Amid strong growth in other sectors, agriculture remained a significant, if smaller, part of the Kenyan economy in 2017, accounting directly for 31.5% of the nation’s GDP. Farms also employed 38% of the formal workforce, while authorities estimated real sector participation to be higher, owing to informal farming. In 2017 growth was slowed by several hurdles, most prominently a drought that the state declared to be a national disaster. The drought restrained domestic production of staple crops such as maize, leading to food scarcity and steep rises consumer inflation. Despite the lower grain output, production of horticultural crops marked an all-time high and remained crucial sources of foreign exchange earnings.
Good prospects for sectoral growth are founded on several grounds. First, in December 2017 the government announced four areas of strategic focus for national development through 2022, including shoring up domestic food security and enhancing local manufacturing, particularly in agro-processing. Second, according to the Horticultural Crops Directorate, a government bureau tasked with promoting, developing and coordinating horticultural production and marketing, demand for produce is expected to grow in established European markets, as well as among new consumers in Asia, the Middle East and North America. In particular, the launch of direct flights between Nairobi and New York is expected to increase exports to the US. Third, the high ratio of smallholder farmers relative to all growers, coupled with a systemic reliance on rainfall, presents ample opportunity to invest in inputs, equipment and infrastructure, which, if realised, would multiply production efficiency nationwide.
Oversight & Regulation
The Ministry of Agriculture, Livestock and Fisheries (MALF) is the main state office charged with oversight of agriculture. To that end, it administers pertinent law, particularly the Crops Act of 2013, which lays out guidelines for promoting the production, processing, marketing and distribution of scheduled flora. To that end, MALF collects data on yields, imports and exports. Moreover, several voluntary bodies, including the Kenya Flower Council and the Horticulture Association of Kenya, work with the ministry to draft and implement industry standards related to product quality, pest control and the like.
Budget Allocation
In June 2018 the administration announced that the 2018/19 national budget would allocate KSh20.25bn ($198.4m) to enhancing food and nutritional security. That sum was earmarked in the following tranches, among others: KSh8.5bn ($83.3m) for irrigation projects at Bura, Galana-Kulalu and Mwea; KSh4.3bn ($42.1m) to subsidise fertiliser for smallholders; KSh1.9bn ($18.6m) to boost outputs and incomes under the cereal enhancement programme; KSh1.4bn ($13.7m) for strategic food reserves; KSh900m ($8.8m) for crop diversification; KSh750m ($7.3m) for digitalising land registries; KSh500m ($4.9m) to promote mechanisation; and KSh300m ($2.9m) each for crop insurance and eliminating fall armyworm.
Sector Performance
Output in 2017 fell short of projections because of a severe drought in the arid and semi-arid lands (ASALs). ASALs are mainly rain-fed, and given limited irrigation and reservoir capacities, precipitation deficits can adversely impact outputs, particularly so for cereals like maize, wheat and barley. Yields for maize, the nation’s largest staple crop, stood at 3.2m tonnes in 2017, down from 3.4m tonnes in 2016. This failed to meet domestic demand and, in order to bridge the gap, necessitated shipments from, among other countries, Mexico, Uganda and Tanzania. Indeed, government licensing and spending on maize imports increased from KSh3.6bn ($35.2m) in 2016 to KSh40.3bn ($394.8m) in 2017, while the import volume itself increased more than eight-fold over the same period, from 149,000 tonnes to 1.3m tonnes. Even dampened by state subsidies, the cereal price index increased 19.8% from 2016 to 2017. Moreover, the shortage inflated the index for all food and alcoholic beverages, most notably fresh produce, dairy products and sugar-based sweets, by 13.4%.
While the drought hampered the cereal harvest, export-oriented horticulture stayed largely unaffected, as it was mostly sited in greenhouses supplied with water year-round. In fact, according to the Fresh Produce Consortium of Kenya (FPC Kenya), a leading trade association, flower exports increased by 19.7% between 2016 and 2017, from 134,000 tonnes to 160,000 tonnes. These gains were paired with more oversight of floriculture, as the Kenya Flower Council, a private voluntary association of growers and exporters, set up a certification scheme elaborating licensing conditions along the full chain of production. These quality standards, which pertain to such things as ecological sustainability and workers’ rights, were benchmarked against equivalents issued by GLOBALG.A.P., a global farm assurance programme that translates consumer requirements into guidelines for industry best practices.
Similarly, data from FPC Kenya indicated that the export volume of vegetables such as green beans, snow peas and broccoli increased by 10.7%, from 78,790 in 2016 to 87,240 tonnes in 2017. That growth was outpaced by the sum export of fruits including mangoes, pineapples and avocados, which rose 17% over the same period, from 48,658 to 56,946 tonnes.
