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Introduction

The National Agribusiness Strategy 2012 defines agribusiness as ‘a sector that comprises all businesses involved in agriculture production – including farming and contract farming, seed supply, agriculture production, agrichemicals, farm machinery, wholesale and distribution, processing, marketing and retail sales’, (Government of Kenya, 2012).

The sector is considered to have huge potential and has been christened: ‘The sleeping giant that could help deliver 10 percent annual economic growth for Kenya’. Agribusiness is a critical sector to the Kenyan economy as it falls within Food and Nutrition Security of the Big Four Agenda.

However, there are a myriad challenges that impede the country’s capability to harness the full potential of agribusiness. These include: exploitative middlemen, adverse weather and climate change (agriculture in Kenya is mainly rain-fed), post-harvest losses, and low investment in the sector (by both the public and private sector).

This has led to the perception of farmers by lending bank and non-bank financial institutions as high risk borrowers, hence their unwillingness to lend to them.

Other challenges which hamper agribusiness include poor quality of farm inputs, and pests and diseases (Government of Kenya, 2012).

Opportunities for agribusiness in Kenya

There are a wide range of opportunities that provide a strong foundation for agribusiness in Kenya, as discussed below:

Rapid urbanisation and increased demand for processed foods

Kenya’s population is becoming increasingly urbanised as a result of rural-urban migration for those seeking employment opportunities. Also, as people get richer and more people live in towns and cities, greater opportunities are created for agriculture. Urban consumers demand better quality, well packaged, processed and a variety of food products. This demand could create more jobs for the youth who participate in agribusiness.

High world prices

Rising world prices mean the country’s dependence on imports leads to economic leakages from the economy. Kenya imports more than half of the rice, oranges, wheat and vegetable oils it consumes. If this trend continues, it will provide an argument for Government support to strengthen local production of agribusiness products to fill the supply deficit.

Dominant sector of the economy

Agriculture plays a critical role in the country’s social-economic development through its contribution to gross domestic product, employment and wealth creation. Agribusiness can absorb large numbers of underemployed rural people, especially the youth.

Potential to generate export earnings

Agribusiness generates about 60 percent of the country’s export earnings through horticulture, industrial crops, livestock, and fishery products. There is a ready market within the Common Market for Eastern and Southern Africa (Comesa), which takes about 70 percent of Kenya’s total exports to Africa.

Comparative advantage in the region

Kenya is endowed with natural resources and human capital, and is the most economically advanced country in the region, hence has a comparative advantage. But the country needs to put in place policies and strategies to maintain its competitive edge.

Status of the sector

Agriculture is a key sector of the Kenyan economy and is one of the President’s Big Four Agenda under food security. Performance of the sector reduced by almost half, from 6.1 percent in 2018 to 3.6 percent in 2019 (see figure 1).

This was attributed to extreme weather and drought in the first half of 2019, then high rainfall in the second half, destroying crops and reducing production. Kenya relies on rain-fed agriculture, hence unpredictable weather negatively impacts on the sector. Maize production decreased from 44.6 million bags in 2018 to 39.3 million bags, largely as a result of an armyworm infestation, while tea and cane production also declined in the same period. Tea is one of the major sub-sectors of the agriculture sector.

Nevertheless, horticultural export grew from 322,600 tonnes in 2018 to 328,300 tonnes in 2019, while the milk supplied to dairy processors rose from 53 percent (634.3 million litres) in 2018 to 668.2 million litres in 2019 (Government of Kenya, 2020a).

Furthermore, there was a decline in the value of marketed products at current prices by 6.5 percent from Sh498.3 billion in 2018 to Sh465.7 billion in 2018. Performance of the sugarcane sector was not any better, with earnings falling by 16.6 percent from Sh21.0 billion in 2018 to Sh17 billion in 2019, while earnings from coffee declined by 35.5 percent from Sh14.8 billion to Sh10 billion as a result of surplus production of coffee globally, especially in Brazil, leading to a decline in world prices.

