Agriculture

Approximately 30% of food produced in the EAC is lost through poor post-harvest handling. In 2016 alone, this equated to almost 4 million metric tons of maize across the EAC countries. Post-harvest handling equipment and facilities are not typically treated as agricultural equipment similar to production equipment such as tractors, despite their equally important role along the value chain. 

Post-harvest losses are exacerbated by high cost of post-harvest handling equipment, of which taxes form a significant proportion. Both import duties and VAT are typically levied on post-harvest equipment such as silos, dryers and hermetic storage bags, to name a few. In some cases, taxes form more than 40% of the total retain price of the equipment.As such, most grain sector actors, particularly small scale farmers and traders, are unable to afford good post-harvest handling equipment, thus perpetuating post-harvest losses.

EABC and the Eastern Africa Grain Council recommend that:

  1. EAC Partner States should zero-rate post-harvest equipment from payment of Value Added Tax (VAT) order to make such equipment  affordable to industry actors, and ultimately reduce post-harvest losses;
  2. EAC Partner States should review the Common External Tariff Schedule to provide for a zero-rated tariff line specifically for post-harvest handling equipment and machinery, in order to allow for tax-free importation of post-harvest equipment.

STRENGTHENING COORDINATION AMONGST EAST AFRICA COMMUNITY PARTNER STATES TO IMPROVE FOOD SECURITY

Countries in the East African Community are facing significant food security challenges. As of February 2017, approximately 6.5 million people in the East African Community faced food security crisis, while prices of staple food commodities across the EAC were more than 50% higher than in 2016.

Although governments have been taking several measures to address food insecurity, these interventions are being taken with a domestic context. However, EAC countries have significant interdependency for food security purposes, particularly with respect to grain trade. As such, some of the government interventions, like erection of trade restrictions for food commodities, may undermine food security in neighbouring countries and potentially diminish future food security prospects in their own countries in the medium and long term. Other government interventions may be diluted if neighbouring countries do not take aligned interventions; 

EABC and Eastern Africa Grain Council recommend that:

  1. EAC Partner States should introduce and implement mechanisms for increased cooperation and coordination of their interventions with respect to food security in order to ensure that actions of individual Partner States do not undermine food security in other Partner States
  2. EAC Partner States should protect free trade in food commodities as a means of achieving food security. Restrictions to free trade in food commodities undermine access to markets for producers, increase transaction costs and do not achieve their intended objectives of improving domestic food availability and stabilizing prices.
  3. The EAC Partner States should strengthen their support to the EAC Regional Food Balance Sheet (RFBS). A strong RFBS will facilitate coordinated decision-making by EAC Partner States to address food security concerns.

AGRICULTURAL INSURANCE IN EAST AFRICA

The agricultural sector in East Africa faces many perils, including adverse weather conditions, market volatility and policy and political dynamics. Climate change has made the weather one of the biggest risks affecting the sector in East Africa. As such, agricultural insurance is predominantly geared towards covering losses from adverse weather and similar events beyond the control of farmers, and has become one of the most important tools for managing risks associated with agriculture.

 A number of pilot programmes have been implemented in the East African countries in an attempt to promote uptake of agricultural insurance. However, uptake remains very low, partly because of the high costs (premiums) associated with agricultural insurance products relative to the incomes of most farmers. The high premiums are a result of high risks associated with agriculture, particularly smallholder agriculture. Consequently, agricultural insurance remains primarily a business which involves large-scale farmers. Only a minor percentage of global premiums are paid in the developing world where insurance is mainly available only to larger and wealthier farmers (FAO).

Increasing the uptake of agricultural insurance products by East African farmers is important for growth of the agricultural sector as it opens up avenues for accessing credit for investment in the sector from financial institutions and provides a safety net for the livelihood of farmers in the event of crop failure caused by adverse weather.

EABC and the Eastern Africa Grain Council recommend that:

  1. The EAC Partner States should explore the possibility of establishing a regional agricultural sector re-insurance scheme. Such a scheme will allow insurance companies that provide agricultural insurance services to hedge their risks, thus offering their products to farmers and other value chain operators at lower premiums, thus stimulating uptake of agricultural insurance products. EAGC is willing to support the process by collaborating with the EAC to convene a meeting of regional experts to discuss, among others, the feasibility of such a scheme.
  2. The EAC Partner States should launch awareness programmes geared towards sensitizing farmers and other agricultural sector actors on the importance of agricultural insurance in order to stimulate uptake of agricultural insurance products.