Facilitating Equitable

Agricultural Development in

sub-Saharan AfricaThe Case of Kenya

ContentsO IntroductionO Objectives, TORs and methodologyO Agriculture and development: The

LinkagesO The case of Kenya

O Structure of agriculture in KenyaO Evolution of PoliciesO Key stakeholdersO Private sector in Agriculture

O Conclusions and recommendations

IntroductionO In most African countries, agriculture

accounts fro almost 1/3 of GDP and 60-80 per cent of employment

O Essential for manufacturing (raw materials) and an important source of export revenue

O Directly linked to economic growth and poverty alleviation in most of SSA

O However, agro-pessism in the last 3 decades led to underdevelopment and neglect of the sector in most SSA

O 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 KenyaO Trends in agricultural sector investments,

expenditure and developmentO Policy, legal and regulatory frameworks in

the sectorO Relationships existing between policy

makers and key stakeholdersO Private sector in Agriculture and

smallholdersO Recommendations for policy

MethodologyO Literature reviewO Secondary data from MoA, Mot and

several parastatalsO Primary data from

O -FGDs with farmer organizations,O Key informants from agricultural

sectorO Consultations with FNRG

Agricultural Development: Positive

Linkages

Agriculture and development: negative

linkagesO Falling world prices acts as a dis-incentive for

production and exportsO Trade liberalization and SAPs led to collapse

of many sectorsO Bio-fuels distorting food pricesO Subsidies in developed countries leading to

unfair competitionO WTO rules and regulations – standards,

tariffsO Low expenditure and investments in

agriculture

Agricultural Sector in Kenya: An overview

O contributes to 23 per cent of GDP, 65 per cent of total exports and 70 per cent of employment

O Economic growth is highly correlated with Agricultural growth (figure 1.1)

O More than 80 per cent of total agricultural production is done by low income smallholders with farms ranging from 0.25 to 2 acres

O Consists of 6 sub-sectors – Livestock, food crops, industrial crops horticulture, fisheries and forestry

O Horticulture contributes 33 per cent of GDP and 38 per cent of export earnings

Agricultural systems, production and trade

O 16 per cent arable land in medium to high potential areas

O Land fragmentation is too high, about 4 million farms are less than an acre

O Small holders re about 6million with farm sizes ranging between 0.25 to 3 ha

O Major crops cash crops include, horticulture, tea, coffee, sugarcane and cotton

O Major food crops include maize and rice

Trends in productivityO General low productivity per ha for most

crops except tea and horticultureO Decreasing area under production for key

crops such as cotton, sugar, coffee which are directly linked to poverty alleviation

O Increased area under production for maize but decreasing yields 9productivity)

O Low technology adoption and poor farming methods

Evolution of policiesO Pre-independence policies were mainly

colonial, Africans were not allowed to grow any cash crops but they provided labor for the British farmers

O Post independence – 1960’s to 70’sO government intervention and support in

production and marketingO Smallholders organized in cooperativesO Rapid growth in agriculture (6 per cent)

Evolution of policies cont’d

O Liberalization era 1980’s to 90’sO Liberalization as a conditionality for AidO SAPs saw abolition of marketing boards and

cooperativesO Abolition of government support in

production and marketingO Declining growth in the sector to -4.1

percent at tis lowestO Post liberalization policies

O Emphasis on the need to revitalize agriculture

O Increased agricultural spending and an increase in agricultural growth

StakeholdersO 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

O Parastatals for various cropsO Producer organizations – umbrella

organizations for farmersO NGOs and civil societyO Research institutionsO Donor Agencies and ODAs,

Investments, expenditure and resource allocationO Government expenditure on agriculture was 10 per

cent of total budget at independence currently stands at 6.4 per cent

O Trends indicate a strong correlation between expenditure in agriculture and agricultural growth

O Low investments in technology, irrigation or value added

O Recurrent expenditure is very high for most ASMs – 80 per cent and 20 per cent development expenditure

O Expenditure in specific sub-sectors also shows glaring neglect of sectors mainly due to political reasons ( such as cotton, sugar, coffee)

O Donor funding based on donor’s priorities and has been increasing in the last 5 years

O Low private sector investments in the sector and Low FDI except for horticulture

ChallengesO Productivity –

O Poor access to inputsO Low technology adoptionO High transaction costsO Dependence on rain fed agricultureO Poor infrastructureO Lack of organized marketing systems

often leading to exploitation of smallholders by middlemen

O Poor Access to credit and financing

Challenges contd’O Policy related challenges

O Enabling environment and trade policy frameworks not suitable for investments in the sector

O Lack of participation of and sufficient representation of farmers in policy making

O Cheap imports and cartelization of some subsectors – maize and sugar act as a dis-incentive for production – maize and sugar scandals

O Land policy and land tenure systems to uneconomical units

O Insufficient investments and budgetary allocation in the sector

O Mismanagement of parastatals

Private Sector in Agriculture

O Typology – O farmers, middlemen, Processors and foreign

investorsO Supporting institutions – financial and credit,

capacity building, marketing and information support

O Agro –processing and value added is still lowO FDI predominantly large farms –dominion

and horticulture sector (employment, vs competition)

O Middlemen – exploitative to smallholders during surplus periods

Constraints for private sector development in

agricultureO Macro-economic environment – inflation, high interest rates and high taxes

O High cost of energyO High cost of labourO Poor infrastructureO Policy and regulatory environment not

conducive for smallholdersO Lack of clear regulatory measures to

protect smallholders against exploitation by middlemen

O Regional Trade policies that are not harmonized and therefore hamper exports

Smallholders in Agriculture and their

constraintsO Constitute 80 per cent of total agricultural outputO Lack of technology and poor technology

absorptionO High cost of inputsO Lack of information and knowledge en better

agricultural practicesO Lack of proper marketing channels hence

exploitation by middlemenO Poor access to creditO Poor infrastructure especially rural access roadsO Cheap imports –sugar, maize, rice and cotton

sectors (dis-incentive for production)O Lack of proper representation in policy decisions

–lobbying is mostly done by large farmers eg wheat sector

ConclusionsO Major highlights

O Poor policy, legal and regulatory frameworks that hamper development of the sector

O Poor resource allocation and investments in the sector by the government (poor planning)

O Low FDI inflowsO Low technology adoption resulting in low

productivityO Poor infrastructureO 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

RecommendationsO 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

O Urgent need for stabilization of macro-economic environment

O Urgent need of investments in rural infrastructure and irrigation

O Creation of a stimulus package for investments in agro-processing, value added and export promotion in the region

O Addressing corruption and cartels hampering the development of some sub-sectors

O Enhancing support services for smallholders by strengthening their producer organizations and cooperatives, including institutional capacity for policy advocacy and lobbying

O Address regional disparity in resource allocation and government’s investments