following year. It was alleged that this was meant to assist those supporting KANU by giving them movement permits. 1°Freedom to move maize without permit and for millers to buy outside the Board, had been granted on several occasions before CSRP during bumper harvests, but was always withdrawn thereafter, because NCPB was unable to sell accumulated stocks (A.D.E. 1993). Food Policy 1996 Volume 20 Number 6
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where it was available.Jl For example, the giant Machakos District Cooperation Union (MDCU), owner of a modern large scale maize mill, wrote to the Board in September 1993 demanding either to be allocated enough maize or to be allowed to buy it elsewhere (NCPB, 1994). t2 Provincial administration officers, allegedly under NCPB's instructions, continued to ban maize movement in their areas. The police too ignored the freedom to move maize and continued to harass traders (Daily Nation, 4 February 1991; Argwings-Kodhek et al., 1993; Jones, 1994). The rules for maize movement, when 44 and then 88 bags were allowed to be shipped without permit, were never made explicit (Smith, 1993). The legislation was confusing, the mechanism for implementing it was lacking, and information was not made public. This increased rent seeking opportunities and bribery. Licences for interregional maize movements have been an important source of political patronage (Toye, 1992). Those licensed to ship and sell maize sell at inflated prices by exploiting their monopolistic positions (Toye, 1992). The pressure from such interests explains why the GOK has resisted decontrol over the years in spite of its own admission that control on movement increased the costs of the marketing system (Maize commission of enquiry report 1966; National Food Policy Paper 1/1981, 2/1994; Development plan 1984-1988, 1989-1993, 1994-1996, Sessional paper 1/86). Increased freedom from 1993 to import and also to ship maize without permit, began to change the mode of operations in the maize market and the maize milling industry. The milling industry and private traders swiftly moved to import maize, after President Moi personally announced that maize import controls had been abolished (Financial Times, 1 November 1993). The President's move was not only a victory for donors who had been pushing for this vital reform but was also prompted by lack of foreign exchange and crop failure (Weekly Review, 25 November 1994). By now millers and private traders had started to support reform and demanded guarantees that restrictions would not be re-imposed (Weekly Review, 3 February 1995). For example, the group Managing Director of the largest milling concern, voicing his company's concern over the uncertainty of government policy with regard to controls, had the following to say in May 1994j3 " . . . as you are aware the private sector has committed large funds on wheat and maize imports after reassurance that controls will not be re-introduced.., we have no choice but to stop further commitments until the picture is c l e a r . . . " . Other millers reported similar complaints (millers' seminar, 1994).
Restructuring of the NCPB NCPB's accumulated deficits and debts were written-off at the start of the CSRP, ~lDuring a millers' seminar in March 1994, millers said that one of the greatest problems of dealing with the Board was poor quality maize (rotten, high moisture content and discoloured). The other main problems were delivery of underweight maize and favouritism towards certain millers during times of maize shortages. leThe M D C U ' s General Manager informed the first author in an interview in May 1994 that the NCPB was supplying them only 1000 bags per week as opposed to their daily requirements of 2700 bags yet at the same time it was refusing them permits to go to Kitale for maize which they had negotiated for. Subsequent appeal to the Minister for his assistance in the matter did not bear fruit (NCPB, 1994). 13This followed a public announcement by the President that the G O K would review the whole issue of reforms and controls for they had hurt consumers. The message was in a strongly worded fax to the World Food Programme.
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thus improving its credibility with financiers. However, by 1993 the balance sheet had degenerated due to fewer and fewer subventions from the GOK and the Board's financial indiscipline. Therefore, the Board relapsed to the same problem of inability to pay farmers (The Economic Review, 13-19 September 1993). The farmers increasingly turned to direct sales to millers, thereby abandoning the Board. However, the Board still retained control over millers' activities through issuance of permits on the movement of maize meal.14 Management reorganisation at NCPB aimed at improving the calibre of senior management through external recruitment, staff training, new salary packages, retrenchment of staff at the lower cadres and recruitment of senior staff. This was necessary following mass sacking of senior staff in 1988 (Mosley et al., 1991) due to alleged corruption. 15 However, a new organisation structure was not defined until 1990, and the Board resisted recruiting skilled personnel from outside sources (A.D.E., 1993; CSRP Monitoring and Evaluation Reports). There were higher staff numbers after the programme was implemented than at the beginning (CSRP Monitoring and Evaluation Reports; A.D.E., 1993). 16 The Board did not provide counterparts to understudy expatriate staff in key areas such as planning, information, transport and financial management (A.D.E. Study, 1993; CSRP Monitoring and Evaluation Reports). The Board argued that no suitable candidates could be found. Accounting and financial management improved during the period expatriate staff worked at the Board. For some time, timely and accurate information was available to the ministries involved in the reform of the Board (MSM, 1992; MOALDM, 1994). However, when the technical assistants left, the systems could not be sustained because there were no skilled people in the Board to take over. There has been no progress in establishing a framework to ensure accounting and financial discipline at the Board. Network rationalisation involved closing some local buying centres (LBCs) and selling or leasing some depots. Initially, many buying centres were closed but depots increased in number (CSRP Monitoring and Evaluation Report No. 13, June 1992). Selling or leasing depots was not considered politically feasible. Politicians successfully petitioned the authorities to stop the closures, and even succeeded in getting more buying centres opened. Transport rationalisation involved developing the Board's forecasting capacity, and improvements of the public railway system particularly through investment in rolling stock and locomotives, and funding the Board to acquire its own custombuilt wagons. This never happened as the EC pulled out its support of several components of the CSRp.17 The Board has not been able to use the supposedly cheaper, bulk transport by rail. ~8 Strong competition amongst road hauliers has enabled maize millers to get competitive rates for transportation of maize and this HPricing is still controlled, with maize meal prices set by policy as "indicative prices". Competition and the irrelevance of such prices have led millers to ignore them. The consumer in 1995 is paying lower prices than the controlled ones. ~SAnecdotal evidence suggests that those affected by the "widespread sackings among middle management" (Mosley et al., 1991) were not from the new MD's area (Rift Valley). I~'It was politically difficult to reduce staff numbers. ~TThe EC pulled out its support, as did other donors, to force the G O K to adopt a multi-party system of government. Training of staff and support of the private sector suffered a similar fate. This made the G O K sceptical and question how serious the EC and other donors were regarding reform. ~SOnly 50% of Kenya railways locomotives and 60% of its wagons are serviceable at any one time. For bulk wagons there is only 2(I to 30% availability ( A . D . E . , 1993:68).
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has meant obtaining maize at competitive rates too. 19 A Crop Purchase Revolving Fund (CPRF) initiated by the EC to improve the Board's cash flow for crop purchases improved the liquidity position of the Board. Initially, it helped in paying farmers promptly, in funding operating losses and enabled the Board to compete for maize supplies with the private sector. However, with huge stocks of maize, the Board began to have problems of disposal. The problems with the CPRF were that it was introduced without any clear protocol, and was placed under the management of the Board. It comprised part of the Board's finances, was not accounted for separately, was not used as envisaged for purchases of maize only, and there was no mechanism in place for enforcing its correct use. Smith (1993) rightly observes that, because of the above problems, it was leaking like a sieve. NCPB's role of buyer and seller of last resort as envisaged when reforms were launched has not been defined. Indeed, as Argwings-Kodhek et al. (1993) observe, NCPB has demonstrated remarkable staying power despite much criticism and official acquiescence in donor-sponsored policy reforms. The Board's support of the CSRP was lacking from the beginning because it did not see a "win situation" in the reforms. With inadequate subsidies from the government, the Board's fears that it would lose under reform looked justifiable.
