Agriculture remains Kenya’s apex sector and largest contributor to both GDP and economic growth, even as the government intensifies development in utilities, energy, mining, construction and manufacturing. A critical source of employment and the country’s largest export earner, the sector has witnessed notable improvements in mechanisation, value addition and export revenues in recent decades, and Kenya now stands as one of the world’s largest markets for tea and horticulture.

The industry also faced some notable challenges in 2015. Plummeting global commodity prices have had a serious impact on tea export revenues; imports of critical crops like sugar and maize have risen as a result of inefficiencies in these subsectors; economic slowdowns in Europe and Asia have weakened global demand for horticulture exports; and the shilling’s ongoing depreciation has exacerbated the sector’s rising production costs.

That said, the government and private sector have made major strides in addressing these issues. Progress at the massive Galana Irrigation Project (GIP) promises to improve production, regional demand for Kenyan agriculture exports is rising, and improvements to quality control processes are bolstering the maturation and diversification of the horticultural sector. With the amount of foreign investment rising across all links of the value chain – improving both food security and cash crop production – the sector is poised to maintain its economic dominance in the coming years. Meanwhile, new and renewed bilateral agreements will expand Kenya’s global footprint and open critical new markets, offsetting losses suffered from weaker commodity prices.


Agriculture is Kenya’s largest economic sector, contributing 27.3% of total GDP in 2014, followed by manufacturing at 10%, according to the “Economy Survey 2015” from the Kenya National Bureau of Statistics (KNBS). It was also the largest growth driver in 2014, accounting for 14.5% of total economic growth, above construction (11.1%), wholesale and retail trade (9.8%), education (9.7%) and financial services (9.1%). Kenya’s Ministry of Agriculture, Livestock and Fisheries (MALF), which consolidated three separate ministries when it was formed in 2013, is responsible for overseeing the sector’s development. Various high-value subsectors, meanwhile, are managed by separate entities such as the Tea Board of Kenya, Kenya Flower Council, Fresh Produce Exporters Association of Kenya, Kenya Dairy Board and Coffee Board of Kenya.


MALF’s major development goals are contained within the overarching Vision 2030 economic development plan, which highlights agriculture as a critical economic pillar and aims to improve productivity, value addition and mechanisation within the sector. Medium-term policy is guided by the Agriculture Sector Development Strategy (ASDS), which runs from 2009 to 2020, and Vision 2030’s second Medium Term Plan (MTP), covering 2013-17. The MTP seeks to introduce irrigation to 404,800 ha of land, reduce fertiliser costs, and implement regulatory reforms aimed at streamlining oversight and policy development. The ASDS, meanwhile, aims to expand agriculture to reduce the number of people living below the poverty line to below 25% of the population, reduce food insecurity by 30% and raise agriculture’s GDP contribution by KSh80bn ($880m).

President Uhuru Kenyatta’s Jubilee Alliance coalition has simultaneously promised to deliver a number of government incentives to the sector, including affordable loans for subsidised fertiliser and equipment purchases, increased development of irrigation and the doubling of food reserves to reach 40% of the country’s annual production.


Spending on agriculture soared in the 2015/16 budget after four successive years of decline, with budgetary allocations to MALF’s three departments – agriculture, livestock and fisheries – reaching a total of KSh46.08bn ($506.9m) in 2015/16, up 24.6% on 2014/15. The State Department for Agriculture was allocated KSh34.5bn ($379.5m), while the State Department for Livestock received KSh7.1bn ($78.1m) and the State Department for Fisheries was allotted KSh4.5bn ($49.5m). Agribusiness, food security and land reforms are a major focus of the 2015 budget, with the state allocating KSh3.1bn ($34.1m) to develop fisheries, KSh2.7bn ($29.7m) to establish strategic grain reserves and KSh3.5bn ($38.5m) for land title reform (see analysis).

Recent Growth

According to the KNBS, agricultural yields recorded a mixed performance in 2014, due to erratic rains in some regions. Value-added agriculture at constant prices grew by a modest 3.5% in 2014 to reach KSh822.5bn ($9bn), driven by gains in rice, coffee, tea and dairy production that outweighed contractions in maize and sugar cane production. The sector’s output value at current prices rose by 15.8% from KSh1.46trn ($16.1bn) in 2013 to KSh1.69trn ($18.6bn) in 2014, while the value of intermediate consumption rose by 9.6% to reach KSh266.4bn ($2.9bn).

