Facilitating Equitable Agricultural Development in sub Saharan Africa The Case of Kenya

Contents

O O O O O Introduction Objectives, TORs and methodology Agriculture and development: The Linkages The case of Kenya O Structure of agriculture in Kenya O O Evolution of Policies Key stakeholders O Private sector in Agriculture Conclusions and recommendations

Introduction

O O O O O In most African countries, agriculture accounts fro almost 1/3 of GDP and 60-80 per cent of employment Essential for manufacturing (raw materials) and an important source of export revenue Directly linked to economic growth and poverty alleviation in most of SSA However, agro-pessism in the last 3 decades led to underdevelopment and neglect of the sector in most SSA Identified by WDR 2008, IFAD 2011 as important sectors for poverty reduction in Afrrica

Objectives, TORs and Methodology

O Analyse the enabling environment for inclusive agricultural development in Kenya O Trends in agricultural sector investments, expenditure and development O O O O Policy, legal and regulatory frameworks in the sector Relationships existing between policy makers and key stakeholders Private sector in Agriculture and smallholders Recommendations for policy

Methodology

O O O O Literature review Secondary data from MoA, Mot and several parastatals Primary data from O O -FGDs with farmer organizations, Key informants from agricultural sector Consultations with FNRG

Agricultural Development: Positive Linkages

Food Productivity • Food security • Control rising prices food Employment and incomes • Farm and off farm employment and services • Incomes through participation in domestic and export markets Raw materials for manufacturing • Employment in manufacturing • Value added and increased competitiveness in world markets • Multiplier effects (services)

Agriculture and development: negative linkages

O O O O O O Falling world prices acts as a dis-incentive for production and exports Trade liberalization and SAPs led to collapse of many sectors Bio-fuels distorting food prices Subsidies in developed countries leading to unfair competition WTO rules and regulations – standards, tariffs Low expenditure and investments in agriculture

Agricultural Sector in Kenya:

O O O O O

An overview

contributes to 23 per cent of GDP, 65 per cent of total exports and 70 per cent of employment Economic growth is highly correlated with Agricultural growth (figure 1.1) More than 80 per cent of total agricultural production is done by low income smallholders with farms ranging from 0.25 to 2 acres Consists of 6 sub-sectors – Livestock, food crops, industrial crops horticulture, fisheries and forestry Horticulture contributes 33 per cent of GDP and 38 per cent of export earnings

Agricultural systems, production and trade

O O O O O 16 per cent arable land in medium to high potential areas Land fragmentation is too high, about 4 million farms are less than an acre Small holders re about 6million with farm sizes ranging between 0.25 to 3 ha Major crops cash crops include, horticulture, tea, coffee, sugarcane and cotton Major food crops include maize and rice

Trends in productivity

O O O O General low productivity per ha for most crops except tea and horticulture Decreasing area under production for key crops such as cotton, sugar, coffee which are directly linked to poverty alleviation Increased area under production for maize but decreasing yields 9productivity) Low technology adoption and poor farming methods

Evolution of policies

O O Pre-independence policies were mainly colonial, Africans were not allowed to grow any cash crops but they provided labor for the British farmers Post independence – 1960’s to 70’s O O government intervention and support in production and marketing Smallholders organized in cooperatives O Rapid growth in agriculture (6 per cent)

Evolution of policies cont’d

O O Liberalization era 1980’s to 90’s O O O Liberalization as a conditionality for Aid SAPs saw abolition of marketing boards and cooperatives Abolition of government support in production and marketing O Declining growth in the sector to -4.1 percent at tis lowest Post liberalization policies O O Emphasis on the need to revitalize agriculture Increased agricultural spending and an increase in agricultural growth

Stakeholders

O O O O O O Government institutions O Ministries – Ministry of Agriculture, Ministry of Regional Development Authorities, ministry of cooperative Development and Marketing, ministry of fisheries Development and ministry of Livestock Development Parastatals for various crops Producer organizations – umbrella organizations for farmers NGOs and civil society Research institutions Donor Agencies and ODAs,

Investments, expenditure and

O O O O O O O

resource allocation

Government expenditure on agriculture was 10 per cent of total budget at independence currently stands at 6.4 per cent Trends indicate a strong correlation between expenditure in agriculture and agricultural growth Low investments in technology, irrigation or value added Recurrent expenditure is very high for most ASMs – 80 per cent and 20 per cent development expenditure Expenditure in specific sub-sectors also shows glaring neglect of sectors mainly due to political reasons ( such as cotton, sugar, coffee) Donor funding based on donor’s priorities and has been increasing in the last 5 years Low private sector investments in the sector and Low FDI except for horticulture

Challenges

O Productivity – O O Poor access to inputs Low technology adoption O O O O O High transaction costs Dependence on rain fed agriculture Poor infrastructure Lack of organized marketing systems often leading to exploitation of smallholders by middlemen Poor Access to credit and financing

Challenges contd’

O Policy related challenges O O O O O O Enabling environment and trade policy frameworks not suitable for investments in the sector Lack of participation of and sufficient representation of farmers in policy making Cheap imports and cartelization of some subsectors – maize and sugar act as a dis-incentive for production – maize and sugar scandals Land policy and land tenure systems to uneconomical units Insufficient investments and budgetary allocation in the sector Mismanagement of parastatals

Private Sector in Agriculture

O O O O Typology – O O farmers, middlemen, Processors and foreign investors Supporting institutions – financial and credit, capacity building, marketing and information support Agro –processing and value added is still low FDI predominantly large farms –dominion and horticulture sector (employment, vs competition) Middlemen – exploitative to smallholders during surplus periods

Constraints for private sector

O O O O O O O

development in agriculture

Macro-economic environment – inflation, high interest rates and high taxes High cost of energy High cost of labour Poor infrastructure Policy and regulatory environment not conducive for smallholders Lack of clear regulatory measures to protect smallholders against exploitation by middlemen Regional Trade policies that are not harmonized and therefore hamper exports

O O O O O O O O O

Smallholders in Agriculture and their constraints

Constitute 80 per cent of total agricultural output Lack of technology and poor technology absorption High cost of inputs Lack of information and knowledge en better agricultural practices Lack of proper marketing channels hence exploitation by middlemen Poor access to credit Poor infrastructure especially rural access roads Cheap imports –sugar, maize, rice and cotton sectors (dis-incentive for production) Lack of proper representation in policy decisions – lobbying is mostly done by large farmers eg wheat sector

Conclusions

O Major highlights O O O Poor policy, legal and regulatory frameworks that hamper development of the sector Poor resource allocation and investments in the sector by the government (poor planning) Low FDI inflows O O O Low technology adoption resulting in low productivity Poor infrastructure Macro-economic environment that is not condusive for investments and growth of the sector O Corruption, cartels and cheap imports virtually leading to a collapse of sugar, cotton, rice and perhaps maize sectors

O O O O O O O

Recommendations

Need to increase resource allocation to a desired level of 10 per cent of government expenditure and a need to review recurrent vs. development expenditure Urgent need for stabilization of macro-economic environment Urgent need of investments in rural infrastructure and irrigation Creation of a stimulus package for investments in agro processing, value added and export promotion in the region Addressing corruption and cartels hampering the development of some sub-sectors Enhancing support services for smallholders by strengthening their producer organizations and cooperatives, including institutional capacity for policy advocacy and lobbying Address regional disparity in resource allocation and government’s investments