Market development Market development involved allowing and supporting the private market actors to perform some of the roles that used to be the prerogative of the Board. At the start of CSRP in June 1988, traders and cooperatives were allowed to start buying limited quantities of maize directly from farmers for supply to sifted maize millers. 2orLicences were granted to them but there was no agreement on how the 20% target of millers' intake they were expected to meet were to be enforced (Gibbon et al., 1993). The millers abandoned the Board since they could get cheaper supplies from the private sector. The Board could not sell its stocks. This led to a rescinding of the decision on 5 August 1988 (Gibbon et al., 1993; Mosley et al., 1991). Soon after, it was announced that only the NCPB and the Kenya Grain Growers Cooperative Union (KGGCU) 21 would be allowed to buy maize from farmers. The reason given was that the Board had to have sufficient stocks for food security and that it would enable it to collect loan dues from the farmers, a role it played on behalf of the Agricultural Finance Corporation (AFC). 22 Private traders and millers were allowed to ship maize again without permit in 1991. They abandoned the Board again. Pressure from the Board, senior politicians and large farmers led to banning of movement again in October 1992. The government in the face of pressure from these vested interests, revoked licences given to private traders and millers (Financial Times, 8 January 1992). Drought, ~gThis partly explains why the millers have abandoned NCPB despite the fact that some are connected to NCPB stores by conveyor belts. Another reason is the poor quality of maize from the Board which in the ~art forced some mills to close down to safeguard consumer loyalty (millers' seminar). qn addition to this, minor crops such as peas, millet, sorghum and pulses were freed from government control in 1991. Beans followed in 1992 and rice in 1993. 21The K G G C U was created in July 1984 allegedly to give more control over maize marketing to the surplus maize growing farmers from the Rift Valley. The involvement of K G G C U in maize marketing was a political act to show donors that the G O K was willing to abolish NCPB's monopoly. 22The AFC, remains, just as it was in colonial times, a powerful instrument for redistributing income to large farmers. It suffers from chronic loan defaulting (see for example Mosley et al., 1991).
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growing political unrest, ethnic violence and fear that the opposition would sabotage food supply in the run up to the multiparty elections of December 1992 were other considerations leading to resumption of controls at the time (Jones, 1994). When imports were allowed in 1993, millers imported a lot of maize. The farmers lost their market for maize. They petitioned the government to ban imports and maize movement (Weekly Review, 25 November 1994). The government announced a ban on maize imports in August 1994 but within a short time reversed the decision due to intense pressure from the donors, maize millers and private traders. Private traders and cooperatives initially showed a lot of enthusiasm to trade in maize but soon faced a myriad of problems, including the continued unofficial enforcement of controls and permits. The major problems included lack of transportation, uncertainty of government policy and lack of finance. 23 Complete decontrol of internal movement of maize and maize meal was not implemented until June 1994 (Budget Speech 1994/5). Therefore, private traders operated under a high degree of policy uncertainty before then. The Board's inability to secure a sufficient share of the maize market, implies stiff competition from an active private sector. However, it is a divided private sector, uncertain of future policies. Initially only the large operators including sifted maize millers posed serious competition to the NCPB because they could organise their finances quickly. Many of the larger operators are Kenyan Asians who own large scale mills and dominate flour distribution and imports. Indigenous Kenyan businesses did not share to the same extent in the large gains made by traders and importers at this time. 24 However, the small scale hammer mills (posho mills) which have been gaining market share recently (see below) are mainly owned by indigenous Kenyans. The dominance of ethnic issues in economic policy making in Kenya is a central feature of the country's political economy and is likely to continue to influence future reform efforts. 25 Some cooperative societies managed to step up their efforts at maize trading but faced problems such as restrictive cooperation legislation, underdeveloped maize market, politicisation of the cooperative movement and lack of progress in supporting them under the CSRP (A.D.E., 1993). Imposition of local service charges and presumptive tax 26 on crops paid by agro-based cooperatives were further limitations (Weekly Review, 11 December 1992). There is no certainty that the freedom to import maize is going to be a permanent feature. The government has not yet made a policy statement on maize and maize flour exports. 27 Despite the various problems, private traders and some farmers have started engaging in limited storage in expectation of better prices. There is 23Costs of capital in the informal market are commonly around 10% or more per month (Nyoro, 1992; Argwins-Kodhek et al., 1993) and thought to be not within the reach of many would-be traders. A fund set up to help small traders was allegedly used to benefit those supporting the ruling party (Mosley et al., 1991 Vol. 2:296) 24The local press talks of a clique of powerful individuals favoured by the political establishment who took advantage of external liberalisation to import foodstuffs duty free (see for example, Weekly Review, 25 January 1994 and 6 January 1995 and The Economic Review, 13-19 September 1993). 25The other central features are the domination of the economy and policy making by large agrarian interests and the patchy and politically weak industrial sector (Mosley et al., 1991). 26The presumptive tax is payable on an estimate of income. 27Despite the fact that at times there are more than adequate stocks in the country, millers are not allowed to export processed maize due to fear of shortages. The uncertain environment of maize production in Kenya is a reminder that retreat from reform remains a real threat.
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evidence of increased use of larger lorries for shipping of maize over long distances since late 1994, competition in the maize and maize flour market has increased and increased confidence is beginning to emerge. The large scale millers are facing stiff competition from the hammer mills (posho mills) who are now not inhibited from acquiring maize. Prices of maize meals have generally fallen and there is a strong shift towards consumption of whole meal (Mukumbu, 1992; Mukumbu and Jayne, 1994; Weekly Review, 25 November 1994; Odhiambo et al., 1994). The shift is similar to that which has occurred in Zimbabwe, Tanzania, Zambia and other countries in the region (Jayne and Rubey, 1993; Rubey, 1993; Bagachwa, 1992; Jayne et al., 1994). Many large scale millers have reported loss of sales in the region of 20-40 per cent from 1993 (millers' seminar, Weekly Review, 25 November 1994; Odhiambo et al., 1994). Some large scale millers have started producing wholemeal to counter competition from posho millers and to test the market for wholemeal.
Changing stance of interest groups Initially, many large millers were sceptical of the reform of the Board for they feared losing their assured source of supply of maize. They did not have adequate information on the reforms and their likely impact (millers' seminar). When limited decontrol was effected, the millers were able to obtain cheaper and good quality maize from outside the Board. When imports of maize were allowed, the large millers and some private traders imported a lot of maize at prices below those of the locally produced maize. They began to be ardent supporters of reform. External liberalisation was also seen by the political establishment to be a good thing as the importers brought in much needed food without requiring foreign exchange from the government. Even the large farmers changed their stance after they realised the benefits of operating outside the NCPB, selling directly to the millers, during the maize shortages of 1993. However, when the shortages of 1993 changed to the glut of 1994, the farmers could find no market with the millers and resorted to selling to the NCPB. But because of inadequate government subsidies, which had decreased since the inception of the CSRP (Performance Contract, 1992, 1994), and the dwindling resources of the Crop Purchase Revolving Fund (CPRF), the Board soon ran out of cash to buy from farmers. Unable to sell to millers or the Board, the farmers began to blame reforms once more, describing them as suicidal (Weekly Review, 2 and 16 December 1994; Weekly Review, 6 January 1995). The President spoke strongly against reforms of the maize market in May 1994, thus supporting the large scale farmers. Soon after, some powerful politicians, some of whom are owners of large maize milling plants, joined the band wagon and began to blame reforms even though their firms had benefited from maize importations. There was, thus, a real threat that controls would be reintroduced. This followed shortly after in August 1994. The millers, traders and donors campaigned strongly to reverse the new ban. Eventually, full decontrol was announced in late 1994 and defended by the very same politicians who had publicly blamed reforms a few months before. 28 Even though resistance to the decontrol of the maize market within the Board is 28The President publicly assured donors that Kenya was committed to reforms and by implication maize decontrol. He assured donors that the NCPB would not interfere with the efforts of the private traders from then on. 580
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still present because of-losing its monopoly, it started to change its stance after the President's assurance that the government was committed to reform of the maize market. 29 But the Board has continued to threaten that if the subsidies are not forthcoming, food security would be jeopardised (NCPB Board Papers 1993 and 1994).
