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REPUBLIC OF KENYA
MINISTRY OF AGRICULTURE
STATUS REPORT ON KENYA COTTON SECTOR
ICAC PLENARY MEETING AT TASHKENT, UZBEKISTAN 23– 27 OCT 2017
COMPILED BY AGRICULTURE AND FOOD AUTHORITY – FIBRE CROPS DIRECTORATE OCTOBER, 2017
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TABLE OF CONTENT PAGE
EXECUTIVE SUMMARY 3
1.0 BACKGROUND 5
2.0 ANNUAL PRODUCTION STATISTICS AND CHALLENGES 7 2.2.1 BIOSAFETY IN KENYA 9 3.0 COTTON GINNING 11 4.0 THE TEXTILE AND APPAREL MANUFACTURE 14
7.0 MARKETING 16
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Executive Summary
Cotton is considered under the Vision 2030 and in the National Medium Term Plan as
one of the most important industries to implement the long term Arid and Semi-Arid
Lands (ASAL) development initiatives and industrialization strategy. It is among the
cash crops that thrive well in the country fragile ASAL regions where few other
economic opportunities exist.
In June 2015 Kenya launched its Industrial Transformation Program. This is a detailed
roadmap to the transformation of the industrial sector into a competitive sector through
promoting local production, improving regional market access and taking advantage of
global niche markets. This program has prioritized cotton, textile and apparel sub
sectors. Through the program, the country is aiming to achieve $ 1 billion in exports
from cotton – textile sector (i.e. fibre production, textile manufacturing and apparel
manufacture) while creating an additional 150,000 jobs by year 2019.
Agriculture and Food Authority (AFA) is projecting a production target of 100,000
hectares of cotton through efficient production schemes by 2021 from the current
30,000 hectares.
The government recognizes that cotton industry is governed by the global trade
initiatives under the WTO and it is paramount to compare its industry status quo with the
rest of the world by striving to instill global competitiveness in the sector. This
constituted the basis for the government to join the International Cotton Advisory
Committee (ICAC) as a full member 10 years ago, in June 2007. Kenya notes and
continue to advocate for a level playing field through fair cotton production, trade and
support systems in the domestic and in the international arena because it is only
through fair practices that countries will achieve sustainable industrialization goals
through measurable positive results from the Industry.
Under implementation are deliberate approaches to spur economic growth in this
important sector such as provision of policies that are sensitive to the value chain
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concerns. This report highlights the status of the country’s entire cotton value chain and
is presented as country statement to the 76th plenary meeting.
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1.0 BACKGROUND
1.1 Cotton production and marketing activities are mainly handled by private ginning
companies with the National Government being involved with policy direction that
aim to create an enabling environment for active private sector participation to
develop the sector.
1.2 In 2013, the legal framework that managed the sector was revised with
establishment of the Agriculture and Food Authority (AFA) through an Act of
Parliament, the Agriculture and Food Authority Act, 2013. Through the act, AFA
was established to regulate and promote agricultural commodities including the
cotton industry by seeing the implementation of the Crops Act, 2013. The Cotton
Amendment Act of 2006 was repealed thereby transforming the former Cotton
Development Authority into the present Fibre Crops Directorate.
1.3 Cotton co-operative societies and unions are being transformed to create six (6)
cotton production clusters countrywide to handle the primary activities relating to
cotton, i.e. production, marketing and farmers’ payment and processing.
1.4 Cotton research in Kenya continue being handled mainly by the newly
transformed Kenya Agricultural and Livestock Research Organization (KALRO)
1.5 Cotton is currently grown solely by small- scale farmers in more than half of the
total number of Counties comprising an estimated 40,000 growers
1.6 In the last 3 years production has stagnated at 5,000 metric tons as a result of a
severe drought compounded by the impact of fluctuating producer prices to the
farmers. In addition there has been remarkable shift in the location of production
emanating from competition with food crops and alternative cash crops in the
respective production regions resulting in reduced cotton acreages.
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1.7 The Government is giving targeted support to growers inform of free seeds to
increase production.
1.8 Kenya has good opportunities for the exploitation of Cotton Industry such as the
long experience in cotton production and processing; an already operational
value chain infrastructure right from production to garments; the country is
strategically placed and connected to the rest of the world through roads, rail and
water; and the access to Regional and other markets such as EAC and
COMESA
1.9 Enactment of legislations, such as the Public Officer and Ethics act and the
Counterfeit and Sub standards act all with a view to enhance good business
practices.
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2.0 Annual production statistics and challenges
Cotton is a source of livelihood to approximately 40,000 smallholder farmers with an
average yield rate of 572kg/ha. The country has a potential of 384,500 ha for production
from rain-fed and irrigated land that can be put under cotton cultivation. Currently less
than 10% of this area is under cotton crop. The commercial varieties grown in the
country are HART 89M & KSA 81M with a production potential of approximately 68,000
tons of lint. However the he country is realizing approximately 5,000 tons of lint which is
only 7% of this potential. The peak production of cotton was in 1984 when 13,000 tons
of lint was achieved.
