Facilitating Equitable Agricultural Development in sub-Saharan Africa

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

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

3. Introduction • 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

4. Objectives, TORs and Methodology • Analyse the enabling environment for inclusive agricultural development in Kenya • Trends in agricultural sector investments, expenditure and development • 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

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

6. Agricultural Development: Positive Linkages

7. Agriculture and development: negative linkages • 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

8. Agricultural Sector in Kenya: 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

9. Agricultural systems, production and trade • 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

10. Trends in productivity • 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

11. Evolution of policies • 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 • government intervention and support in production and marketing • Smallholders organized in cooperatives • Rapid growth in agriculture (6 per cent)

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

13. Stakeholders • Government institutions • 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,

14. Investments, expenditure and 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

15. Challenges • Productivity – • Poor access to inputs • Low technology adoption • 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

16. Challenges contd’ • Policy related challenges • 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

17. Private Sector in Agriculture • Typology – • 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

18. Constraints for private sector 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

19. 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

20. Conclusions • Major highlights • 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 • Low technology adoption resulting in low productivity • Poor infrastructure • Macro-economic environment that is not condusive for investments and growth of the sector • Corruption, cartels and cheap imports virtually leading to a collapse of sugar, cotton, rice and perhaps maize sectors

21. 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