Managing the politics of reform As the discussion above has indicated, the CSRP at its outset did not have true commitment from the highest political level of government. In particular it did not have the President's full and direct support, crucial for success in cases where power is concentrated as in Kenya. The President came fully into the picture only much later and his party did not endorse reforms until 1995, 15 years after reforms began in Kenya. Experience from elsewhere suggests that political commitment from the inception of reform is crucial if success is to be expected (Krueger et al., 1991; Mosley et al., 1991). Thus CSRP lacked a reform culture from the beginning and inadequate information led to opposition from various interest groups as well as the government. But when reform experience began to spread and more information was available, the reform measures found strong support. 3° The style of Kenya politics, especially during the period of one-party rule, was such that major reforms or issues gained public support and that of the key politicians if they were seen to be backed by the President. 3~ This is what started to happen from the end of 1994 when the President publicly announced that his government was still committed to reforms and by implication to maize market liberalisation. This points to the significance of getting the political regime to publicly commit itself to reform before proceeding to let the technocrats implement reform measures. The essence of managing the politics of reform is achieving as far as possible a "win-win" situation for the main parties involved. When the CSRP was started, the various interest groups were not made to believe that they would win. For example, as demonstrated above, the large scale millers straight away opposed reforms only to change their stance much later when they experienced the benefits of reform. Others involved including politicians changed their stance as well. Some of the senior politicians with stakes in milling, supported maize importations but blamed them later when the government banned importations. They had to be seen to be supportive of the government position. Inadequate information was part of the problem. Information on the CSRP was needed in an effort to make the public aware of the benefits of the reforms, the adjustments needed, and to get their support. Many bureaucrats, especially those e'~The NCPB from the beginning of the CSRP resisted reform of the maize market and had continued to oppose any moves to abolish its monopoly of the maize market (Financial Times, 1 November 1993). The change in its stance appears to be motivated by the President's announcement that the reforms were to proceed. 3t~Fhe millers provide the best example of this. Initially they were sceptical of reform but later on with maize decontrol and freedom to import they became ardent supporters of reform. The chairman of the largest milling concern was quoted saying that his group's turnover more than doubled because of the deregulation of the grain sector leading to competitive procurement of raw materials (Weekly Review, 3 February 1995). 3~President Moi's personal involvement in pushing family planning ahead from 1987, his earlier involvement in decentralising planning from 1983 through the strategy of District focus For Rural Development and introducing the 8.4.4 system of education helped create the support culture for the programmes.
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from other ministries not directly involved in CSRP matters, were left in the dark. It seems that the architects of the CSRP did not have a clear conception of what was workable, what would be difficult politically and what changes reforms would bring about in terms of relations in the market. Another part of the problem was the leadership of the reforms. The CSRP was identified more with bureaucrats than with the politicians. The NCPB managed the programme to the almost total exclusion of other parties. Things would have moved faster if the politicians felt that they were the owners of reform. Underlying the reform problem is the instability of maize production in Kenya, owing to the high variation in rainfall, and the function of NCPB to smooth the market as a net buyer in times of glut and a net seller during droughts. Thus NCPB's behaviour and its ability to control the market depended on whether maize production was good or bad, and on government's willingness to provide it with enough funding to buy up stocks in times of glut. Although NCPB had been opposed to CSRP since the beginning of reforms in 1988, it was still given the main managerial role in implementing it. It faced a number of problems. There was no reform culture in place to support its restructuring. Its new role as buyer and seller of last resort remained poorly defined and it continued to try to buy up all maize available to the capacity of its storage. Drought conditions then reduced its stock position and its ability to restock was reduced by cuts in government subsidies to it. Subsequently, imports of maize left it unable to dispose of stocks. NCPB began to change its stance only when the President publicly assured donors that Kenya was committed to reform. Even now, how it will discharge its role of buyer and seller of last resort remains undefined. NCPB's problems could have been transformed into a 'win' situation if the government had provided it with adequate subventions, had fully supported the reforms from the outset and had strictly limited the Board's activities. However, one should not lose sight of the fact that the Board is used for patronage purposes and that immense pressure from the interests that gain from it would have to be dealt with even when there was a culture of reform in place. A further problem in political management of the reforms arose in late 1993, just when the reforms were beginning to have more positive results after the President and KANU had started to show their public commitment. The donors, pressing for multipartyism, pulled out support in key areas, including the CSRP. This was interpreted negatively in government circles (Financial Times, 27 October 1993, 2 and 3 November 1993), and reduced the momentum of its support for the reforms. The reform process, instead of being a joint effort, tended to become a political football between Government and donors. This points to the importance of a stable stance by donors in managing the politics of reform. Donor credibility, with government and the public, is important in sustaining the implementation of reforms.
Conclusion Structural adjustment programmes require difficult tradeoffs among interest groups. Therefore, the political aspects are critical. The Kenya experience with CSRP provides several lessons in managing the politics of reform: reform could be made faster and smoother by the creation of a sustainable culture of reform through education and training at all levels, including training of politicians, getting the full support of the key decision maker (the President) in case of populist 582
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regimes, providing enough information to key interests as well as to the public, never letting the reforms lose momentum and hence building continuity and confidence at all levels. All these help to achieve the maximum possible credibility for reforms, and underpin the morale and motivation of those implementing and adjusting to reforms. They are no doubt a crucial consideration in reform programmes (Krueger, 1992). References A.D.E. (1993), Evaluation of the cereals sector reform programme in Kenya. Draft Report. Argwings-Kodhek, Mukumbu, M. and Monke, E. (1993), The impacts of maize market liberalization in Kenya, Food Research Institute Studies XXII (3), 331-348. Bates, R. H. (1981), Markets and States in Tropical Africa: The Political Basis of Agricultural Policies. University of California Press, Berkley, CA. Bates, R. H. (1989), Beyond the Miracle of the Market: The PoliticalEconomy of Agrarian Development in Kenya. Cambridge University Press, Cambridge, MA. Bates, R. H. and Krueger, A. O. (eds) (1993), Political Economic Policy Reform Programs: Evidence from Eight Countries. Blackwell, Oxford. Bagachwa, M. S. D. (1992), Choice of technology in small and large firms: grain milling in Tanzania. World Development 20 (1) 97-107. Cowen, M. (1985), Change