Policy, legal reforms and institutional reforms

There has been substantial policy, legal and institutional reforms, with some still on-going.

In terms of relevant policies, the draft agriculture policy’s key objective is to ‘provide for economically viable, socially equitable and environmentally sustainable use of land for crops, livestock and fisheries’.

The strategies and legal reforms are explained below:

National Food and Nutrition Security Policy Implementation Framework 2017-2022

This framework was launched in 2017 with the following objectives:

1. To ensure that all Kenyans have the means to access affordable, nutritious and personally acceptable food;
2. To guarantee a sustainable, safe and high quality food supply;
3. To promote food consumption patterns that maximise health;
4. To guarantee sustainable, safe and high quality food supply; and,
5. To promote food consumption patterns that maximise health.

The strategies under the Food and Nutrition Security Pillar target to:

1. Reduce over-reliance on rain-fed agriculture: The Government will develop 85,000 acres of irrigation area and expand smallholder irrigation by 1,617 acres.
2. Reduce the cost of food; the Government will provide affordable energy; enhance market distribution infrastructure and offer incentives for post-harvest technologies to reduce post-harvest losses.
3. Reduce the number of food insecure Kenyans, and reduce chronic malnutrition among children under five years.
4. Create 1,000 production SMEs and 600,000 direct and indirect jobs, and increase the average daily income of farmers.

National Agribusiness Strategy 2012

Agribusiness in Kenya is anchored on the National Agribusiness Strategy, which was launched in 2012. The four broad objectives of this strategy are: to remove barriers and create incentives for the private sector to invest in agribusiness and related business opportunities; invest public resources more strategically to trigger growth in agribusiness; make agribusiness systems more competitive, easily adaptable and ‘fleet-footed’ in order to deal with dynamic markets and the opportunities they bring; and encourage ‘the right kind’ of institutional frameworks that enable all actors to utilise market opportunities.

The strategy identifies critical strategic priorities to trigger agribusiness in Kenya. These strategies are:

1. Put markets at the centre of all production, processing, product development and packaging;
2. Focus on research, development and innovation to better catalase growth of a vibrant agribusiness sector;
3. Promote smarter organisation of actors in the sector to benefit from economies of scale and improved productivity;
4. Improve the range and effectiveness of financial and non-financial services; and,
5. Attract investment by creating an enabling environment and putting performance above politics.

To address these strategic priorities, the strategy proposes implementation arrangements in terms of institutional roles and responsibilities in which different actors play their respective roles effectively and efficiently.

Kenya Youth and Agribusiness Strategy 2017-2021

Youth participation in agriculture in Kenya is quite low and continues to decline. The sector is predominantly driven by people aged 50 to 65 years, most of whom practice traditional or subsistence farming (Government of Kenya, 2017).

Youth have a tendency of migrating to urban areas in search of white-collar jobs. Also, they have low interest in agriculture, with the public sector concentrating on production rather than value addition. Furthermore, poor access to information on marketing and factors of production such as land and capital (financing), remain a major hindrance to engagement in agriculture.

The Kenya Youth and Agribusiness Strategy 2017-2021 was launched in 2017 and is currently under implementation. The strategy identified 11 broad objectives:

• Transform the mind-set and perception of the youth towards agribusiness;
• Equip the youth with appropriate agribusiness skills, knowledge and information;
• Enhance access to affordable and youth-friendly financial services for agri-preneurship, and enhance access and sustainable use of land in agribusiness;
• Engage the youth in research, development and utilisation of innovative agricultural technologies;
• Enhance access to factors of production and promote better utilisation of modern technologies and good agricultural practices (GAP) to increase efficiency;
• Increase utilisation of agricultural products through value addition;
• Improve access to affordable, suitable markets, support implementation, reviews and development of policies that create an enabling environment for the youth in agri-preneurship;
• Promote youth-inclusive climate-smart agricultural technologies and create green jobs for environmental sustainability;
• Promote an integrated approach to address cross-cutting challenges – including gender disparities, cultural barriers, alcohol and substance abuse, HIV and Aids, and weak governance and value systems, among other objectives.

