AGRICULTURE AND FOOD AUTHORITY FIBRE CROPS DIRECTORATE STATUS OF COTTON NOVEMBER, 2016 1 P age
INTRODUCTION Vision 2030 has identified fibre crops as a key sub-sector for economic development especially in arid and semi-arid areas of this country. Cotton and Sisal are the main fibre crops grown in the Country. The commodities have the potential to reduce extreme poverty, food insecurity and unemployment due to its multiplier effect through forward and backward linkages amongst the industry s players who include farmers, processors, traders, transporters and input suppliers. STATUS OF COTTON IN KENYA AREAS GROWN cotton is drought tolerant crop grown in the Arid and Semi-Arid Lands in Kenya (ASALs) where food crops do not perform well thereby acting as food security. Cotton is grown in smallholder farms in the Rift Valley, Eastern, Central, Coast and Nyanza zones. 2 P age
1. PRODUCTION a. Structure of Kenya Cotton Value Chain The sub-sector is comprised of the following: Cotton production Ginning Spinning Weaving Garment and non apparels making Peripheral industries (oil, animal feed manufacture, sanitary wares) b. Cotton production statistics (2005-2015) YEAR 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Area 32,357 36,277 35,929 43,035 39,963 20,533 32,240 25,540 21,182 24,322 28,627 Seed 19,414 22,492 24,993 15,093 14,886 11,822 15,255 13,877 12,116 13,472 15,726 cotton Production (MT) Seed 20.00 21.00 20.00 22.00 26.00 48.00 65.00 35.00 42.00 42 42 Cotton price (KES/kg Bales(185 23,000 51,000 45,035 27,027 28,000 21,300 27,487 21,450 21831 24,274 28,340 kg Lint) Yield (MT/ha) 0.60 0.60 0.69 0.35 0.37 0.58 0.60 0.55 0.57 0.56 0.65 Growth and Access Potential Potential land is 400,000ha with only about 29,000 ha utilised. While the industry is currently producing about 28,000 bales of lint annually, the domestic market demand is 140,000 bales with a potential to grow to 260,000 bales. The country has a ginning capacity of 140,000 bales and only 31% is utilised. The Directorate targets productivity efficiency of 2500kg/ha in the future compared to the current 572kg/ha. The industry has the potential to support over 200,000 farmers while only 39,000 farmers are currently farming cotton. The industry has the potential to generate over Kshs. 15 billion at farm-gate level and that approximately 69% of this revenue would remain with farming community. 3 P age
Research and Development institutions notably KALRO is researching and adopting for new improved varieties.the directorate is partnering with Kenya seed company and KALRO to establish a certified cotton seed program Revitalizing cooperative societies in 25 Counties growing cotton and sisal Cabinet approval of the National Biotechnology Development policy and enactment of the Act that established National Bio-safety Authority to regulate, guide safe use, transfer as well as commercialize biotechnology in the country; The government is reviving irrigation schemes. Though the country has never been self sufficient in cotton, in the past (1980s) the schemes used to produce 40% of national production. Over 800 hectares were planted with cotton in 2012/13 season in BURA and HOLA schemes. The Authority has already initiated partnership with Kenya Agricultural Research Institute (KARI), Kenya Seed Company and National Irrigation Board (NIB) for purposes of seed bulking in the schemes. Ten metrc tonnes were produced in 2015. Cotton being a strategic crop for communities in the marginal areas, the government is providing farmers with cotton seeds for planting as food security measure; Continued support to training and demonstration of better crop practices through extension and advisory services in collaboration with the County governments Cabinet approval of the National Biotechnology Development policy and enactment of the Act that established National Bio-safety Authority to regulate, guide safe use, transfer as well as commercialize biotechnology in the country; Pursuant to the development of standards and National classification system for cotton Enlisting with reputable global cotton organizations including the Intergovernmental organizations like International Cotton Advisory Committee (ICAC) with its Secretariat in Washington DC, United Sates of America, Common Fund for Commodities (CFC) and African Cotton and Textiles Industries Federation(ACTIF) among others. Cottom marketing Cotton marketing is fully liberalized with prices determined by globally by demand and supply. Cotton marketing is facing difficulties, emanating from weak cotton cooperative unions/societies or organized farmer groups, resulting in poor farmers bargaining power and no economies of scale. Farmers are being encouraged to form and strengthen farmer organizations to undertake marketing activities on behalf of members There is a plan to revive dormant cooperative societies since the infrastructure for most of them is still intact or requires minimal rehabilitation c. Ginning 4 P age