in state power, international conditions and peasant producers: the case of Kenya. Journal of Development Studies 2, 355-384. CSRP: Monitoring and Evaluation Reports (Various). CSRP: Monitoring and Evaluation Report No. 13, June 1992. CSRP: Memorandum of Understanding (GOK/EC), January 1988. Daily Nation, 4 February 1991. Financial Times, Jan. 8, 1992; Oct. 27, 1993; Nov. 1, Nov. 2 and Nov. 3, 1993. Gsaenger, H. G. and Schmidt, G. (1977), Decontrolling the maize marketing system in Kenya. IDS Paper No. 254, University of Nairobi. Heyer, J. Maitha, T. K. and Senga, W. M. (eds) (1976), Agricultural Development in Kenya: An Economic Assessment. Oxford University Press, Oxford. Jayne, T. S. and Rubey, L. (1993), Maize milling, market reform and urban food security: the case of Zimbabwe. World Development 21 (6) 975-988. Jayne, T. S. and Chisvo, M., Mukumbu, M., Rubey, L., Diskin, P. and Sipula, K. (1994), Interactions between consumer preferences, technology and policy: A regional analysis of maize in Southern Africa. MSU International Development Working Paper. Department of Agricultural Economics, East Lansing. Jones, S. (1994), Agricultural marketing in Africa: privatisation and policy reform. Report to ESCOR/ODA. Kenya: Budget Speech, 1994/5, page 9. Kenya: Development Plan, 1984-1988; 1989-1993 and 1994-1996. Government Printer, Nairobi. Kenya (1966), Maize Commission of Enquiry Report 1966. Government Printer, Nairobi. Kenya (1992, 1994), Performance Contract: GOK/NCPB, 1992 and 1994. Kenya (1981), National Food Policy Paper 4/1981, Government Printer, Nairobi. Kenya (1994), National Food Policy Paper 2/1994, Government Printer, Nairobi. Kenya (1986), Sessional Paper 1/1986 on Economic Management for Renewed Growth, Government Printer, Nairobi. Krueger, A. O. (1992), Economic Policy Reform in Developing Countries, Blackwell, Cambridge. Krueger, A. O. (1993), Political Economy of Policy Reform in Developing Countries. The MIT Press, Cambridge, MA. Krueger, A. O., Schiff, M. and Valdes, A. (1991), The Political Economy of Agricultural Pricing Policy. The Johns Hopkins University Press, Baltimore. Lofchie, M. (1989), The Policy Factor: Agricultural Performance in Kenya and Tanzania. Lynne Rienner, Boulder, CO. Millers" seminar (1994) A seminar for millers convened by the researchers in Nairobi in March 1994. MOALDM (Ministry of Agriculture, Livestock Development and Marketing), 1994. MSM (Ministry of Supplies and Marketing), 1992. Mukumbu, M. (1992), The effects of market liberalisation on the maize milling industry in Kenya. Proceedings of Conference on Maize Supply and Marketing under Maize Market Liberalisation, Karen-Nairobi, 18-19 June 1992. Mukumbu, M. and Jayne, T. S. (1994), Urban maize meal consumption patterns: strategies for
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improving food access for vulnerable urban households in Kenya. Paper presented at the Symposium on Agricultural Policies and Food Security in Eastern Africa, 19-20 May 1994. NCPB Board papers, 1993 and 1994. NCPB (1994) NCPB file number NCPB/29/I/ll 1. Nyoro, J. K. (1992), Competitiveness of maize production system in Kenya. Proceedings of Conference on Maize Supply and Marketing Under Market Liberalisation, Karen-Nairobi, 18~19 June 1992. Odhiambo, M. O., Suji, M. O., Keya, M., Luswetti, F., Holtzman, J. S. and Steffen, P. (1994), The Kenya maize sub-sector: a rapid appraisal approach with emphasis on market information needs and extension issues. Mosley, P. and Smith, L. (1989), Structural adjustment and agricultural performance in sub-Saharan Africa 1980-1987. Journal of International Development ! (3), 321-355. Mosley, P., Harringan, J. and Toye, J. (1991), Aid and Power: The World Bank and Policy Based Lending. Vols 1 and 2. Routledge, London. Gibbon, P., Havnevik, K. J. and Hermele, K. (1993), A Blighted Harvest: The World Bank and African Agriculture in the 1980s. James Currey, London. Rubey, L. (1993), Consumer maize meal preferences in Zimbabwe. Ministry ol Lands, Agriculture and Water Development, Government of Zimbabwe, Harare. Schmidt, G. (1979), Maize and beans marketing in Kenya: the interaction and effectiveness of the informal and formal maize marketing systems. IDS Occasional Paper No. 31, University of Nairobi. Smith, L. (1993), The progress of marketing reform and the public sector: country experiences. Presentation on Kenya, at a one-day FSG Seminar, 8 January 1993. The Courier, No. 114, March-April 1989. The Economic Review, 13-19 September 1993. Weekly Review (Nairobi), December 11 1992; November 25 1994; December 2 and 16 1994; January 6 1995; February 3 1995. Toye, J. (1992) Interest group politics and the implementation of adiustment policies in sub-Saharan Africa, Journal of International Development 4 (2), 183-197.
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Food Policy, Vol. 20, No. 6, pp. 573-584, 1995 Copyright (~) 1995 Elsevier Science Ltd Printed in Great Britain. All rights reserved 0306-9192/95 $10.00 + 0.00
0306-9192(95)00050-X
Kenya's Cereal Sector Reform Programme: managing the politics of reform Peter M. Lewa and Michael Hubbard 1
School of Public Policy, The University of Birmingham, Birmingham B15 2 TT, UK The political aspects of reform have been underplayed in structural adjustment programmes. The problematic and inconsistent implementation of Kenya's Cereal Sector Reform Programme (CSRP), it is argued here, is substantially the result of failing to manage the politics of reform. Good political management of the reform process would have included ensuring a clear understanding by interest groups of the likely consequences of liberalisation, and full involvement of the President and Cabinet from the outset in order to create an ongoing reform culture.
Keywords:cereals, Kenya,marketing, adjustment, milling, politics
This paper examines the reform of the maize milling industry of Kenya under liberalisation of the maize market. Maize market liberalisation has been implemented under the auspices of the EC sponsored Cereal Sector Reform Programme (CSRP) from 1988. 2 CSRP is one of a number of reforms within the overall framework of structural adjustment programmes (SAPs). Kenya's implementation of the CSRP has been inconsistent and problematic owing to political interest groups who have influenced the reforms (Gibbon et al., 1993). When policies of SAPs began to be advocated in the early 1980s, the discussions of the political aspects were not on the formal agenda (Toye, 1992). Yet politics is a key factor in the reform process (Krueger et al., 1991; Mosley et al., 1991; Krueger, 1992, 1993; Bates and Krueger, 1993), as the CSRP experience bears out. The main contention of this paper is that the inconsistency in implementation of the CSRP is substantially the result of neglect of the political dimension in the reform process, with no culture of reform being developed in the pre-reform period. Specifically, it is suggested that if the designers and managers of the CSRP had taken the trouble to provide adequate information on the expected benefits of the reforms, the process would have received more consistent support. This is JThe authors are both from the School of Public Policy, University of Birmingham. The research upon which this paper is based was funded by the European Commission. The views are those of the authors alone. 2The EC had the largest component in the reform of the maize market but other donors such as the World Bank, the IMF and U S A I D were also involved.
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evident from the behaviour of market actors, particularly the sifted maize millers and politicians with stakes in maize milling and the food distributive trade, who opposed reforms initially but later supported them. The paper does not suggest that real conflicts of interest resulting from the reforms are absent, nor that all consequences of the reform were predictable. But absence of full backing by the President and Cabinet, and lack of understanding by all interest groups of the likely benefits and costs, did create uncertainties and conflicts of interest which turned out to be more apparent than real. These contributed to inconsistent implementation and avoidable conflict between donors and government. It is suggested that managing the politics of reform is a task that was neglected and should be explicitly incorporated in such programmes.