Expansion gathered pace in early 2015, although the KNBS’s long-term forecasts show that insufficient rains will once again impact the sector in 2015, keeping growth for the year at levels similar to 2014 due to the industry’s over-reliance on rain-fed water. According to the KNBS, the agriculture, forestry and fishing sector expanded by a cumula-tive 4.4% during the first quarter of 2015, double the growth recorded in same period in 2014. The government attributes this to greater use of agricultural inputs, with increased demand for fertiliser driving inputs up by 18.4% year-on-year to 265,900 tonnes in the first quarter of 2015.

Food Security

The Kenya Agricultural Research Institute reported that an estimated 80% of the population, particularly those in rural areas, earn their livelihood through agriculture-related activities, while the Rural Poverty Portal reported that smallholder farming accounts for the majority of Kenya’s agricultural output. A third of Kenyan land is considered arable, concentrated in the central highlands, coastal plains and lakes region. However, an estimated 70% of poor Kenyans live in the country’s central and western regions. Poverty and food insecurity are therefore most acute in the country’s arid and semi-arid lands (ASAL), which are extremely prone to droughts. To address this is a top agricultural priority of the government.

Production of maize, the country’s top staple crop, has been in decline for a number of years, falling by 4.2% in 2014 to reach 39m 90-kg bags, according to the KNBS. These losses were partially offset by rising production of wheat, the country’s second-largest staple crop, which increased by around 9% in the same year to reach 7618 tonnes. However, maize production still far outweighs both wheat and rice, and lack of the reliable rainfall needed for maize self-sufficiency continues to present a major challenge to food security.

The value of marketed maize declined by 5% in 2014, falling from KSh10.1bn ($111.1m) a year earlier to KSh9.6bn ($105.6m) as a result of lower volumes produced. Maize production in the North Rift region suffered as a result of Maize Lethal Necrosis Disease, a virus that the Cereal Growers Association warns could affect up to 70% of maize farmers. Combined with erratic and uneven rainfall, this has exacerbated food insecurity in Kenya, with the KNBS reporting that total daily food energy per capita declined from 2284 calories in 2013 to 2257 calories in 2014. Per capita daily supply of proteins and fats, meanwhile, fell from 67 grams to 66 and 47 grams to 44, respectively, largely as a result of reduced production in the meat segment. Kenya’s food self-sufficiency ratio (SSR) thus fell from 80.1% in 2013 to 74.9% in 2014, due to a decline in the vegetable SSR from 77.7% to 72.2%. The SSR for animal products, however, continued to hover in the range of 100%, according to the KNBS, meaning the country is able to produce all of the meat, milk, fish and animal fats required to meet domestic demand.

Security Gains

Food security has much improved in 2015. Early results from Kenya’s long rains, which run from March to May, resulted in average to above-average food production, as MALF reported in its August assessment of Kenya’s food security situation. The assessment found that the country’s ASALs, where food insecurity prevailed through early 2015, have shown strong recovery and their food insecurity is now largely classified as “minimal” or “stressed” as opposed to “crisis”, under the Integrated Food Security Phase Classification system. According to MALF, the number of people in need of food assistance fell from 1.6m in February 2014 to 1.07m in August 2015, while national maize stocks that month stood at 14.6m bags, including 6.7m held by farmers, 2.3m by traders and 1.1m by millers.


Previous strategies to address food insecurity in Kenya have included subsidies for farm inputs, improvement of research extension services, provision of rural credit, price subsidisation and tax-free maize imports during times of crisis, in addition to encouraging citizens to diversify eating habits to reduce the country’s ongoing over-reliance on maize. More recently, the government has begun intensifying its efforts to expand irrigation programmes nationwide, most notably under the GIP and the Mwea Irrigation Scheme.

The five-year, KSh250bn ($2.8bn) GIP is one of the country’s most ambitious irrigation plans under development, involving the construction of two dams on the Galana River and one on the Tana River. The scheme is expected to transform Kenya into a net maize exporter capable of producing 40-50, 90-kg bags of maize per acre per season, double the levels recorded in 2014.

