Why local fertiliser plant can’t bank on the regional market

When Kenya started plans to establish a local fertiliser plant, the investor had an eye on export to Uganda and Tanzania where the product is in high demand.

However, the ambitious plan on the lucrative regional market seems to have been scattered with the plans by Uganda and Tanzania to build their own factories.

Kenya and the Japanese conglomerate Toyota Tsusho entered into an agreement that would see the firm establish a blending and manufacturing plant, for domestic and export market.

The plan by the two neighbouring countries comes at a time when Kenya is completing the first phase of the plant with the fertiliser expected in the market in a month.

Toyota chairman and the firm’s adviser for East Africa Dennis Awori said the move by Uganda and Tanzania will not affect the planned construction as they will still export part of the fertiliser to these countries.

Mr Awori said Kenya will sell to border towns of the two countries as it will be cheaper for them to get supplies from Eldoret than all the way from Kampala.

“We will still have market for our products at the border towns of Mbale, Malaba, Soroti and the Elgon region since it will be cheaper for us to sell them than having it come all the way from Kampala,” said Mr Awori.

African Potash, a company listed on the London Stock Market, has signed an agreement with Uganda that will see the UK firm establish its presence in the country to supply affordable fertiliser to farmers in the country.

Uganda is also targeting exports to the East African states. The landlocked state is better placed than Kenya to sell its fertiliser to Burundi and Kigali.
Last month, Tanzania announced plans to start building a $3 billion fertiliser factory in partnership with a consortium of investors from Germany, Denmark and Pakistan this year.

Agriculture Cabinet Secretary Willy Bett pointed out that the fertiliser plant by Toyota is on the right track and that Uganda and Tanzania will not jeopardise Kenya’s plans.

“The market is still there for the fertiliser, the demand keeps growing day after another and we should not be scared with the establishment of other factories in the region,” said Mr Bett.

Expand the production capacity

The investor, Mr Bett said will decide whether to expand the production capacity or if they will restrict it to domestic requirements.
The first phase of the project has a capacity of 150,000 tonnes a year.

Analysts argue that the Toyota project can only be viable if Kenya has the required raw materials . This include natural gas (which has been found in Northern Kenya), Phosphate rock, Potash and Sulphur. Toyota has indicated that it will export minerals like phosphate rock from Morocco.

“For any country that would like to produce its own fertilisers, the alternative approaches to developing an indigenous fertiliser industry depends on whether it has one or more of the required raw materials within its borders,” said Mr Mosoti  Andama, a public policy analyst.  

Mr Andama said the project ought to have been implemented at least as a regional plant for fertiliser market in Kenya, Uganda, Tanzania, Southern Sudan, Burundi, DRC and Rwanda to be viable.

MEA Limited, one of the largest fertiliser dealers currently blends NPK from value-added raw materials (urea, potash and phosphate) shipped in from Europe, Saudi Arabia, Russia, Canada and Morocco.

Toyota started the construction of the $1.2 billion fertiliser plant in Uasin Gishu last year, opening a window for farmers to buy the critical input cheaply.

The government estimates that the plant will cut the cost of fertiliser by about 40 per cent, or less than Sh2,000 per 50-kg bag.

The government spends Sh3 billion annually to provide farmers with low-cost fertiliser at Sh1,600 compared to market rate of Sh3,500.

The company is financing the whole project as a private venture and it is putting up the project in two phases and they have started with the NPK plant.

The second phase will include production of Diammonium Phosphate (DAP), urea and Calcium Ammonium Nitrogen (CAN) fertilisers, which is expected to commence after the completion of the first one.