Lobby pleads with state to protect Macadamia processors

Macadamia nut processors in Kenya have asked the government to curb direct exportation of raw, unprocessed macadamia nuts.

MACNUT Association, the lobby representing the processors says this has led to significant financial losses for local processors, farmers, and job layoffs for the processors' employees and the suppliers that depend on them.

While the temporary window in 2023 was thought to be useful to help mop up nuts that had remained unsold, this decision has increased the number of Chinese nut-in-shell exporters who are buying these nuts directly through brokers.

According to the lobby, Chinese traders primarily purchase grafted nuts, which constitute 50 per cent 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,'' the association said. 

As of July 2024, exports from Kenya reached Sh3.3 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 Sh6.9 billion, marking a significant revenue to Kenya and contribution to the national GDP.

Adverse effects have resulted from exports of unprocessed macadamia nuts including revenue losses to Kenya amounting to over $50 million (Sh6.5 billion).

Macnut Association chairperson 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,'' Maigua said.

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 added that 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 50per cent 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 of unprocessed nuts continue.

The suppliers who depend on the processing industry are also facing significant challenges, further compounding the impact on the local economy.

All in all, over 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 30per cent 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 higher-quality 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 chairperson expressed that the association has been working closely with AFA and development partners to implement the AFA strategic plan which includes rolling 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-products of this process are 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.

"This is leaving Kenya with an unredeemable market position in global kernel markets, with Kenya’s market share falling from 13 per cent 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 now wants 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.

The lobby also wants initiatives to 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.

Furthermore, the processors now want the government to give incentives to foster investment in local processing facilities, facilitating value addition and enhancing global competitiveness.

It also wants the state to establish quality standards for raw and processed nuts to uphold Kenyan macadamia's reputation and ensure it remains synonymous with excellence.

"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.”