In April 2015 Israeli firm Green Arava, which was awarded a KSh14bn ($154m) contract to develop a 405-ha model farm, announced it had begun its first planting at the GIP. Meanwhile, the 12,282-ha Mwea Irrigation Scheme, originally established in 1956, is largely targeting rice paddy production. Located 100 km north-east of Nairobi in Kirinyaga County, the Mwea scheme is the largest of seven public irrigation projects under the supervision of the National Irrigation Board.


Although rice imports are expected to reach 430,000 tonnes during the 2015/16 marketing year, up from 420,000 tonnes in 2014/15, according to the US Department of Agriculture, the Kenyan government has identified the crop as a viable alternative to maize. Recent successes at Mwea and other related paddy irrigation schemes have painted a brighter outlook for expansion of rice production within the country. Such plans will benefit from the 2015/16 budget, which has allocated KSh13.8bn ($151.8m) to irrigation projects, including KSh3.5bn ($38.5m) for the GIP, KSh29.5bn ($324.5m) for water supply and sanitation, KSh2.1bn ($23.1m) for water storage and flood control, and KSh12.6bn ($138.6m) for environmental protection and conservation.

KNBS reported that in 2014 irrigated cropped areas rose by 4.4%, from 18,600 ha to 19,411 ha. Although the total number of farmers operating on irrigation schemes remained constant, at about 16,000 in 2014, production from those utilising these schemes rose. Mwea recorded an 8.9% increase in paddy production to reach 70,416 tonnes after works on line canals were carried out, while overall irrigated rice production rose by 5.8%, from 90,703 tonnes in 2013 to 96,029 tonnes in 2014. Sales of paddy rice grew by 8.3% to reach 47,200 tonnes in 2014, with the total value of rice output increasing from KSh4.4bn ($48.4m) in 2013 to KSh4.5bn ($49.5m) in 2014, while payment to plot holders rose from KSh3.2bn ($35.2m) to KSh3.3bn ($36.3m) during the same period.


Another major policy development with significant long-term implications for food security was the government’s August 2015 announcement that it will lift a ban on genetically modified organisms (GMO). Deputy President William Ruto told local press at the Bio-Safety Conference in Nairobi that consultations over the safety of GMOs had been concluded and that the Cabinet was expected to discuss the issue, after which GMOs would be legally permitted.

GMOs could benefit Kenyan agriculture, as they offer drought- and pest-resistant seeds that could survive tougher growing conditions in ASALs. This is becoming increasingly critical given the rising incidence of Maize Lethal Necrosis Disease: the Kenya Agricultural and Livestock Research Organisation announced in September 2015 that GMOs offer the best solution to combatting the disease, while researchers at the Water Efficient Maize for Africa programme announced that same month that they were in the process of developing strains of maize which are resistant to the disease.


Kenya is a major global exporter of both fresh-cut flowers and vegetables used in ready-made, value-added packages, with the EU and Japan standing as the country’s largest horticultural export markets. KNBS reported that the quantity of horticultural exports rose by a modest 3% to hit 220,200 tonnes in 2014, driven by cut flower exports, which grew from 105,600 tonnes to 114,800 tonnes, as well as fruit exports, which increased by 12.9% to reach 35,100 tonnes in 2014.

Vegetable exports and total horticultural earnings fell in 2014, however, with vegetable export volumes dropping from 77,200 tonnes in 2013 to 70,300 tonnes, while vegetable earnings declined from KSh22.9bn ($251.9m) to KSh18.8bn ($206.8m), a nearly 18% drop. Although total earnings from the export of fresh horticultural produce rose from KSh83.7bn ($920.7m) in 2013 to KSh84.1bn ($925.1m) in 2014, producers have suffered losses due to currency fluctuations, delays in the renewal of a critical trade agreement with the EU and rising quality standards (see analysis).


Tea is another critical export earner for the country, and Kenya stands as the largest single exporter of black tea globally. Tea production in the country rose by 2.9% from 432,400 tonnes in 2013 to 445,100 tonnes in 2014, while the total area under tea production expanded by 2.2% from 198,600 ha in 2013 to 203,000 ha in 2014. The smallholder subsector recorded a 5% increase in production in 2014 to 262,400 tonnes, up from 249,800 the previous year, while output from the estates subsector rose by just 100 tonnes to reach 187,200 tonnes during the year.