Cereals
In 2017 yields of maize, wheat, barley and sorghum were variably affected by the drought. Maize farmers, who supply the nutritional mainstay for 80% of the population, suffered singularly from an outbreak of fall armyworm, which affected hundreds of thousands of hectares spread across several counties. Meanwhile, the wheat harvest fell by 23%, from 214,700 tonnes in 2016 to 165,200 tonnes in 2017. That slump continued the downward trend in the wheat market, as the 2016 figure marked a 7% decline from the output of 2015.
Amid the adverse conditions, barley and sorghum outputs remained unchanged or improved, albeit unevenly. The barley harvest remained flat from 2016 to 2017, at 77,000 tonnes. Meanwhile, the reap of sorghum, which tends to tolerate more arid conditions, spiked over the same period, growing from 117,000 tonnes in 2016 to 144,000 tonnes in 2017.
These production trends have been driven in part by preference changes in the national and regional beverage markets. Kenya’s largest beer producer, East Africa Breweries Limited (EABL), has historically taken as part of its corporate social obligations a commitment to source its grains from local farmers. In 2016 EABL contracted with over 30,000 ASAL smallholders,to source over 80% of their grains, up from 40% in 2013, and the firm has announced its intention, per a campaign called Growing Value Together, to obtain 100% of their brewing grains from local growers by 2020.
Given the influence of EABL over local suppliers, the seeding of sorghum and millet are tightly pegged to sales of the beers that make use of these crops. EABL’s construction of a new brewery dedicated solely to the production of Senator, a lager made from sorghum, coupled with the beer’s integration into the value-end of the national and regional beer markets, raised its 2017 sales growth above that of the barley-derived Tusker. This shift has driven some farmers to switch from growing sorghum to barley, leading to the longer-term changes in their respective net productions.
Diversifying the Food Basket
The twinned ecosystem shocks of 2017 magnified Kenyan suffering and underlined the urgency of state efforts to multiply the bases of Kenyans’ diets. In 2016 Kenyans ate 2.6m tonnes of maize, comprising 54.7% of the 4.8m tonnes of the total cereals utilised. The year following, despite the harms of drought, pests and soaring prices, maize consumption stayed level from 2016, at 2.6m tonnes. However, overall grain consumption increased to 5.4m tonnes in 2017, with wheat consumption increasing most steeply during the period, from 1.5m tonnes to 1.9m tonnes. Accordingly, the share of maize as a portion of total cereals eaten fell significantly, to 49.1%.
Moreover, as part of its efforts to diversify Kenyan diets, and therein insure against food shocks, the state has encouraged the purchase of other, substitute carbohydrates, such as cassava, potatoes and yams. Consumption of starchy roots grew modestly over the same time frame, from 3.2m tonnes to 3.4m tonnes, further diminishing the share of maize in the nation’s total caloric base. While such shifts might foretell further displacement of the crop’s preferred status and a kind of decentralisation of the Kenyan diet, it remains to be seen if the new trend will persist in the face of a rebounding maize harvest.
Government Strategy
In December 2017 President Uhuru Kenyatta announced the Big Four agenda, a list of priority initiatives and projects for his second term of government, which runs until 2022. Those programmes are organised around four pillars: food and nutritional security; affordable housing; manufacturing; and universal health care. The first pillar takes as its central aim the transformation of Kenya from a state incapable of satisfying domestic demand into a food-secure country. Meeting that ambitious target will, in turn, require achieving narrower goals in the interim, such as mitigating dependence on rainfall, diversifying the nation’s staple basket and supporting smallholders. Those goals dovetail with the aims outlined under the second pillar, which commits to raising industry’s share of GDP from 9.2% in 2017 to 15% by 2022. Thus, the development strategy identifies several overlapping subsectors, such as leather goods, fisheries and value-added processing, as priorities for growth.
Irrigation
The bloc of smallholders that produce most of Kenya’s food rely heavily on rainfall. The 2017 drought showed that this reliance systemically exposes their own livelihoods, national nutrition and state coffers to natural hazards. Achieving food security, then, will depend on curbing this reliance on chance.
To this end, the state supports the continuation of irrigation projects that began under previous regimes, as well as the launch of new supply projects like the Agricultural Sector Development Strategy (ASDS). The ASDS, which was launched in 2009 and is scheduled to run until 2020, aims to increase smallholder yields by improving both access to water and the calibre of inputs such as hybrid seeds, fertilisers and pesticides.
