The Effects of fertilizer market policy reforms in Kenya on performance of local fertilizer manufacturing firms - the case of Kel chemicals ltd
Date
2020-09
Authors
Sahil, Shah S.
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
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.
Description
Submitted in partial fulfilment of the requirements for the degree of Master of Public Policy and Management at Strathmore University
Keywords
Agricultural production,, Fertilizer production,