The sector is struggling to maintain momentum, however, largely as a result of plummeting global tea prices and reduced yields. Collins Cheruiyot, managing director of Kenya Tea Packers, told OBG, “98% of the tea grown in Kenya is black CTC (crush, tear, curl) tea, which leaves the country susceptible to the wild swings in global black CTC tea prices. The industry needs to diversify to shield itself from such volatility, but also to match changing global tastes for other types of tea, including infusions and green tea.”

The KNBS reported that average yields on tea estates fell from 3210 kg per ha in 2013 to 2834 kg in 2014, and from 2172 kg per ha to 2127 kg per ha on smallholder farms for the same period, while unit prices maintained a downward trend for the second year in a row as a result of higher global supplies and declining demand in key export markets such as Russia. Average auction prices at the Mombasa Tea Auction, the world’s second-largest such auction, fell to about $2.16 per kg in 2014, compared to some $2.53 in 2013 and $3.18 in 2012, although tea export and re-export volumes rose by a marginal 1% in 2014 to reach an estimated 494,300 tonnes.


Meanwhile, coffee production increased by 24.4% in 2014, from 39,800 tonnes in 2012/13 to 49,500 tonnes in 2013/14, although the amount of land planted for coffee crops recorded a smaller rise, from 109,800 ha to 110,000 ha over the same period. Production at coffee estates declined for the second year in a row, although coffee cooperative production rose by 49.3% from 21,900 tonnes to 32,700 tonnes.

Such growth was driven by improvements within the bi-annual coffee production cycle. Meanwhile, the KNBS reported rising investment in the sector, particularly among smallholder cooperatives, which expanded their yields by 48.4% in 2014, compared to a 5% contraction for coffee estates. “The success of the coffee and tea industries depends on two things: international pricing and productivity. While the international price cannot be controlled, productivity can,” Moses Changwony, managing director of Sasini Tea and Coffee, told OBG. “Productivity in Kenya’s coffee and tea sectors remains far below its global peers, and there is room for improvement through greater technical know-how and training.”


The country has struggled to maintain and expand its levels of sugar production, which remains concentrated in its dry western region, over the years, with domestic production falling even as local producers rally against increasing regional imports. “Kenya is not really competitive in sugar. There are some historic debts at state-owned sugar companies, and the industry has not been managed well,” Steve New, director at the USAID-funded Kenya Agricultural Value Chain Enterprises Project, told OBG. “The government has intervened, but I do not see much future in sugar. Generally speaking, it requires a high level of mechanisation and high yields, which would require high levels of investment.”

The total area under sugar cane cultivation rose by 1.2% to reach 211,342 ha in 2014, although the area harvested fell by 15.9% to 72,181 ha, with total cane deliveries falling by 3% to 6.5m tonnes. This was offset by rising yields, which grew by 14.1% to 62.4 tonnes per ha in 2014, largely as a result of improved harvesting practises, which led to better weights and sucrose content.

Despite these gains, total sugar production fell by 1.2% in 2014 to reach 592,700 tonnes, while imports also fell by 19.4% to 192,100 tonnes after the government extended special measures to protect the domestic industry. The Common Market for Eastern and Southern Africa has allowed these measures to remain in force until March 2016, granting the extension after the government announced plans to sell five loss-making national sugar mills in a bid to boost competitiveness, productivity and output (see analysis). However, in August 2015 Adan Mohamed, acting cabinet secretary, told local media that the process will take up to 12 months, which opens the possibility that Kenya will request an additional extension on import limits in 2016.


With tea, sugar and horticulture struggling to maintain traction in 2015, dairy products remain a bright spot, as evidenced by rising production, exports and investment in the sector. The KNBS reported that the volume of raw milk marketed in Kenya rose by 3.4% to reach 541.3m litres in 2014, the second consecutive year of increases after a fall in 2012. The country’s output of fresh milk and cream coming from processing plants rose by 3.1%, while the volume of processed butter and ghee simultaneously rose by 17.4% to reach some 1445 tonnes in 2014.