Table 1: Seed Cotton & Lint Production & Market Trends (2012-2016)
YEAR 2012 2013 2014 2015 2016 Area (Ha) 25,540 21,182 24,322 28,627 28,700 Seed cotton Production (MT) 13,877 12,116 13,472 15,726 15,800 Yield (MT/ha) 0.55 0.57 0.56 0.65 0.55 Seed Cotton price (USD cents) 35 42 42 42 42 Lint Price (USD cents /Kg) 130 - 142.32 142 No. of Bales(185 kg Lint) 21,450 21,831 24,274 28,340 28,468 Lint Production (Tons) 4,000 4,000 4,500 5,200 5,200
Current production averages at 572 kg/ha compared to a potential of 2500 kg/ha. Main
causes are inadequate quality cotton seed; high cost of inputs; poor management of
pests; inefficient marketing channels; cheap imports including lint and dependence on
rain fed cotton production.
2.1 Challenges
I. Lack of funds for certified seed production and distribution system to the farmers;
II. Inadequate cotton research funding and investments in cotton research facilities
leading to low adoption of modern technologies;
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III. Small scale farming in marginal areas due to lack of capacity to invest in large
scale production (average < 1 HA.);
IV. Production in semi-arid areas that have low rainfall and prone to high incidences
of pests’ infestation demanding high level use of agrochemicals. Cotton is grown
in these areas because of land pressure in the high potential areas are used for
high value crops;
V. Lack of affordable credit for farmers to assess credit for timely land preparation
and access to other inputs;
VI. Production is by resource poor farmers who are unable to invest in large scale
production hence not benefiting from economies of scale;
VII. Un predictable cotton prices in the world market in addition to competition from
farmers of countries benefiting from subsidies;
VIII. Competition from level trading ground within the trading blocs with countries that
have better climatic conditions for cotton production;
IX. Weak farmer organizations denying them lobbying power for marketing and
access to most benefits;
X. The country is still producing conventional cotton and is yet to get involved in
commercial production using GMO technology.
2.2 Government Interventions:
I. Formation of 6 farmer clusters to lobby for their interests and for economies of
scale;
II. High yielding seed importation program through Public Private Partnership (PPP)
initiated in collaboration with Kenya Plant Health and Inspectorate Services
(KEPHIS);
III. Government is encouraging contract production in Irrigation schemes for large
scale production of cotton. New schemes being targeted especially with
devolution of the agriculture production
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IV. The Fibre Crops Directorate has been established to direct, coordinate and
regulate the Industry;
V. Research program for high yielding, pest and disease control and drought
tolerant varieties with higher fibre length, strength and ginning outturn have been
developed
VI. There is progress towards introduction of Bt cotton to mitigate on poor
management of pests with a view to increase farmers returns while conserving
the environment. In Kenya pest control activities take 32% of the production cost. Experiments on use of the technology indicated 20% reduction in pest
management costs.
2.2.1 Biosafety in Kenya
The Biosafety Act was formulated and operationalized in 2009 to pave way for
introduction of transgenic technology. This was followed by development of following
Biosafety regulations:
- Contained Use Regulations, 2011
- Environmental Release Regulations, 2011
- Import, Export and Transit Regulations, 2011
- Labelling Regulations, 2012
However on 21st November 2012 the ministry of public health put a ban on importation
of genetically modified foods in Kenya. This was a big blow to the commercialization
initiative since cotton is not just a fibre but also produces oil and animal feed. In 2017 a
petition on ban of GMOs for presentation to the Cabinet and is awaiting discussion with
positive indications that the ban will be lifted.
There are two (2) limited approved GMO projects in Kenya (Environmental Release
stage): Bt Cotton and Bt Maize for National Performance Trials (NPT). Currently a
taskforce on Bt is fast tracking of National Performance Trials and Environmental
Impact Assessment through;
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- Identification of sites where NPTs will be undertaken
- Undertaking site specific Environmental Impact Assessment (EIA) on identified
sites
- Identification of seed companies for seed multiplication
- Processing for NPTs seed importation is underway
Capacity
The country has adequate capacity to implement the technology.
The country under Kenya Agriculture and Livestock Research Organization (KALRO)
has over 30 trained personnel trained in GM technology.
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3.0 Cotton Ginning
3.1 Ginning Efficiency
Profitability of a ginning factory is dependent on its efficiency to recover lint from seed
cotton (Ginning out-turn-GOT). There are 5 operational ginneries in the country with a
GOT of 34% against a potential of 40% for the two commercial varieties. Other factors
such as power consumption, capacity utilization and labour input in processing also
affect production efficiency hence the profitability of the factories. All the operational
ginneries are operating at below 30% capacity utilization due to low seed cotton supply
and high has a labour input negating modern best practices. This situation has led to
closure of ginning factories from 22 in late 1990’s to the current 5.
The practice in Kenya is that ginners’ process seed cotton into lint and cotton seed.
The lint is sold to spinning factories while the seed is sold to oil and animal feed
manufacturers. Analysis show that earnings of a ginning factory and by extension to the
farmer can be tremendously improved through minimum integration of ginning factory to
include cotton seed milling. Factories are being encouraged to integrate their
operations.