Background Attempts to open the grain market in Kenya to private trade go back to 1944. Such attempts have always been beaten back by political opposition at the highest levels of government (The Courier, No. 114). The World Bank, in the early 1980s, had pressed for maize market reform without much success (Mosley and Smith, 1989; Mosley et al., 1991). 3 The official maize marketing arrangements in Kenya constitute a wellestablished interest of large farmers, including the President (Toye, 1992). The large farmers are an important part of the President's agricultural power base (Mosley et al., 1991).4 The National Cereals and Produce Board (NCPB) has been long established at the centre of the maize marketing system, controlling the purchase of maize from farmers and sales to millers. It has been a source of political patronage for various interests (in farming, transport and milling) and persistently resisted reform attempts to abolish its maize monopoly (Financial Times, 1 November 1993). The liberalisation of the maize market amounted to a challenge to deeply entrenched interests for it meant loss of patronage and loss of rents that accrue from the Board's existence (Weekly Review, 25 November 1994; Gsaenger and Schmidt, 1977; Schmidt, 1979). The main attraction of CSRP for GOK was the promise it held of reducing the heavy budgetary costs of running the strategic grain reserve. From the outset, the Office of the President (OOP) and hence the Cabinet were not fully involved in planning for the CSRP, since it was left to the Treasury, Ministry of Supplies and Marketing (MSM), and the NCPB. 5 When the CSRP began to be implemented, the Board used its power to prevent any moves it considered not workable. It could get away with this because high level support for the reform, through active participation by other key ministries and departments as well as the Cabinet, had been lacking at the beginning. 6 3Other donors such as the USAID also pushed hard for reform of the maize market in the 1980s. 4Other vested interests such as bureaucrats, ruling party supporters and NCPB are also important in Kenya's agriculture (Heyer et al., 1976; Cowen, 1985; Bates, 1981, 1989; Lofchie, 1989; Mosley et al., 1991; Toye, 1992). 5The government had never publicly supported reforms. Support was officially publicly given by President Moi in 1995 and subsequently by the ruling party. This political support came 15 years after the first structural adjustment loan (SAL) was given. Political support had, thus, been lacking all the time since SAPs began in Kenya in 1980. 6Other key ministries and departments, such as the Ministry of Cooperatives and the Central Bureau of Statistics (CBS) were incorporated into the Technical Committee of the CSRP long after the programme had started.
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The constitution of a High Level Committee (HLC) of the CSRP in 1988, consisting of the Permanent Secretaries of key ministries, was important for the support of the programme. However, the ongoing support of the Cabinet was not strictly speaking involved, as the NCPB closed other parties out of the decisions to decontrol the maize market through its management of the CSRP. Indeed, NCPB and the MSM steered CSRP forward almost to the exclusion of the other ministries and departments. 7 The agreement on the implementation of CSRP, signed between the Government of Kenya (GOK) and the EC, did not explicitly address the reform of the maize milling industry, as is evident from the omission of the milling industry from the agreement. There was an assumption that once NCPB was reformed then the milling industry (the NCPB's captive market and the largest buyer of officially marketed maize), would automatically be reformed. Permitting millers to procure maize directly from the private sector, thereby bypassing the NCPB, was the most contentious area of policy reform (Smith, 1993), with politicians having stakes in maize milling opposing the reforms. This opposition began to die out once benefits of reform began to be realised, as discussed below.
The components of the CSRP Three key CSRP components address maize market liberalisation and hence the reform of the maize milling industry. These are decontrol of the maize market, restructuring of the NCPB, and market development. Each of these is briefly examined below. Decontrol of the maize market Decontrol of the maize market involved raising the number of bags that could be moved without a permit. 8 The limit to be moved without a permit was raised from 2 to 10 bags of 90 kg each in September 1983, lowered to 2 bags in 1984 during the severe drought of that year and due to donor pressure raised to 44 in February 1991, then to 88 bags in June 1992. 9 Even though maize millers were free to buy directly from farmers and private traders during periods of decontrol, the NCPB required those supplying the millers to do so on the basis of permits so that the supplies could be monitored (Argwings-Kodhek et al., 1993).1° Millers suspected of accepting maize from other sources were threatened with deregistration and many others were refused permits to enable them to buy maize 7The above experience is similar to that of the World Bank initiative in the early 1980s. At that time, a triumvirate of three enthusiastic bureaucrats, the Central Bank Governor, Permanent Secretary Treasury and Permanent Secretary-OOP, pushed for reform, almost making the Cabinet redundant (Mosley et al., 1991). It was left to the President, without the vital support of his Cabinet, to sanction policy which the three proposed. 8Farmers, private traders and consumers had been allowed, since the beginning of controls in 1940, to move up to two bags of maize out of the district of origin without a permit from the district commissioner (Mosley et al., 1991). 9Movement of maize was banned in October 1992 before the multiparty elections of December 1992 and was not lifted until the end of the following year. It was alleged that this was meant to assist those supporting KANU by giving them movement permits. 1°Freedom to move maize without permit and for millers to buy outside the Board, had been granted on several occasions before CSRP during bumper harvests, but was always withdrawn thereafter, because NCPB was unable to sell accumulated stocks (A.D.E. 1993). Food Policy 1996 Volume 20 Number 6
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where it was available.Jl For example, the giant Machakos District Cooperation Union (MDCU), owner of a modern large scale maize mill, wrote to the Board in September 1993 demanding either to be allocated enough maize or to be allowed to buy it elsewhere (NCPB, 1994). t2 Provincial administration officers, allegedly under NCPB's instructions, continued to ban maize movement in their areas. The police too ignored the freedom to move maize and continued to harass traders (Daily Nation, 4 February 1991; Argwings-Kodhek et al., 1993; Jones, 1994). The rules for maize movement, when 44 and then 88 bags were allowed to be shipped without permit, were never made explicit (Smith, 1993). The legislation was confusing, the mechanism for implementing it was lacking, and information was not made public. This increased rent seeking opportunities and bribery. Licences for interregional maize movements have been an important source of political patronage (Toye, 1992). Those licensed to ship and sell maize sell at inflated prices by exploiting their monopolistic positions (Toye, 1992). The pressure from such interests explains why the GOK has resisted decontrol over the years in spite of its own admission that control on movement increased the costs of the marketing system (Maize commission of enquiry report 1966; National Food Policy Paper 1/1981, 2/1994; Development plan 1984-1988, 1989-1993, 1994-1996, Sessional paper 1/86). Increased freedom from 1993 to import and also to ship maize without permit, began to change the mode of operations in the maize market and the maize milling industry. The milling industry and private traders swiftly moved to import maize, after President Moi personally announced that maize import controls had been abolished (Financial Times, 1 November 1993). The President's move was not only a victory for donors who had been pushing for this vital reform but was also prompted by lack of foreign exchange and crop failure (Weekly Review, 25 November 1994). By now millers and private traders had started to support reform and demanded guarantees that restrictions would not be re-imposed (Weekly Review, 3 February 1995). For example, the group Managing Director of the largest milling concern, voicing his company's concern over the uncertainty of government policy with regard to controls, had the following to say in May 1994j3 " . . . as you are aware the private sector has committed large funds on wheat and maize imports after reassurance that controls will not be re-introduced.., we have no choice but to stop further commitments until the picture is c l e a r . . . " . Other millers reported similar complaints (millers' seminar, 1994).
Restructuring of the NCPB NCPB's accumulated deficits and debts were written-off at the start of the CSRP, ~lDuring a millers' seminar in March 1994, millers said that one of the greatest problems of dealing with the Board was poor quality maize (rotten, high moisture content and discoloured). The other main problems were delivery of underweight maize and favouritism towards certain millers during times of maize shortages. leThe M D C U ' s General Manager informed the first author in an interview in May 1994 that the NCPB was supplying them only 1000 bags per week as opposed to their daily requirements of 2700 bags yet at the same time it was refusing them permits to go to Kitale for maize which they had negotiated for. Subsequent appeal to the Minister for his assistance in the matter did not bear fruit (NCPB, 1994). 13This followed a public announcement by the President that the G O K would review the whole issue of reforms and controls for they had hurt consumers. The message was in a strongly worded fax to the World Food Programme.