Agricultural Sector Transformation Growth Strategy (ASTGS) 2019-2029

The ASTGS 2019-2029 aims at achieving nutritious and affordable food, accessible to all Kenyan households. This is the central goal of an agricultural transformation. Transformation of the agricultural sector is critical in achieving 100 percent food security as part of the President’s Big Four Agenda. According to the Ministry of Agriculture, Livestock and Fisheries (MALF), the strategy’s key objective is “to transform the agricultural sector into a vibrant and modern commercial sector that sustainably supports Kenya’s development in the context of devolution.”

The strategy is grounded in the belief that food security requires a vibrant, commercial and modern agricultural sector that sustainably supports economic development.

Price policy goals focus on reasonable prices for producers or farmers and affordable prices for consumers, which are challenging to balance yet critically important for food and nutrition security. However, the prices of basic food items are only one indicator of the larger goals of an agricultural transformation. Other indicators include increases in incomes, alongside productivity, increases in output, value addition and reduction of food insecurity – all of which are metrics of ASTGS measures (Government of Kenya, 2019b).

Agricultural transformation involves the following:

• Modernisation of on-farm production and input markets from subsistence to commercial agriculture, serving both local and export demand;
• Shift of value in the value chain away from primary production and toward processing and retail, eventually a shift of farmers out of farming and into more productive jobs (agricultural value chains, or out of agriculture);
• Changing demand in terms of the food people eat, for example more processed foods, animal proteins and fruits/vegetables.

The indicators of agricultural transformation include: rising incomes and declining poverty; productivity gains, yield increase; greater value-addition per worker, increase in national agricultural output, and increase in demand for animal protein, sweeteners, oils and processed foods.

Legal Reforms

There have been a number of legal reforms in the Agriculture Ministry aimed transforming the sector and giving the implementation of policies legal standing. Some of the current Bills and legislations, and their status as indicated in the Parliament Bill Tracker, are highlighted below:

The Crops (Tea Industry) Regulation 2020, on-going

The purpose of this regulation is to guide the development, promotion and regulation of the tea industry for the benefit of tea growers and other stakeholders.

The Irrigation Bill (National Assembly Bill No. 46 of 2019

This Bill was sponsored by then Majority Leader in the National Assembly, Aden Duale. Its objective is to promote the development and management of irrigation in Kenya. The Bill was assented to by the President on 2nd August 2019.

The Livestock and Livestock Products Marketing Board Bill (National Assembly Bill No. 2 of 2019)

It was sponsored by Mandera North MP Bashir Abdullahi and seeks to establish the livestock and livestock products marketing board. The Bill, which was before the National Assembly on 12th March 2020 for the third reading, was forwarded to the Senate for consideration.

The Crops Amendment Bill (National Assembly Bill No. 25 of 2019)

The broad objective of this Bill is to introduce Achiote (a tree native to tropical regions largely used for food colouring and flavour) to the first schedule of the Crops Act 2013. The Bill, which was sponsored by Matuga MP Tandaza Kassim Sawa, was tabled in the House on 26th May 2019 for the first reading.

The Crops Amendment Bill (No. 2) 2019; National Assembly Bill (No. 32 of 2019)

The amendment Bill No. 2 of 2019 was sponsored by Gatundu South MP Moses Kuria and was tabled before the House on 2nd May 2019 for its first reading. The objective of the Bill is to ensure favourable balance of trade and balanced payment for coffee (which shall not be exported from Kenya in raw form). The Bill underscores the importance of value addition to coffee before it is exported, to fetch higher earnings.

The Sugar Bill 2019 (National Assembly Bill 68 of 2019)

The objective of this Bill is development, regulation and promotion of the sugar industry and to boost the Kenya Sugar Board. The Bill was sponsored by Kandunyi MP Wafula Wamunyiyi and was tabled in the House on 30th October 2019 for its first reading.

