Increased investments in processing capacity and a push to diversify produce are boosting growth in Kenya’s agri-business industry.
In early May local holding group Goldenscape announced plans to construct a KSh150m ($1.5m) food-processing facility in Laikipia County in the Rift Valley region of Kenya.
The plant, which is expected to come into operation in 2019, will process various fruits and vegetables, including tomatoes and onions, with the primary aim of reducing food waste due to gaps in the regional logistics and storage chain, thus boosting both farmer income and sales value.
Reducing waste is vital to enabling Kenya to take advantage of the full value of its agricultural industry. The fresh produce sector, which includes flowers, fruits and vegetables, among others, posted an 11% increase in export earnings to KSh115.25bn ($1.1bn) in 2017, with KSh33bn ($327.6m) coming from fruit and vegetables, according to data from the Fresh Produce Consortium Kenya.
However, the National Bureau of Statistics estimates that transport, storage and sanitation constraints resulted in an estimated KSh150bn ($1.5bn) worth of food loss in that year.
Drawing investment into processing parks
The Goldenscape development follows announcements by officials from Homa Bay and Kirinyaga counties in October 2017 of plans to establish agro-processing business parks, with the aim of attracting local and foreign private businesses to deepen the value of the agriculture sector, provide more income to farmers and create jobs for youth.
The Export Processing Zones Authority (EPZA) will classify these areas as export processing zones, giving them access to a range of technical support services.
The park in Homa, a 110-acre, $9.9m development that will focus on cotton, leather and fruit processing, was the most recent deal to be inked with the EPZA. Alongside attracting investors, the county is also working to increase local production of raw materials to supply the industries based there.
Meanwhile, officials in Kirinyaga County are developing 10 agro-industrial hubs, worth a total of $50m, which are expected to enter into operation by the end of the year. Kirinyaga is a centre for rice and vegetable production, including tomatoes and French beans.
Agri-business highlighted in draft budget
Increased attention to agro-processing by private businesses and local authorities is supported by funds and schemes from the federal government.
In the draft budget for FY 2018/19, which begins on July 1, the National Treasury stepped up allocations to support agricultural expansion and food security, one of the main pillars of its “Big Four” economic and social development programme. The cornerstone of Jubilee government’s agenda, the Big Four plan also aims to boost the role of manufacturing, expand affordable housing and achieve universal health care.
Out of the KSh2.53trn ($25.2bn) national draft budget, KSh43.1bn ($429.7m) has been earmarked for investment programmes to help reach food and nutrition security for all Kenyans by 2022.
However, the benefits of widened agro-processing will not be restricted to ensuring sufficient domestic supply. Under the manufacturing pillar, the government is targeting higher-value-added output from the tea, coffee, meat, sugar, dairy, fruits and vegetables segments to create jobs and increase export earnings.
The draft budget estimates that investments in processing capacity for these products will create 200,000 new jobs and treble the amount of processed agricultural exports by raising annual growth from the current 16% per year to 50% annually by 2022.
To achieve these measures, the budget outlines the goal of establishing 1000 small and medium-sized enterprises focused on food processing to add value to the agricultural production chain.
The draft document also highlights plans to lease more arable state-owned land for large-scale crop production. Up to 700,000 acres will be made available through public-private partnerships for grain and vegetable farming, the output of which will feed into the processing units.
Crop diversification adds to export income
Alongside promoting value-added processing to boost agriculture and export earnings, planting a more diverse range of high-value crops is also being targeted to increase the sector’s economic contribution.
Local and state officials in Kericho County, for example, have begun a scheme to expand avocado production, distributing 2000 Hass-variety seedlings to growers in the predominantly tea-producing area.
Another cash crop generating interest from growers is macadamia nuts. Coffee farmers have long used macadamia trees to shade their beans, with coffee being one of the long-standing staples of Kenyan agriculture. However, given the value of macadamia exports, farmers are increasingly shifting their focus to the nut.
Kenya is now the world’s third-largest producer of macadamia nuts, with output hitting 41,614 tonnes in 2017, according to the Agriculture and Food Authority.
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