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thus improving its credibility with financiers. However, by 1993 the balance sheet had degenerated due to fewer and fewer subventions from the GOK and the Board's financial indiscipline. Therefore, the Board relapsed to the same problem of inability to pay farmers (The Economic Review, 13-19 September 1993). The farmers increasingly turned to direct sales to millers, thereby abandoning the Board. However, the Board still retained control over millers' activities through issuance of permits on the movement of maize meal.14 Management reorganisation at NCPB aimed at improving the calibre of senior management through external recruitment, staff training, new salary packages, retrenchment of staff at the lower cadres and recruitment of senior staff. This was necessary following mass sacking of senior staff in 1988 (Mosley et al., 1991) due to alleged corruption. 15 However, a new organisation structure was not defined until 1990, and the Board resisted recruiting skilled personnel from outside sources (A.D.E., 1993; CSRP Monitoring and Evaluation Reports). There were higher staff numbers after the programme was implemented than at the beginning (CSRP Monitoring and Evaluation Reports; A.D.E., 1993). 16 The Board did not provide counterparts to understudy expatriate staff in key areas such as planning, information, transport and financial management (A.D.E. Study, 1993; CSRP Monitoring and Evaluation Reports). The Board argued that no suitable candidates could be found. Accounting and financial management improved during the period expatriate staff worked at the Board. For some time, timely and accurate information was available to the ministries involved in the reform of the Board (MSM, 1992; MOALDM, 1994). However, when the technical assistants left, the systems could not be sustained because there were no skilled people in the Board to take over. There has been no progress in establishing a framework to ensure accounting and financial discipline at the Board. Network rationalisation involved closing some local buying centres (LBCs) and selling or leasing some depots. Initially, many buying centres were closed but depots increased in number (CSRP Monitoring and Evaluation Report No. 13, June 1992). Selling or leasing depots was not considered politically feasible. Politicians successfully petitioned the authorities to stop the closures, and even succeeded in getting more buying centres opened. Transport rationalisation involved developing the Board's forecasting capacity, and improvements of the public railway system particularly through investment in rolling stock and locomotives, and funding the Board to acquire its own custombuilt wagons. This never happened as the EC pulled out its support of several components of the CSRp.17 The Board has not been able to use the supposedly cheaper, bulk transport by rail. ~8 Strong competition amongst road hauliers has enabled maize millers to get competitive rates for transportation of maize and this HPricing is still controlled, with maize meal prices set by policy as "indicative prices". Competition and the irrelevance of such prices have led millers to ignore them. The consumer in 1995 is paying lower prices than the controlled ones. ~SAnecdotal evidence suggests that those affected by the "widespread sackings among middle management" (Mosley et al., 1991) were not from the new MD's area (Rift Valley). I~'It was politically difficult to reduce staff numbers. ~TThe EC pulled out its support, as did other donors, to force the G O K to adopt a multi-party system of government. Training of staff and support of the private sector suffered a similar fate. This made the G O K sceptical and question how serious the EC and other donors were regarding reform. ~SOnly 50% of Kenya railways locomotives and 60% of its wagons are serviceable at any one time. For bulk wagons there is only 2(I to 30% availability ( A . D . E . , 1993:68).
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has meant obtaining maize at competitive rates too. 19 A Crop Purchase Revolving Fund (CPRF) initiated by the EC to improve the Board's cash flow for crop purchases improved the liquidity position of the Board. Initially, it helped in paying farmers promptly, in funding operating losses and enabled the Board to compete for maize supplies with the private sector. However, with huge stocks of maize, the Board began to have problems of disposal. The problems with the CPRF were that it was introduced without any clear protocol, and was placed under the management of the Board. It comprised part of the Board's finances, was not accounted for separately, was not used as envisaged for purchases of maize only, and there was no mechanism in place for enforcing its correct use. Smith (1993) rightly observes that, because of the above problems, it was leaking like a sieve. NCPB's role of buyer and seller of last resort as envisaged when reforms were launched has not been defined. Indeed, as Argwings-Kodhek et al. (1993) observe, NCPB has demonstrated remarkable staying power despite much criticism and official acquiescence in donor-sponsored policy reforms. The Board's support of the CSRP was lacking from the beginning because it did not see a "win situation" in the reforms. With inadequate subsidies from the government, the Board's fears that it would lose under reform looked justifiable.
Market development Market development involved allowing and supporting the private market actors to perform some of the roles that used to be the prerogative of the Board. At the start of CSRP in June 1988, traders and cooperatives were allowed to start buying limited quantities of maize directly from farmers for supply to sifted maize millers. 2orLicences were granted to them but there was no agreement on how the 20% target of millers' intake they were expected to meet were to be enforced (Gibbon et al., 1993). The millers abandoned the Board since they could get cheaper supplies from the private sector. The Board could not sell its stocks. This led to a rescinding of the decision on 5 August 1988 (Gibbon et al., 1993; Mosley et al., 1991). Soon after, it was announced that only the NCPB and the Kenya Grain Growers Cooperative Union (KGGCU) 21 would be allowed to buy maize from farmers. The reason given was that the Board had to have sufficient stocks for food security and that it would enable it to collect loan dues from the farmers, a role it played on behalf of the Agricultural Finance Corporation (AFC). 22 Private traders and millers were allowed to ship maize again without permit in 1991. They abandoned the Board again. Pressure from the Board, senior politicians and large farmers led to banning of movement again in October 1992. The government in the face of pressure from these vested interests, revoked licences given to private traders and millers (Financial Times, 8 January 1992). Drought, ~gThis partly explains why the millers have abandoned NCPB despite the fact that some are connected to NCPB stores by conveyor belts. Another reason is the poor quality of maize from the Board which in the ~art forced some mills to close down to safeguard consumer loyalty (millers' seminar). qn addition to this, minor crops such as peas, millet, sorghum and pulses were freed from government control in 1991. Beans followed in 1992 and rice in 1993. 21The K G G C U was created in July 1984 allegedly to give more control over maize marketing to the surplus maize growing farmers from the Rift Valley. The involvement of K G G C U in maize marketing was a political act to show donors that the G O K was willing to abolish NCPB's monopoly. 22The AFC, remains, just as it was in colonial times, a powerful instrument for redistributing income to large farmers. It suffers from chronic loan defaulting (see for example Mosley et al., 1991).
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growing political unrest, ethnic violence and fear that the opposition would sabotage food supply in the run up to the multiparty elections of December 1992 were other considerations leading to resumption of controls at the time (Jones, 1994). When imports were allowed in 1993, millers imported a lot of maize. The farmers lost their market for maize. They petitioned the government to ban imports and maize movement (Weekly Review, 25 November 1994). The government announced a ban on maize imports in August 1994 but within a short time reversed the decision due to intense pressure from the donors, maize millers and private traders. Private traders and cooperatives initially showed a lot of enthusiasm to trade in maize but soon faced a myriad of problems, including the continued unofficial enforcement of controls and permits. The major problems included lack of transportation, uncertainty of government policy and lack of finance. 23 Complete decontrol of internal movement of maize and maize meal was not implemented until June 1994 (Budget Speech 1994/5). Therefore, private traders operated under a high degree of policy uncertainty before then. The Board's inability to secure a sufficient share of the maize market, implies stiff competition from an active private sector. However, it is a divided private sector, uncertain of future policies. Initially only the large operators including sifted maize millers posed serious competition to the NCPB because they could organise their finances quickly. Many of the larger operators are Kenyan Asians who own large scale mills and dominate flour distribution and imports. Indigenous Kenyan businesses did not share to the same extent in the large gains made by traders and importers at this time. 24 However, the small scale hammer mills (posho mills) which have been gaining market share recently (see below) are mainly owned by indigenous Kenyans. The dominance of ethnic issues in economic policy making in Kenya is a central feature of the country's political economy and is likely to continue to influence future reform efforts. 25 Some cooperative societies managed to step up their efforts at maize trading but faced problems such as restrictive cooperation legislation, underdeveloped maize market, politicisation of the cooperative movement and lack of progress in supporting them under the CSRP (A.D.E., 1993). Imposition of local service charges and presumptive tax 26 on crops paid by agro-based cooperatives were further limitations (Weekly Review, 11 December 1992). There is no certainty that the freedom to import maize is going to be a permanent feature. The government has not yet made a policy statement on maize and maize flour exports. 27 Despite the various problems, private traders and some farmers have started engaging in limited storage in expectation of better prices. There is 23Costs of capital in the informal market are commonly around 10% or more per month (Nyoro, 1992; Argwins-Kodhek et al., 1993) and thought to be not within the reach of many would-be traders. A fund set up to help small traders was allegedly used to benefit those supporting the ruling party (Mosley et al., 1991 Vol. 2:296) 24The local press talks of a clique of powerful individuals favoured by the political establishment who took advantage of external liberalisation to import foodstuffs duty free (see for example, Weekly Review, 25 January 1994 and 6 January 1995 and The Economic Review, 13-19 September 1993). 25The other central features are the domination of the economy and policy making by large agrarian interests and the patchy and politically weak industrial sector (Mosley et al., 1991). 26The presumptive tax is payable on an estimate of income. 27Despite the fact that at times there are more than adequate stocks in the country, millers are not allowed to export processed maize due to fear of shortages. The uncertain environment of maize production in Kenya is a reminder that retreat from reform remains a real threat.