Notable among ongoing efforts is the Galana-Kulalu Irrigation Project. In partnership with several firms, the National Irrigation Board (NIB) broke ground in 2014 on a KSh7.3bn ($71.5m) multi-phased project that intends to irrigate 405,000 ha in the country’s southwest by diverting its two longest rivers. According to the NIB, only a 2140-ha model farm has been successfully planted thus far, though development is accelerating Across the country, nearly abutting Uganda and Tanzania, another project is newly under way to maximise water resource potential and relieve chronic scarcity. Launched in March 2018 with financing from the Kenyan state, the European Investment Bank, the French Development Agency (AFD) and the EU’s Africa Infrastructure Trust Fund, the Lake Victoria Water and Sanitation Project plans to expand access to potable water and wastewater disposal services in Kisumu, the nation’s third-largest city. This €70m investment is expected to build on previous efforts by the AFD and the Lake Victoria South Water Services Board to improve intake, distribution and discharge capacities.
Smallholder Farmers
Kenya’s agriculturalists can be divided into three categories: smallholders; large-scale horticulturists; and other commercial growers. A smallholder is defined by the UN’s Food and Agricultural Organisation (FAO) as someone who keeps less than two ha of crop land under cultivation. In Kenya,this category includes some 5m farmers, who own the majority of the country’s arable land, account for most of the sector’s labour hours and produce 70% of the food crops consumed domestically. In his assessment of the sector’s potential, Eric Bureau, the managing director and head of crop science at Bayer East Africa, told OBG that, “The agricultural opportunity in Kenya lies in increasing the efficiency and yields for smallholders.”
Even as smallholders hold these big-picture advantages, they face considerable impediments to scaling up and increasing their outputs, predominantly in the particulars of accessing credit, equipment and various inputs. The administration has framed the easing of those difficulties as integral to realising its wider goals to bolster food security, national employment and per capita productivity. To those ends, the state has, for instance, increased support for farmers to purchase fertiliser. In the 2013-17 period subsidies pushed the price of a state-produced, 50kg fertiliser down by 28%, from KSh2500 ($24.49) in 2013 to KSh1800 ($17.64) in 2017. Central to that provision was the construction in 2016 of two new fertiliser-blending centres in Eldoret and Nakuru, which served to increase the annual production capacity from 50,000 tonnes in 2013 to 300,000 tonnes in 2017. The sum of these efforts was credited with providing 918,000 tonnes of fertiliser to some 1.5m smallholders and increasing maize yield per ha by 120% between 2013 and 2017.
While smallholders furnish the bulk of the nation’s foodstuffs, large-scale horticulturists dominate the cultivation of export-bound produce. These farmers usually run well-capitalised businesses and enjoy readier access to loans and high-quality inputs; moreover, owing in part to higher educational attainment, they tend to more eagerly adopt innovations. Sector growth has come on the strength of rising demand for their products, as exports rose by 16% between 2016 and 2017. Further expansion will largely depend on growers’ abilities to meet the rigorous quality standards of receiving markets, especially those in Europe.
As for the last category, non-horticultural commercial farmers cultivate large-scale, mechanised farms for exports like tea, coffee and some cereals. These farmers can typically leverage their financial capacities and operational scales to maximise irrigation systems and other productivity-enhancing technologies.
Agricultural Consolidation
Smallholders still require considerable help to increase yield efficiency and volume. Several identified areas for intervention include: strengthening technical capabilities; reducing barriers to high-quality inputs; easing financing conditions; and building resilience to climactic shifts.
In some respects, farmers have begun to gain traction via better sector-wide coordination, as some smallholders have entered into bloc associations that carry more weight in market negotiations. In 2017 a consortium of 70,000 such farmers enjoyed improved access to both markets and substantive inputs, due in part to the work of the Alliance for a Green Revolution in Africa. The alliance, which is funded in by the Rockefeller Foundation and the Bill and Melinda Gates Foundation, is committed to improving soil fertility, the reach of irrigation, farm management practices and the availability of financial tools. Moreover, farmers in Bomet, Nakuru, and Nyeri counties have recently enjoyed better access to information on price patterns, seed varieties and crop management via extension services, which several industry players framed to OBG as a critical public good, best delivered by the state.
Agro-Processing
In announcing the five-year plan, President Kenyatta stressed the need for greater value addition in agriculture. “As part of the Big Four, our tea, coffee, meat, fruits and vegetables will be processed locally. This way, we will obtain more value from our produce, and create more jobs and wealth for Kenyans,” he said. While agro-processing remains in its infancy, the Big Four laid out specific opportunities to expand such practices in several subsectors, such as dairy production, the processing of poultry and edible oils, and cold-chain solutions for transporting flowers, dairy and meat products. This development is part of a broader commitment under the second pillar of the Big Four to raise industry’s GDP share, and will be achieved by driving private sector investment and job creation in subsectors such as textiles, leather, agro-processing, construction, mining and steel production.
