The Effects of fertilizer market policy reforms in Kenya on performance of local fertilizer manufacturing firms - the case of Kel chemicals ltd
Sahil, Shah S.
MetadataShow full item record
As part of reforms to boost agricultural production, the Kenya government introduced a fertilizer subsidy named National Accelerated Agricultural Inputs Access Program (NAAIAP) in 2006. This study uses fertilizer production, sales and income data of KEL Chemicals Ltd., the leading fertilizer manufacturing company in Kenya, to evaluate the effect of this subsidy on the performance of a local fertilizer manufacturing company. With respect to the NAAIAP policy, the specific objectives of this study were to: establish its effect on the fertilizer production of KEL Ltd; ascertain the policy effect on the financial performance of KEL Ltd.; determine how KEL Ltd deals with policy shifts targeting the fertilizer sector; and evaluate KEL’s modes of contingency and decision-making in the face of policy changes. Appropriate literature was reviewed to provide a foundation of knowledge on the subject and place the research within the context of existing literature. A mixed-method approach was employed to conduct an empirical investigation of the externalities of demand-side government interventions in the agricultural sector. The independent variable in this study was market policy reforms in the fertilizer market, which specifically focused on (NAAIAP) policy. The dependent variables were the performance indicators of KEL Ltd. Annual fertilizer production and financial data were collected from KEL ltd records from 1998 to 2015. This data was supplemented by key informant interviews with KEL’s top managers. Descriptive, trend analysis, and tests of significance on the quantitative data were done using Microsoft Excel while content analysis was carried out on the responses received from interviewees. This study found out that the NAAIAP policy had a positive impact on the fertilizer production and financial performance of KEL Ltd. Comparative analysis of KEL’s fertilizer production, fertilizer sales and profits showed that the annual means and medians for all these indicators were significantly higher, at α=0.05, after the introduction of the fertilizer subsidy. The study also found that the management of KEL carries out regular reviews of its operating strategies to address public policy shifts in the fertilizer industry and that KEL continuously strives to improve on their contingency plans to deal with adverse policy reforms. This study concluded that the NAAIAP policy led to an increase in fertilizer production, sale, and profitability of local fertilizer manufacturing firms. However, this research recommends that further studies should be carried out to determine the impact of the NAAIAP subsidy policy on the overall growth of the agricultural sector in the country as well as how this policy has affected the distribution, sale, and use of fertilizer in the country.