Brookside Dairies is the dominant player in the Kenyan market and has undertaken a series of acquisitions over the past five years, including of Buzeki Dairy, the Ilara Milk Company, SpinKnit Dairy and, most recently, Uganda’s Sameer Agriculture and Livestock in June 2015. In July 2014 French food group Danone acquired a 40% stake in Brookside to help expand its product portfolio and regional footprint.

Competition is slated to intensify as a number of private firms also seek to enter the Kenyan market. In September 2014 Alika Dangote, head of Nigeria’s Dangote Group, announced his plans to construct a new dairy plant in Nairobi in a bid to capitalise on rising urbanisation and consumer spending on dairy products. The facility will produce powdered milk, much of which will be exported to Nigeria. Dangote’s announcement was followed by the February 2015 news that Deepak Kamani, chairman of Kenya’s Zuri Group, plans to build a fresh and powdered milk plant in Nyahururu.

Sharing Land

Land acquisition remains a significant challenge to the expansion of agricultural activities in Kenya, particularly as new sectors like energy, utilities and mining rise to economic prominence in the country. Lack of available land for agriculture has seriously impacted the value chain, from small-scale farmers to industrial food processers, making ongoing reforms an important facet of the government’s agriculture development strategy. A new piece of legislation recently drafted has been widely panned by both local communities and private developers, and the issue is likely to continue to be a major challenge for the sector in the years to come.

Real Estate Rising

According to the KNBS, the real estate market in Kenya ranks third by total earnings nationally, behind agriculture and manufacturing, while the Institute of Economic Affairs (IEA), a local think tank, reported that Kenya’s property market is growing exponentially. This assessment is echoed by recent research by Stanlib Investments and real estate agency HassConsult suggesting that Kenya’s thriving real estate market is due to the high return acquired from land, the highest return of all asset classes over the last seven years, amounting to an increase of 98% since 2007. For instance, land prices have increased at double the rate of cattle and four times the rate of property over the last four years, compared to gold and oil prices, which have fallen over that same period. The IEA, meanwhile, reported that advertised land prices have increased about 535% since 2007, from an average of $330,000 per acre to roughly $1.8m per acre in 2015.

Farmer Conflict 

The incredible value to be found in the real estate and land market in Kenya may, however, be producing its own serious drawback: potential confrontation between large corporate entities and local communities. Land conflicts between private developers and local communities have played out repeatedly in the agriculture sector, such as in the village of Ngangarithi in Nyeri County. Home to 25,000 people, the region’s fertile land used to grow a variety of cash crops, although real estate firms moving into the region have been more interested in its potential for commercial property development. Conflict has ensued, with villagers removing markers meant to demarcate land for private development and eventually taking to the streets in protest. Major agriculture investors such as Del Monte Kenya have meanwhile found their expansion plans constrained by the lack of available land for new processing facilities, which can offer considerable economic benefits to the local community.

New Land Bill

Though a law has recently been drafted to help stabilise the distribution and sale of land in Kenya in the form of the Minimum and Maximum Land Holding Acreage Bill 2015, critics have argued that the mechanisms put in place by the law do more to reinforce present imbalances than address them. The proposed law sets limits on the minimum and maximum amount of land that can be privately owned depending on the region, with maximum plot sizes generally ranging from a little over 1 ha to 25 ha. This has worried some stakeholders, who claim that the limits are arbitrary. Another concern is that the bill contains a number of clauses empowering the lands cabinet secretary to approve holdings larger than the maximum and gives sub-county land control committees the power to grant or refuse the acquisition of private land, as well as veto power should a committee determine that the applicant already owns a sufficient amount of land.

Should the bill pass, property purchases would require the buyer to navigate multiple levels of bureaucracy, thereby increasing the likelihood of corruption and the amount of time the transaction takes. In July 2015 the bill was presented by Fred Matiang’i, acting lands cabinet secretary, to the Commission on the Implementation of the Constitution and will undergo internal review and consultations across the country before it can be tabled before Parliament.


Although the sector will continue to struggle with challenges driven by volatile global markets, currency fluctuations and low commodities prices, domestic and regional demand are rising, bringing with them a host of new investments in the Kenyan agriculture sector. Food security, irrigation and exports are set to continue improving in the coming years, keeping all segments of the value chain on an upwards trajectory, while investors will continue to benefit from a widening array of new opportunities across the value chain.