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evidence of increased use of larger lorries for shipping of maize over long distances since late 1994, competition in the maize and maize flour market has increased and increased confidence is beginning to emerge. The large scale millers are facing stiff competition from the hammer mills (posho mills) who are now not inhibited from acquiring maize. Prices of maize meals have generally fallen and there is a strong shift towards consumption of whole meal (Mukumbu, 1992; Mukumbu and Jayne, 1994; Weekly Review, 25 November 1994; Odhiambo et al., 1994). The shift is similar to that which has occurred in Zimbabwe, Tanzania, Zambia and other countries in the region (Jayne and Rubey, 1993; Rubey, 1993; Bagachwa, 1992; Jayne et al., 1994). Many large scale millers have reported loss of sales in the region of 20-40 per cent from 1993 (millers' seminar, Weekly Review, 25 November 1994; Odhiambo et al., 1994). Some large scale millers have started producing wholemeal to counter competition from posho millers and to test the market for wholemeal.
Changing stance of interest groups Initially, many large millers were sceptical of the reform of the Board for they feared losing their assured source of supply of maize. They did not have adequate information on the reforms and their likely impact (millers' seminar). When limited decontrol was effected, the millers were able to obtain cheaper and good quality maize from outside the Board. When imports of maize were allowed, the large millers and some private traders imported a lot of maize at prices below those of the locally produced maize. They began to be ardent supporters of reform. External liberalisation was also seen by the political establishment to be a good thing as the importers brought in much needed food without requiring foreign exchange from the government. Even the large farmers changed their stance after they realised the benefits of operating outside the NCPB, selling directly to the millers, during the maize shortages of 1993. However, when the shortages of 1993 changed to the glut of 1994, the farmers could find no market with the millers and resorted to selling to the NCPB. But because of inadequate government subsidies, which had decreased since the inception of the CSRP (Performance Contract, 1992, 1994), and the dwindling resources of the Crop Purchase Revolving Fund (CPRF), the Board soon ran out of cash to buy from farmers. Unable to sell to millers or the Board, the farmers began to blame reforms once more, describing them as suicidal (Weekly Review, 2 and 16 December 1994; Weekly Review, 6 January 1995). The President spoke strongly against reforms of the maize market in May 1994, thus supporting the large scale farmers. Soon after, some powerful politicians, some of whom are owners of large maize milling plants, joined the band wagon and began to blame reforms even though their firms had benefited from maize importations. There was, thus, a real threat that controls would be reintroduced. This followed shortly after in August 1994. The millers, traders and donors campaigned strongly to reverse the new ban. Eventually, full decontrol was announced in late 1994 and defended by the very same politicians who had publicly blamed reforms a few months before. 28 Even though resistance to the decontrol of the maize market within the Board is 28The President publicly assured donors that Kenya was committed to reforms and by implication maize decontrol. He assured donors that the NCPB would not interfere with the efforts of the private traders from then on. 580
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still present because of-losing its monopoly, it started to change its stance after the President's assurance that the government was committed to reform of the maize market. 29 But the Board has continued to threaten that if the subsidies are not forthcoming, food security would be jeopardised (NCPB Board Papers 1993 and 1994).
Managing the politics of reform As the discussion above has indicated, the CSRP at its outset did not have true commitment from the highest political level of government. In particular it did not have the President's full and direct support, crucial for success in cases where power is concentrated as in Kenya. The President came fully into the picture only much later and his party did not endorse reforms until 1995, 15 years after reforms began in Kenya. Experience from elsewhere suggests that political commitment from the inception of reform is crucial if success is to be expected (Krueger et al., 1991; Mosley et al., 1991). Thus CSRP lacked a reform culture from the beginning and inadequate information led to opposition from various interest groups as well as the government. But when reform experience began to spread and more information was available, the reform measures found strong support. 3° The style of Kenya politics, especially during the period of one-party rule, was such that major reforms or issues gained public support and that of the key politicians if they were seen to be backed by the President. 3~ This is what started to happen from the end of 1994 when the President publicly announced that his government was still committed to reforms and by implication to maize market liberalisation. This points to the significance of getting the political regime to publicly commit itself to reform before proceeding to let the technocrats implement reform measures. The essence of managing the politics of reform is achieving as far as possible a "win-win" situation for the main parties involved. When the CSRP was started, the various interest groups were not made to believe that they would win. For example, as demonstrated above, the large scale millers straight away opposed reforms only to change their stance much later when they experienced the benefits of reform. Others involved including politicians changed their stance as well. Some of the senior politicians with stakes in milling, supported maize importations but blamed them later when the government banned importations. They had to be seen to be supportive of the government position. Inadequate information was part of the problem. Information on the CSRP was needed in an effort to make the public aware of the benefits of the reforms, the adjustments needed, and to get their support. Many bureaucrats, especially those e'~The NCPB from the beginning of the CSRP resisted reform of the maize market and had continued to oppose any moves to abolish its monopoly of the maize market (Financial Times, 1 November 1993). The change in its stance appears to be motivated by the President's announcement that the reforms were to proceed. 3t~Fhe millers provide the best example of this. Initially they were sceptical of reform but later on with maize decontrol and freedom to import they became ardent supporters of reform. The chairman of the largest milling concern was quoted saying that his group's turnover more than doubled because of the deregulation of the grain sector leading to competitive procurement of raw materials (Weekly Review, 3 February 1995). 3~President Moi's personal involvement in pushing family planning ahead from 1987, his earlier involvement in decentralising planning from 1983 through the strategy of District focus For Rural Development and introducing the 8.4.4 system of education helped create the support culture for the programmes.
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from other ministries not directly involved in CSRP matters, were left in the dark. It seems that the architects of the CSRP did not have a clear conception of what was workable, what would be difficult politically and what changes reforms would bring about in terms of relations in the market. Another part of the problem was the leadership of the reforms. The CSRP was identified more with bureaucrats than with the politicians. The NCPB managed the programme to the almost total exclusion of other parties. Things would have moved faster if the politicians felt that they were the owners of reform. Underlying the reform problem is the instability of maize production in Kenya, owing to the high variation in rainfall, and the function of NCPB to smooth the market as a net buyer in times of glut and a net seller during droughts. Thus NCPB's behaviour and its ability to control the market depended on whether maize production was good or bad, and on government's willingness to provide it with enough funding to buy up stocks in times of glut. Although NCPB had been opposed to CSRP since the beginning of reforms in 1988, it was still given the main managerial role in implementing it. It faced a number of problems. There was no reform culture in place to support its restructuring. Its new role as buyer and seller of last resort remained poorly defined and it continued to try to buy up all maize available to the capacity of its storage. Drought conditions then reduced its stock position and its ability to restock was reduced by cuts in government subsidies to it. Subsequently, imports of maize left it unable to dispose of stocks. NCPB began to change its stance only when the President publicly assured donors that Kenya was committed to reform. Even now, how it will discharge its role of buyer and seller of last resort remains undefined. NCPB's problems could have been transformed into a 'win' situation if the government had provided it with adequate subventions, had fully supported the reforms from the outset and had strictly limited the Board's activities. However, one should not lose sight of the fact that the Board is used for patronage purposes and that immense pressure from the interests that gain from it would have to be dealt with even when there was a culture of reform in place. A further problem in political management of the reforms arose in late 1993, just when the reforms were beginning to have more positive results after the President and KANU had started to show their public commitment. The donors, pressing for multipartyism, pulled out support in key areas, including the CSRP. This was interpreted negatively in government circles (Financial Times, 27 October 1993, 2 and 3 November 1993), and reduced the momentum of its support for the reforms. The reform process, instead of being a joint effort, tended to become a political football between Government and donors. This points to the importance of a stable stance by donors in managing the politics of reform. Donor credibility, with government and the public, is important in sustaining the implementation of reforms.