3.2 Grading and Standards
Grading is done and enforced at the farm level and during primary processing at the
ginnery. Grading at the farm is visual based on colour (Grades A and B). This system
though subjective and has challenges in enforcement during seed cotton marketing
works well. Occasionally the regulator (AFA) is called upon to arbitrate on applicable
grades.
Apart from grading there is the challenge of lack of affordable cotton based harvesting
and packaging materials as recommended by the government regulating agency.
Farmers are improvising on harvesting materials to mitigate on contamination
challenges.
3.3 Cotton Classing
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Kenya has joined globally recognized quality standards to characterize its cotton
through instrument cotton classing. A cotton classing system has been developed and
is being implemented. The system determines actual quality of lint before offering to the
markets and is also being used for confirmatory analysis of bought fibre by textile mills
and to optimize their operations and efficiencies. The facility is carrying out fibre
analysis for research purposes (breeding). It is envisaged that at full implementation
growers will benefit from enhanced price derived from benefits of characterization of lint
and its traceability to the source. As good as this system appears, some of the ginners
are yet to voluntarily present samples for analysis.
3.4 Ginning Skills
Since 1980’s there has been no deliberate training of ginning personnel and operators
and the investors in the ginning sector rely on old technicians whose skills are not
updated to the current best practices and technologies. Skill training for technicians
would be expensive because the country lacks institutions for such training and training
of this cadre would require taking participants to countries where there are ginning
schools such as India, Turkey or China. An alternative would be to establish a
curriculum and a training school in the country
3.5 Challenges in Ginning
I. Unpredictable lint prices due to variation in the world prices;
II. Low utilization capacities of the ginneries due to low cotton production leading to
high cost of ginning;
IV. High cost of production factors mainly energy;
V. High cost of credit to enable ginners to promote cotton production to provide
adequate raw materials for their ginneries, purchase modern ginneries or
rehabilitate or modernize the existing ones;
VI. Lack of a supportive regulatory framework within the trading block of the
Common Market for Eastern and Southern Africa (COMESA) to support cotton
seed oil processing.
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3.6 Intervention
As a stop gap, a market linkage mechanism through contract production along value
chain is being promoted and encouraged to coordinate sale of seed cotton. A pricing
formula of seed cotton continue being implemented.
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4.0 The Textile and Apparel manufacture
4.1 Current status
The country textile sector can be divided into two sub sectors, namely integrated mills
and apparel manufacture. The sector is varied in terms of age, size, technology and
market outlets.
The spinning and weaving firms are large scale, while the garment manufacturers range
from large to micro enterprises. The large ones use industrial machines for mass
production while the small ones use electrical or foot powered machines.
With market liberalization in the early 1990s, there has been a decline in the
performance of the cotton textile industry due to influx of cheap textile products and
garments from other countries.
There are a number of mills, however only 3 are involved in cotton processing. In 2005
the installed capacity was estimated at 115 million square meters per year. Today there
are over 30 large-scale garment manufacturers mainly producing for export markets. In
addition there are several small and micro garment/apparel manufacturers in the
country.
The textiles mills are operating under-capacity spinning to produce cotton yarns,
weaving and knitting, dyeing, and making finished fabrics. Cost of milling varies widely
depending on the quality and origin of lint cotton used for the process. Textile mills
producing yarns and fabrics for export oriented companies (Export Processing Zones,
EPZs) tend to rely on imported fabric and lint.
The local textile manufacturing has failed to grow and integrate with our Export
Processing Zones (EPZs) due to the following reasons:
I. Cheap imports for both new and second hand cotton products
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II. Un-level playing field due to high subsidies by developed countries
III. High cost of capital
Despite the low performance and closures, the sector has a high potential. Currently
75% of domestic demand is imported while spinners oriented towards sale of yarns and
fabric for domestic oriented makes use 20% local lint and 80% imported lint. Current
mills capacity require 11,000 tons of lint annually though the country would require
37,000tons of lint to meet the annual local fabric demand of over 225.0 million square
meters.
In 2015 the country textile sector exported items worth $ 380 Million in addition to
creating employment.
4.2 Challenges in the textile sector
I. Challenges posed by international protocols from unfair competition that lead to
enormous cheap imports of textile products and garments from developed
countries with subsidies leaving little room for locally produced cotton products;
II. Competition from developed countries from subsidized products;
III. Inefficient technology along the chain which is not cost effective due to lack of
competitive credit schemes to support upgrading of technology;
4.3 Intervention
The Government through Export processing Authority is establishing an incubator
programme for small scale textile manufacturers
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5.0 Marketing
5.1Current status
The market has been fully liberalized and the trading of cotton products is now wholly in
the hands of the private sector.
5.2 Challenges
I. Influx of unregulated imported subsidized, and cheap lint and textile products
flooding the local market greatly distorting the price of Kenyan lint and textile
products;
II. Inefficient market information flow and market research leading to over
reliance on traditional markets;
5.3 Intervention
With Cotton classing system in place, draft subsidiary legislations have been developed
and important quality parameters determined by stakeholders so that prices of cotton in
future will be pegged on quality in order to promote production of high quality lint and
textile products.