Warehousing Receipt System Legislation to Reduce Post-harvest Losses in Kenya

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The Warehouse Receipt System Bill no. 10 has been in the Kenya parliament since 2017 but if passed in 2018, it will create a more valuable system of cold room certifications for farmers to reduce post-harvest losses.

The law was last mentioned in the National Assembly on February 21, 2018 under a standing order. Its gist is to help make strong contracts between owners of certified storage rooms and family growers for the short upkeep of their goods under a legal title.

Currently, farmers have informal contracts with warehouse operators, which puts their fresh produce at risk of arbitrary disposal due to the ‘as is’ contract approach.

The proposed bill will help farmers to hold selling their fresh produce for a prolonged period especially if there are low market prices. Cold rooms have a capacity to store maize, legumes and vegetables under proper silo storage for the average shelf life of most produce of 6 to 12 months. This will make it possible for family growers to maintain their harvests under a professional contract and sell them when prices improve.

The salient points of the Warehousing Receipt System Bill 2018 that will make agricultural storage contracts more sustainable include:

1. The warehouse owner will be liable to keep the fresh produce and deliver the promise to the trader or farmer.

2. The law will also cover wrongful transfer of the produce especially when it is against the trader/farmer’s stipulations.

3. The goods all also attract a special tax that obligates both the owner of the warehouse and the farmer or trader.

4. After a successful negotiation of terms between warehouse operators and the produce owners, there will be a title document or receipt to enforce the contract.

The Significance of the Law in Kenya’s Fresh Produce sector

The 2018 warehouse bill will significantly affect agriculture, which contributes around 32.6% of the total Gross Domestic Product (2016 figures). It will also impact upon value chain distribution in a number of trades including agriculture and manufacturing. The two combined contributed 27% of Kenya’s GDP in the same period.

The biggest effect will be on family growers. Currently, they sell their produce at low prices to brokers due to lack of storage facilities. Since the bill seeks to regulate fulfilling storage contracts under ‘negotiation,’ it will enable farmers to have secure storage at negotiable rates.

SME exporting firms that lack sufficient storage facilities will also enjoy cold room lease at negotiable rates from warehousing outlets. The exporters will have the assurance that their goods will not suffer wrongful disposal or other breaches during the contract.

It will also be impacting on farmers and suppliers of produce experiencing low liquidity. They can use the stored goods as collateral to get loans from micro-finance institutions that support farming. Currently, due to informal warehousing contracts, banks cannot use stored goods as collateral.

Summary

Post-harvest losses in Kenya account for 20 to 30 percent of losses yearly according to the country’s Agriculture Ministry. Maize is the most affected with around 4.8 million 90 kilogram sacks of the produce lost each year out of the median forty million produced. With the coming of the contractual warehousing law, the losses will significantly reduce. Besides, farmers and exporters will take advantage of the high season to sell their goods that they store during the off-peak.

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