GoK Urged Government To Protect Local Macadamia Nut Processing Industry

By Soko Directory Team / Published September 2, 2024 | 3:05 pm

The MACNUT Association, representing local Macadamia nut processors, is calling on the Government of Kenya through the Ministry of Agriculture to address the critical challenges facing the macadamia nut processing industry due to the direct export of raw, unprocessed macadamia nuts. This practice has led to significant financial losses for local processors, farmers, and job layoffs for the processors’ employees and the suppliers that depend on them.

The Government of Kenya, through the Ministry of Agriculture, recently approved the direct export of basic raw, unprocessed macadamia nuts. While the temporary window in 2023 was thought to be useful to help mop up nuts that had remained unsold, this decision has resulted in an increase in the number of Chinese nut-in-shell exporters who are buying these nuts directly through brokers. These Chinese traders primarily purchase grafted nuts, which constitute 50% of the crop in Kenya, leaving indigenous nuts unsold. This has reduced the income for farmers, as the nut-in-shell market only buys grafted nuts, while the majority of Kenyan farmers grow both grafted and indigenous varieties—unlike Kenyan local processors who buy both types for processing.

As of July 2024, exports from Kenya reached KES 3.3 billion for kernels which could have attracted a significantly higher price if NIS was readily available for value addition. Before the restriction, Kenya exported Processed Kernel to diversified markets worth KES 6.9 billion, marking a significant revenue and to Kenya and contribution to national GDP.

Adverse effects have been resulted from exports of unprocessed macadamia nuts including Revenue losses to Kenya amounting to over $50 million—$20 million from exported as raw unprocessed NIS and $30 million from post-harvest losses which means also loss of income to the government (taxes) due to the decline in local processing and exports.

The Chairperson of the Macnut Association representing macadamia nut processors, Mrs. Jane Maigua, said, “While the Kenyan Macadamia sector has in the last 10-15 years grown on the back of sales of Kernel to the USA and Europe, the approved directive has significantly reduced the availability of nuts for value addition by Kenyan processors for sale in global markets. The negotiated trade agreements with USA-AGOA and EPA will not be beneficial to Kenyan farmers in the Macadamia Industry if the directive remains as is. Currently, the market for unprocessed nuts is only in China, which means Kenya is narrowing its market into a single market rather than diversified markets.” She further added, “It should be understood that the majority of the farmers do not get the benefit of pricing when nuts are exported as in-shell; brokers are the main ones that benefit. Local processors who source directly from farmers pay more for the produce and have done so in the last several decades.”

The direct export of raw, unprocessed macadamia nuts has created an uneven playing field for local processors who offer higher prices to local farmers. As a result, local processors have reported losses exceeding 50% in the last year, with many forced to close or face debt collectors. Over 5,000 workers have already lost their jobs in the first half of 2024, with projections indicating that more than 10,000 workers could lose their jobs by the end of the year and a further 20,000 by June next year if the exports on unprocessed nuts continues. The suppliers who depend on the processing industry are also facing significant challenges, further compounding the impact on the local economy. All in all, 0ver 50,000 livelihoods are at stake, as they depend on the jobs within the macadamia processing industry

Farmers are selling their nut produce at approximately 30% lower prices, making it difficult for them to sustain their farming operations. Exporting unprocessed macadamia nuts has also led to a scarcity of quality nuts for kernel export markets. Furthermore, Chinese buyers are using X-ray machines to reject low-quality nuts, which further reduces income for farmers. These rejected nuts are often mixed with higherquality ones and sent to local processors, resulting in increased production costs. Chinese buyers are capitalizing on years of investment by local processors in the sector, including extension support to farmers, input supply, and seedling distribution. The chair of the Macnut Association expressed that the association has been working closely with AFA and development partners to implement the AFA strategic plan which includes roll out scaled extension support for macadamia farmers to improve on good agronomy practices of macadamia trees.

The element of sustainability also comes into the picture as local processors use the macadamia nut shells to power their driers. The shells and by-product of this process is then returned to the farms as compost. However, the export of raw, unprocessed macadamia nuts to China has resulted in the new nut- in-shell export companies using significant amounts of wood in their dryers, which is not sustainable for the environment.

Another major effect of the direct export of unprocessed Macadamia nuts to China is that key buyers and large retailers from US and European markets are taking flight from Kenya to other macadamia-producing countries due to a shortage of kernels from Kenya, which has jeopardized and will continue to damage long-cultivated relationships between processors and buyers if the correct action is not taken as soon as possible. This is leaving Kenya with an unredeemable market position in global kernel markets, with Kenya’s market share falling from 13% due to the reduced availability of kernels for export.

The MACNUT Association is urging the Government of Kenya to take immediate action to protect the local nut processing industry and ensure the sustainability of the entire value chain.

In response to the above-mentioned challenges, the Macnut Association is proposing the following:

A re-evaluation of the policy allowing the export of raw NIS, and immediate reinstatement of the total ban to safeguard the quality of our exports and the sustainability of the industry.
Initiatives should be developed to educate farmers about market dynamics, empower them in their dealings with brokers, and ensure they receive fair and equitable compensation for their produce.
The introduction of government incentives to foster investment in local processing facilities, facilitating value addition and enhancing global competitiveness.
Establishing quality standards for raw and processed nuts to uphold Kenyan macadamia’s reputation and ensure it remains synonymous with excellence.
Promoting sustainable agricultural practices among farmers to improve the quality of macadamia nut production and the long-term viability of their livelihoods and the environment.
Regular stakeholder consultations to understand the ground realities and challenges faced.

In conclusion, the Chair of the Macnut Association, Mrs. Jane Maigua, stated, “Our local macadamia nut processing industry is on the brink of collapse due to the direct export of raw unprocessed nuts to China. We are losing our competitive edge on the global market, and the livelihoods of thousands of Kenyans are at stake. We urge the government to implement policies that support local processors.”

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