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Emerging trends shaping agriculture in Kenya

In recent times, exciting developments in areas such as ICT, finance and real estate—not to mention an inordinate focus on Nairobi due to urbanization—have created the impression that agriculture is no longer the cornerstone of the Kenyan economy. This view, however, couldn’t be any further from the truth. Agriculture is still the mainstay of the Kenyan economy, as demonstrated by  recent economic data from the statistics office.
Not only does agriculture provide jobs, both directly and indirectly, for at least 70 percent of the Kenyan workforce, but it is actually one of the sectors currently driving overall economic growth in Kenya. According to the Kenya National Bureau of Statistics (KNBS), agriculture expanded by 7.1 percent in the third quarter of 2015 compared to 6.8 percent over the same period a year earlier. Agriculture is actually one of the few sectors that expanded in the face of a tougher economic environment due to a weaker shilling, rising imports and higher interest rates.
Despite apparent good performance, the future of agriculture in Kenya is all but certain. Demographic changes such as population growth and urbanization have placed immense pressure on the agricultural sector to produce more. Additionally, this pressure to produce more is staged against the backdrop of other equally impactful trends such as climate change, changes in agricultural financing and integration of mobile phones and ICT into market information systems.
Kenya’s agricultural sector will not enjoy any sustainable progress if it does not understand these trends, assess their long-term impact and reformulate policy based on this analysis. This exercise also has to accommodate the fact that majority of farmers in Kenya are smallholder farmers. Its recommendations therefore have to be tailored to simplicity and practicality and avoid the theoretical bent that often alienates, rather than helps, smallholder farmers.
Evolving information systems
One of the largest challenges traditionally facing smallholder farmers not just in Kenya but Africa is information asymmetry. This occurs when one party in a transaction has more or better information than the other.
The problem of information asymmetry in Kenya’s agricultural sector is best exemplified by the fact that farmers often don’t know the prevailing market price of commodities. The data they get is often significantly delayed, sometimes even by one or two weeks, giving them a distinct inability to act on favorable prices and maximize their profits. Only a few farmers in the market have the kind of data that can allow for a better trading relationship between them and the market.
Market information currently available in the agricultural sector is also too fragmented to provide a coherent sense of the state of the sector. This has introduced a need for a more scientific and systematic analysis of data. But advanced data analysis is still a challenge. There are no good data storage and retrieval systems in Kenya and most of Africa. This is, of course, because of outdated data science techniques and underfunding of institutions tasked with collecting and analyzing data.
In September 2015, for instance, World Bank had to give financial assistance to the KNBS. World Bank gave $50 million to KNBS to help the body with better accumulation of data. “High-quality data are critical to measure progress in growing the economy, reducing poverty and fostering shared prosperity,” Diarietou Gaye, the bank’s country director for Kenya.
The increased penetration of mobile phones in Kenya, however, has made the aggregation and analysis of agricultural data much easier. This has the potential to significantly reduce information asymmetry in Kenya’s agricultural sector. For instance, new cell phone services employ SMS text messaging to quickly transfer accurate information about wholesale and retail prices of crops, ensuring farmers can negotiate deals with traders and improve their timing of getting crops to the market.
Policy makers have always acutely understood the potential that technology carries for Kenya’s and the broader African continent’s agricultural sector. This explains why the integration of mobile into the market information systems has been deliberate right from the outset.
In fact, some mobile phone services linking farmers to markets in Africa were launched as early as 2002, according to a document published by the Forum for Agricultural Research in Africa (FARA). The success of these earlier services has, however, been haphazard, largely because of lower mobile penetration rates at the time they were launched.
With mobile penetration having improved tremendously since 2002—particularly here in Kenya where adoption of new technology has been noticeably faster than the rest of Africa—mobile enabled data services have become more viable. The kind of data being made available to farmers over mobile phones is now not just confined to market prices. More sophisticated data such as historical data on pricing, farming techniques, historical weather patterns and much more is now available to farmers through mobile apps.
Ultimately, however, Kenya will need to also improve other areas in order for the benefit of mobile driven data systems to be fully realized. Poor transport, for instance, is still a big bottleneck. It makes no sense to have timely market data when actually getting produce to the market is a hectic, expensive and time consuming affair. Transport charges account for up to 76 percent of total agricultural marketing costs in Kenya, Uganda and Tanzania, according to the Commodities and Development Report 2015 authored by the United Nations Conference on Trade and Development (UNCTAD).
Financing changes
The cited UNCTAD study also addresses a very vital development in agriculture in Kenya and the region. It makes an observation that has been made before: foreign financing of agriculture is no longer viable and reliable, at least not in the way that it used to be. Foreign finance is volatile, the study says.
Indeed, foreign finance has become increasingly volatile. This is, of course, because of the difficult financial predicament presently facing the world. Recent developments in the global economy serve to strongly suggest that the 2008 global financial crisis is still far from over. Europe is still grappling with a tepid economic recovery while China comes to terms with the aftermath of a stock market crash and a devalued currency. Moreover, the U.S. rate increase suggests that money will be reluctant to leave the U.S. for a while. Simply put, rich governments all around the world are currently apprehensive about spending, much less donating.