Tea
Tea has long been the agriculture sector’s most significant source of foreign exchange earnings, and the 424,000 tonnes shipped out in 2017 made Kenya the largest exporter of black tea in the world. However, the signals for tea’s prospects are mixed: while the export price of a kilogramme rose by 21.6% between 2016 to 2017, from KSh259 ($2.54) to KSh315 ($3.09), output fell sharply over the same period, owing to the same arid conditions that curbed the maize crop. Climate change threatens to increase the frequency of such harmful weather events going forward.
Horticulture
Kenyan horticulture, comprised of fruits, vegetables and flowers, is dominated by commercial and large-scale operations. Driven by rising demand in well-established markets in Europe as well as in new ones in Asia, the Middle East and North America, horticulture grew at the fastest pace of any agricultural subsector in 2017, at 7%. The trend is expected to continue and may even accelerate, as the launch of Kenya Airways’ direct connection between Nairobi and New York in October 2018 is expected to further open the North American market to Kenyan exports.
Avocado sales, which grew 20.1% between 2015 and 2016, from 38.9 tonnes to 46.7 tonnes, generated KSh5.2bn ($50.9m) in revenue and accounted for 7% of all Kenyan fruit exports. However, leveraging middle-income consumers’ preference for healthy fats will depend on cycling a portion of that revenue back into boosting production as, according to local media, a severe shortage on the local market prompted the state to impose a temporary export ban in early 2018.
Livestock
The FAO reported in December 2016 that Kenya had 20.5m head of cattle, which ranks as the 15th-largest population globally and the fifth-largest in Africa. The state has announced its intention to develop leather refinement capabilities and, to that end, has already committed to building four processing facilities, including a leather industrial park in Machakos county, which radiates north-east from Nairobi. Under the management of the Export Promotion Zones Authority, the Machakos project was designed to exploit a 202-ha plot as a one-stop shop, integrating 15 tanneries, 200 factories and 200 showrooms within a single operation.
Fish
Kenya’s fishing industry, which enjoys rapidly growing, freshwater populations of Nile tilapia and African catfish (also known as magur) accounted for 0.8% of country’s GDP in 2017. Despite the modesty of that share, aquaculture employed roughly 500,000 people that year, and in the 2006-10 period, largely on a capital infusion from a 2009 state-stimulus programme, its yield grew on average by 24.3% yearly, from 4,218 tonnes in 2006 to peak at 24,096 tonnes in 2014.
While yields declined in 2015-16, aquaculturalists have an extensive geographical network to grow into. The country’s coastline is 640km long, while its inland bodies, including freshwater lakes and rivers, cover 18,029 sq km. This potential is, for the moment, constrained by shortcomings in the value chain, including poor roads and limited supplies of power and water. Fish farming tends, moreover, to demand upfront heavy investments of financial and human capital alike.
That said, there are measures being taken to address these hindrances. A public-private partnership (PPP) known as FoodTechAfrica has brought together 13 contributors, including the Kenya Marine and Fisheries Research Institute and the Netherlands Ministry of Foreign Affairs, to eliminate bottlenecks in fish processing and thereby spearhead a “blue revolution” for East African aquaculture. Through that PPP in March 2017, the Unga Group, a manufacturer of animal feeds and other nutritional products, opened a mill with the capacity to make 5000 tonnes of fish feed annually. The Big Four agenda likewise lays out plans for the state to increase its yearly processing potential, from 2500 tonnes in 2018 to 18,000 tonnes by 2022.
Outlook
Kenyan agriculture, and by extension the economic and nutritional health of the nation as a whole, face a mixed outlook in the years to come. The sector’s challenge flow cyclically: the population has expanded in the last decade more quickly than the cereal yields on which they depend; those yields fluctuate with extreme weather that is becoming increasingly common; and the state diverts resources from spending meant to hedge against those climate shocks, in order to fund emergency cereal imports.
On the other hand, the Big Four agenda delineated a commitment and a strategy that, when taken together, might reverse these trends. The nation’s exports, particularly its horticultural produce, are fetching strong prices worldwide and growing yet, providing a crucial stream of foreign revenue. Moreover, aligning agricultural and industrial goals present opportunities to develop those raw commodities into value-added goods that are better insulated against climactic events. Lastly, international development organisations and investors continue to look upon Kenya as a harbinger of an economic breakthrough in a regional still largely dependent upon agriculture, and the country still enjoys access to investment and philanthropy that can fund projects, such as water infrastructure that might power that breakthrough.
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