Currently there are 23 ginneries in the country with only 8 being operational distributed as follows:- Region No Working Name of ginnery Coast 5 3 Voi, Mpeketoni, Malindi Western 5 0 Luanda being rehabilitation Nyanza 6 0 - Eastern 5 3 Kitui, Makueni, Meru Central 1 0 - Rift Valley 1 1 Salawa (Rift Valley Products) Total 23 8 Non-operational ginneries S/NO Ginnery Ownership Remarks 1. Lamu Private Not viable-cotton is in the main land 2. Hola Private Closed in 1998 after collapse of Bura 3. Angurai Private Machinery relocated to Uganda in 2000 4. Malaba Malakisi farmers Ceased operations in 1995 5. Isimbi/Amukura Private Ceased operations in 1996 6. Nambale Farmers Ceased operations in 2006 7. Luanda Farmers Ceased operations in 1994 8. Ndeere Farmers Ceased operations in 1995 9. Homabay/Asego holdings Private Ceased operations in 2005 10. Kibos Private Ceased operations in 2007 11. Kendu Bay Private Ceased operations in 1996 12. Algenya Private Unreliable operations from 2004 13. Tharaka Private Under renovations from 2004 14. Meru Farmers Private Closed in 2005 The varieties grown in the country are short medium staple cottons with Ginning out Turn (GOT) of over 40% but actual GOT achieved at the ginneries is 33%. The total installed annual ginning capacity of the cotton ginneries is 140,000 bales. The combined available operating ginning capacity is 70,000 bales at full capacity for 6 months. The cotton co-operative societies own four cotton ginneries in Nyanza and Western provinces, namely Ndere, Nambale, Malaba,/Malakisi and Luanda. Three have in the past been leased to private ginnery operators while only Nambale ginnery was operated by the cooperative society before they closed down in 2006. Luanda Ginnery is being rehabilitated through the funding provided by Busia County Government. Busia Count Government has established a County revolving fund which has so far enabled Luanda Nambale and Jairos to purchase seed cotton 5 P age
Homabay County Government has provided funds to Homabay cooperative society to purchase seed starting 2013/14. d. Cotton testing and classification To address concern on quality and consistency of demanded local lint by buyers and processors, classification services are now available at Kabete, National Agricultural Laboratories procedures have been developed for measuring physical attributes for cotton that affect quality of the finished products and manufacturing efficiency. All bales are tested and quality attributes accompany bales offered for sale Attributes are among others: trash levels, fibre length, micronaire, fibre strength, colour grade, maturity etc. The aim is to assure Spinners and Traders on actual Lint Quality, this will ensure cost saving on raw material (Lint) and optimization of operations and also brand our local cottons in conformity with internationally recognized standards e. Textiles/Apparel Local textile manufacturers supply only 45 % of the Kenyan textile market requirements while imported new and used clothes account for about 37 % of the market. Demand for textile products in the country is estimated to be growing at 3.8 annually. Currently there are 4 operational textile mills in the country, see table below. If they were to operate at their installed capacity, they would create demand for cotton lint of 60,000 bales per annum, on top of the current annual demand of 120,000 bales to be able to meet the increasing demand for the increasing Kenyan population. Internal trade utilizes Fibre Crops Directorate which is expected to assist the farmers in produce quality control. The Directorate has achieved some degree of success as a regulatory body. Kenya imports most of the cotton products in order to supplement local production, which is presently inadequate. In terms of import substitution and at the current market prices, local cotton production saves the exchequer some KES 188 million. Operational cotton mills Factory Town Ownership 1. Thika Cloths Mills Thika Private 2. Rift Valley Textile Mills Eldoret Moi University 3. Sun Flag Mills Nairobi Private 4. African Cotton Mills Mombasa Private Closed Large Textile Mills Mill Location 6 P age