Conclusion Structural adjustment programmes require difficult tradeoffs among interest groups. Therefore, the political aspects are critical. The Kenya experience with CSRP provides several lessons in managing the politics of reform: reform could be made faster and smoother by the creation of a sustainable culture of reform through education and training at all levels, including training of politicians, getting the full support of the key decision maker (the President) in case of populist 582
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regimes, providing enough information to key interests as well as to the public, never letting the reforms lose momentum and hence building continuity and confidence at all levels. All these help to achieve the maximum possible credibility for reforms, and underpin the morale and motivation of those implementing and adjusting to reforms. They are no doubt a crucial consideration in reform programmes (Krueger, 1992). References A.D.E. (1993), Evaluation of the cereals sector reform programme in Kenya. Draft Report. Argwings-Kodhek, Mukumbu, M. and Monke, E. (1993), The impacts of maize market liberalization in Kenya, Food Research Institute Studies XXII (3), 331-348. Bates, R. H. (1981), Markets and States in Tropical Africa: The Political Basis of Agricultural Policies. University of California Press, Berkley, CA. Bates, R. H. (1989), Beyond the Miracle of the Market: The PoliticalEconomy of Agrarian Development in Kenya. Cambridge University Press, Cambridge, MA. Bates, R. H. and Krueger, A. O. (eds) (1993), Political Economic Policy Reform Programs: Evidence from Eight Countries. Blackwell, Oxford. Bagachwa, M. S. D. (1992), Choice of technology in small and large firms: grain milling in Tanzania. World Development 20 (1) 97-107. Cowen, M. (1985), Change in state power, international conditions and peasant producers: the case of Kenya. Journal of Development Studies 2, 355-384. CSRP: Monitoring and Evaluation Reports (Various). CSRP: Monitoring and Evaluation Report No. 13, June 1992. CSRP: Memorandum of Understanding (GOK/EC), January 1988. Daily Nation, 4 February 1991. Financial Times, Jan. 8, 1992; Oct. 27, 1993; Nov. 1, Nov. 2 and Nov. 3, 1993. Gsaenger, H. G. and Schmidt, G. (1977), Decontrolling the maize marketing system in Kenya. IDS Paper No. 254, University of Nairobi. Heyer, J. Maitha, T. K. and Senga, W. M. (eds) (1976), Agricultural Development in Kenya: An Economic Assessment. Oxford University Press, Oxford. Jayne, T. S. and Rubey, L. (1993), Maize milling, market reform and urban food security: the case of Zimbabwe. World Development 21 (6) 975-988. Jayne, T. S. and Chisvo, M., Mukumbu, M., Rubey, L., Diskin, P. and Sipula, K. (1994), Interactions between consumer preferences, technology and policy: A regional analysis of maize in Southern Africa. MSU International Development Working Paper. Department of Agricultural Economics, East Lansing. Jones, S. (1994), Agricultural marketing in Africa: privatisation and policy reform. Report to ESCOR/ODA. Kenya: Budget Speech, 1994/5, page 9. Kenya: Development Plan, 1984-1988; 1989-1993 and 1994-1996. Government Printer, Nairobi. Kenya (1966), Maize Commission of Enquiry Report 1966. Government Printer, Nairobi. Kenya (1992, 1994), Performance Contract: GOK/NCPB, 1992 and 1994. Kenya (1981), National Food Policy Paper 4/1981, Government Printer, Nairobi. Kenya (1994), National Food Policy Paper 2/1994, Government Printer, Nairobi. Kenya (1986), Sessional Paper 1/1986 on Economic Management for Renewed Growth, Government Printer, Nairobi. Krueger, A. O. (1992), Economic Policy Reform in Developing Countries, Blackwell, Cambridge. Krueger, A. O. (1993), Political Economy of Policy Reform in Developing Countries. The MIT Press, Cambridge, MA. Krueger, A. O., Schiff, M. and Valdes, A. (1991), The Political Economy of Agricultural Pricing Policy. The Johns Hopkins University Press, Baltimore. Lofchie, M. (1989), The Policy Factor: Agricultural Performance in Kenya and Tanzania. Lynne Rienner, Boulder, CO. Millers" seminar (1994) A seminar for millers convened by the researchers in Nairobi in March 1994. MOALDM (Ministry of Agriculture, Livestock Development and Marketing), 1994. MSM (Ministry of Supplies and Marketing), 1992. Mukumbu, M. (1992), The effects of market liberalisation on the maize milling industry in Kenya. Proceedings of Conference on Maize Supply and Marketing under Maize Market Liberalisation, Karen-Nairobi, 18-19 June 1992. Mukumbu, M. and Jayne, T. S. (1994), Urban maize meal consumption patterns: strategies for
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improving food access for vulnerable urban households in Kenya. Paper presented at the Symposium on Agricultural Policies and Food Security in Eastern Africa, 19-20 May 1994. NCPB Board papers, 1993 and 1994. NCPB (1994) NCPB file number NCPB/29/I/ll 1. Nyoro, J. K. (1992), Competitiveness of maize production system in Kenya. Proceedings of Conference on Maize Supply and Marketing Under Market Liberalisation, Karen-Nairobi, 18~19 June 1992. Odhiambo, M. O., Suji, M. O., Keya, M., Luswetti, F., Holtzman, J. S. and Steffen, P. (1994), The Kenya maize sub-sector: a rapid appraisal approach with emphasis on market information needs and extension issues. Mosley, P. and Smith, L. (1989), Structural adjustment and agricultural performance in sub-Saharan Africa 1980-1987. Journal of International Development ! (3), 321-355. Mosley, P., Harringan, J. and Toye, J. (1991), Aid and Power: The World Bank and Policy Based Lending. Vols 1 and 2. Routledge, London. Gibbon, P., Havnevik, K. J. and Hermele, K. (1993), A Blighted Harvest: The World Bank and African Agriculture in the 1980s. James Currey, London. Rubey, L. (1993), Consumer maize meal preferences in Zimbabwe. Ministry ol Lands, Agriculture and Water Development, Government of Zimbabwe, Harare. Schmidt, G. (1979), Maize and beans marketing in Kenya: the interaction and effectiveness of the informal and formal maize marketing systems. IDS Occasional Paper No. 31, University of Nairobi. Smith, L. (1993), The progress of marketing reform and the public sector: country experiences. Presentation on Kenya, at a one-day FSG Seminar, 8 January 1993. The Courier, No. 114, March-April 1989. The Economic Review, 13-19 September 1993. Weekly Review (Nairobi), December 11 1992; November 25 1994; December 2 and 16 1994; January 6 1995; February 3 1995. Toye, J. (1992) Interest group politics and the implementation of adiustment policies in sub-Saharan Africa, Journal of International Development 4 (2), 183-197.
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