Another key change in financing is that African governments have also become increasingly wary of foreign finance, which as they have painfully learned, typically comes with political conditionality and strings attached. Donor funding has substantially reduced Africa’s bargaining power in global trade, especially in negotiations for agricultural trade.
As an example, rich donor countries that are opposed to fertilizer subsidies here in Africa have for a long time refused to reduce their own hefty subsidies to commercial farmers in their home countries. They only agreed to remove these subsidies after the recent World Trade Organization (WTO) meeting in Nairobi.
“Few countries on the continent operate large subsidy programs; many remove them as conditions for international lending programs,” says Theo de Jager, President of the Southern Africa Confederation of Agricultural Unions. This exemplifies how donor funding comes with conditionality and why African governments are trying as much as possible to reduce reliance on donor funding.
With lower appetite for donor financing, the only other viable option for agriculture financing in Kenya and Africa today is internal financing. But governments rarely, if ever, allocate enough money to agriculture. The 2003 Maputo Declaration that required African countries to allocate at least 10 percent of their budgets to agriculture has remained largely unheeded across most of Africa, including here in Kenya.
Even where sizeable amounts of money have been pledged for agriculture, prudent utilization of the funds has rarely been seen. The zeal with which budgetary pledges have been made has not translated into action. “Budgetary pledges should be translated into actions of relevance to development of small holder agriculture,” says UNCTAD.
The gap in agricultural financing, unable to be plugged by donors and government, is now being met by the private sector. Previously, many farmers could not borrow from banks and had to consequently rely on other informal financing mechanisms such as moneylenders, pawnbrokers, crop-buying agents and group savings, as well as credit associations and cooperatives.
But Kenyan banks today, especially the microfinance institutions, have tailored products for smallholder farmers. An increasing number of local financial institutions have come up with innovative financing solutions for smallholder farmers, to assist them access money for agribusiness, says UNCTAD. Loans products to finance buying of farm inputs such as certified seeds, fertilizers, chemicals, renting of machinery, and labor and harvesting costs are gaining popularity in local banks and micro-finance institutions, targeted at small scale farmers of commercial food crops, adds the UN agency.
Climate change and science
The third and arguably most impactful trend shaping agriculture in Kenya is the intersection between climate change and science within the context of agriculture. The visible impacts of climate change on the whole African continent show just how big a problem it is. Lake Chad, which spans Chad, Niger and Nigeria, is estimated to have shrunk by as much as 95 percent, according to the United Nations. Moreover, 82 percent of the ice that covered Mt. Kilimanjaro in Tanzania has vanished since it was first surveyed in 1912. These are just a few enumerations; there are many more, some even more severe.
One of the major impacts of climate change is lower crop yields due to erratic weather patterns. This has created a considerable problem for agriculture. This is because lower crop yields bolster the push for the introduction of drought resistance genetically modified organisms (GMO). The introduction of GMOs is a highly polarized topic.
The arguments for GMO as a counter to climate change are gaining traction, especially after reviewing the projections for food shortage in Kenya as well as the limited availability of arable land. Statistics from the Food and Agriculture Organization (FAO) show that close to four million people in Kenya receive food aid annually and that only about 20 percent of Kenyan land is suitable for farming.
These grim statistics, while showing how important tackling climate change is in improving Kenya’s food security, also present a strong case for the introduction of drought resistant GMOs. The ruling over whether or not Kenya will commercially introduce GMOs is expected late January 2016, but all indications suggest the crops will be introduced. This is after Deputy President William Ruto gave emphatic public support for the introduction of GM crops in 2015. If the crops are adopted, as largely expected, Kenya will become the fourth African country to allow the cultivation of GMO crops following South Africa, Burkina Faso and Sudan.
Kenya is Africa’s largest per-capita maize consumer, according to Bloomberg Intelligence. Climate change, and how it affects maize yields, will therefore be a defining issue for agriculture as lower yields mean that the country will depend more on imports and aid.
Conversely, dependence on imports and aid will strengthen the case for introducing higher yielding GM crops. This is inevitable and undoubtedly a point of friction in light of just how divisive the topic of GM crops is.
In fact, there is growing voice that says that the assessment that Africa needs more synthetic fertilizers, and genetically modified crops in order to meet the challenges of hunger, poverty and climate change is a myth. One such voice is Frederic Mousseau, Policy Director of the Oakland Institute, an independent policy think tank with a footprint across most of Africa.
Mousseau is of the opinion that Africa can cope with climate variations without resort to fertilizers or GM crops. This he says has been made possible by the increasing adoption of biointensive agriculture. Biointensive agriculture is an organic agricultural system that focuses on achieving maximum yields from a minimum area of land, while simultaneously increasing biodiversity and sustaining the fertility of the soil.
According to Mousseau, 200,000 Kenyan farmers, feeding over one million people, have now switched to biointensive agriculture, which allows them to use up to 90 percent less water than in conventional agriculture and 50 to 100 percent fewer purchased fertilizers.
The problem with the current response to food security and issues such as climate change, Mousseau adds, is that governments are not really in touch with the realities on the ground and are largely reading situation from donors’ scripts. “A majority of African governments, with encouragement from donor countries, focus most of their efforts and resources to subsidize and encourage a model of agriculture largely reliant on the expensive commercial agricultural inputs, in particular synthetic fertilizers mainly sold by a handful of Western corporations,” he says.