1. Mountex Kenya Nanyuki 2. United textile Mills (UTI) Thika 3. Kikomi (1983) ltd KIsumu 4. Londra Limited Nakuru 5. Towel Industries Ruiru 6. Fine spinners Nairobi 7. Rupa Cotton Mills EPZ EPZA Nairobi 8. TSS Cotton Mills Nairobi f. African Growth and Opportunity Act (AGOA) The African Growth and Opportunity Act (AGOA) were signed into law in the United States of America (US) on May 18, 2000 as Title 1 of The Trade and Development Act of 2000. AGOA provides reforming African countries with the most liberal access to the US market available to any country or region with which the United States does not have a Free Trade Agreement. AGOA extends duty-free and quota-free benefits to imports of a number of apparel items, and textile products used to make those goods, produced in eligible sub-saharan African (SSA) countries. The Act has given the beneficiary sub-saharan countries, Kenya included, a window period (recently extended for ten years) to develop their own base for the textile raw materials, while allowing use of fabric and other materials on the apparel items from any part of the world (3rd country fabric provision). Kenya was the first African country to be accredited as an AGOA beneficiary in the sub-saharan African region. The enactment of AGOA opened up an opportunity for growth and revival of the textile sector in Kenya. AGOA benefits brought foreign investors into the country particularly under EPZ program manufacturing apparel for export to the US market. CHALLENGES AND INTERVENTIONS Level Status Intervention/Proposals Production High input costs (mainly pesticides at 35% to 57%) Poor farm yields from: Lack of certified seeds seed available is recycled from the ginning process. Over the years the quality has gone Promotion of integrated input system (cooperative approach) and contract farming 1. Introduction of new high yielding varieties 3 varieties have successfully gone through National variety trials, one from Amiran kenya has been approved for semi-commercialised. 578 acres of it will be planted in Bura Irrigation scheme in the October 2016 season 2. Bt cotton - approval to introduce biotech cotton was 7 P age
down resulting in low yields, Low adoption of technology Marketing Poor and unpredictable prices High cost of capital leading to delayed and irregular payments to farmers Collapse of cooperatives granted by the National Bio-Safety Committee (NBC) in 2003. The process of introducing Bt. cotton was concluded in the following year and KARLO was permitted by the Kenya Plant Health Inspectorate Services (KEPHIS) to import Bt. cotton seeds from Monsanto for trials. The trials are complete with sufficient data to proceed further to allow for approvals of the event leading to commercialization. Bt cotton was recently approved for environmental trials. It is expected that adoption of Bt. cotton will increase yields and boost the economics of cotton production. 3. Certified seed - In 2015, the Directorate facilitated KARLO to produce 9 MT of certified cotton seed (KSA 81M variety). The seed will be further multiplied in Isolo County this year (2016-17) targeting 1500 acres and a production of 2000 MTseed cotton Capacity building County government staff and farmers on the whole cotton value chain proposals to establish a price stabilization fund or a revolving fund promote Contract farming and PPP Operationalization of commodities fund Revitalization of cooperatives provide incentive to textiles and garment manufacturers that has a requirement for backward linkage Guidelines on pricing The directorate in consultation with stakeholders develops pricing formula as provided for in the draft regulations, to protect farmers from exploitation Lack of integrated marketing systems Ginning Inefficient technology High cost of power 8 Page Incentives or appropriate long term credit schemes for integrated ginning investments. and Private Public Partnership (PPP) Consider ginning sector under the implementation of Small Microenterprise Enterprises parks (SME) Revise tariff lines on power for the sub sector (billing)
Textile and Apparel Manufacturi ng High operational costs Collapse Farmer ginneries Inadequate working capital and weak management of farmer owned ginneries Delay in payment for lint High cost of manufacturing, particularly from high power and labour cost Usage of obsolete technology Threat from cheap imports (new and used) Invest in energy efficient solutions & integrate into by-products value addition Promote PPP to revive farmer owned facilities Homabay and Luanda ginnery are in the process of rehabilitation with support from their County Governmnts Enhance capacity through application of CAP 490 of the amended cooperative Act, 2004 Encourage industry agreements and collaborations Revise tariff lines on power for the sector Incentives to investments (investigate rebates and other options to investors). Appropriate tax to level competition, ban second hand cloths Strengthen surveillance for compliance to standards and taxes Promote local consumption (mandatory local sourcing for uniformed forces) Introduce incentives for buy Kenya, build Kenya brand 9 P age