A bumper maize harvest has prompted government to sink Rwf1.2 billion in maize processing to mop up the excess harvest from the farmers in the Eastern Province, a senior government official has said.
The bail out cash, which was given out recently in form of soft loans to maize processors, comes with an interest of 5 percent.
“In the past these are some of the areas that had been hunger stricken so when you get surplus it is good news. Again when you have surplus it can also frustrate the farmers because they end up with this surplus that they do not know what to do with,” Emmanuel Hategeka, the Permanent Secretary of Ministry of Trade and Industry told Business Times last week.
Statistics from the Central Bank indicate that national maize production around the country went up by 51.1 percent in Season A of 2010 with 327,319 tons produced compared to last year’s 216,604 tons.
The surplus harvest is attributed to successful implementation of green revolution policy and crop intensification programme, fertilizer application and conducive climatic conditions.
Hategeka observed it was necessary for government to step in due to limited capacity of the existing cooperative societies that are supposed to collect and market such produce on behalf of the farmers.
He further noted that while some traders have tired to buy the produce, the system was not organized as well.
“Government had to intervene to mop up the produce from the districts/farmers using cooperatives, using the exiting feeder network and eventually we had to really try to mend the broken supply chain by linking processors now to farmers using the bridge of cooperatives and business people” he explained.
The official also observed that the processors that had been buying maize also encountered serious financial problems as most of them are saddled with bank debts and have limited access more financing alternatives.
Hategeka said as a result government set up the emergency fund which is referred to as “a processing revolving Fund” to correct the market failure.
“If cooperatives were accessing funds from micro finance institutions to buy the produce and sell; if processors were accessing bank loans to buy produce and process, government would not intervene. But there was a market failure and there was a break down in the system so we set up that fund to try and collect that,” Hategeka said.
While the Fund was set up as temporarily measure for bumper harvest in Season A, the official noted that the process is taking longer entering into the Season B.
To address such a challenge in the long term, Hategeka observed that government is currently considering setting up a bigger cooperative body – the Rwanda Grain and Cereals Cooperation through a public- private arrangement.
“With private sector coming together and having enough financial capacity to buy produce during harvest season from the farmers and having enough storage facilities,” he said.
In addition the cooperative would provide pest control mechanisms for the produce that is in store, collect credible statistics and data on consumption and market demand as well as increasing capacity to link the grain trading system.
“So that once we have surplus in the country, then they can tap into regional market.”