The Tea Bill 2018 (Senate Bill 36 of 2018)

The key objective of this Bill is to provide regulation, development and promotion of the tea industry. The Bill is sponsored by Senator Aaron Cheruiyot and was tabled before the House committees for technical review on 25th June 2019. The Bill proceeded to the second reading.

The Food Security Bill 2017 (Senate Bill No 12 of 2017)

The Bill aims at giving effect to article 43(1) (c) of the Constitution on freedom from hunger and the right to adequate food of acceptable quality; article 53(1)(c) of the Constitution on the right of every child to basic nutrition; and article 21 of the Constitution on the implementation of rights and fundamental freedoms. The Bill was sponsored by then Senate Majority Leader Kipchumba Murkomen and was forwarded to the Budget and Appropriations Committee for further review.

The Nairobi Coffee Exchange Rules, 2018

The regulation establishes the Nairobi Coffee Exchange and the rules under the Capital Markets Act (Cap. 485A) to govern it. The objective and purpose of the regulation is to: “give directives, principles and conditions for trading of clean coffee at the exchange rate and to ensure the trading is conducted in a secure, stable and transparent manner in an environment of fair competition” (Government of Kenya, 2018b:5).

Institutional outlook

Ministry of Agriculture, Livestock and Fisheries

It is one of the largest ministries in the current Government and is responsible for agribusiness and realisation of food and nutrition security – one of the Big Four Agenda of President Uhuru Kenyatta’s Government. The Ministry is the overall body in-charge of policy formulation and provision of strategic direction for agriculture, livestock and fisheries, as highlighted in its core functions below:

• Formulation, implementation and monitoring of agricultural legislations, regulations and policies;
• Supporting agricultural research and promoting technology delivery;
• Facilitating and representing agricultural State corporations;
• Development, implementation and coordination of programmes in the agricultural sector;
• Regulation of inputs, produce and products from the agricultural sector;
• Management and control of pests and diseases; and,
• Collecting, maintaining and managing information on the agricultural sector.

Its current specific functions are delivered through key State departments as follows:

State Department for Crops Development

It is charged with the following functions: National agricultural policy and management; national food policy; agricultural crops development, regulation and promotion; agriculture financing; phytosanitary services and international standards compliance; farmers training; agricultural training colleges; agricultural land resources inventory and management; and policy on land consolidation for agricultural benefit.

Other functions are: Agricultural insurance policy management; agricultural land resources inventory and management; agricultural mechanisation policy management; policy on land consolidation for agricultural benefit; agricultural insurance policy; agricultural extension services standards; capacity building policy for agricultural staff; overall policy for exploitation of agro-based maritime resources; policy on development of fishing ports and associated infrastructure; capacity building for sustainable exploitation of agro-based maritime resources; protection of aquatic ecosystems; and protection of Kenya as a centre for aquaculture.

State Department for Crops and Agricultural Research

The department is responsible for the following functions: Crop research and development; agriculture seed research and development; livestock research and development: tsetse-fly and trypanosomiasis research and control; fisheries research; crop genetic research; animal genetic research and biosafety management.

State Department for Fisheries, Aquaculture and the Blue Economy

The State Department for Fisheries, Aquaculture and the Blue Economy is charged with the following functions: Fisheries policy; fisheries marketing; fisheries marking policy; fishing licensing; development of fisheries; fish quality assurance; co-ordination of development of policy, legal, regulatory and institutional frameworks for the fisheries industry and the Blue Economy; and enhancement of technical cooperation with partner states.

Other functions are: Co-ordination of maritime spatial planning and integrated coastal zone management; protection and regulation of maritime ecosystems; management and licensing of local and foreign fishing trawlers in Kenyan waters; protection of maritime resources in the Exclusive Economic Zone (EEC); overall policy for exploitation of agro-based maritime resources; policy on development of fishing ports and associated infrastructure; and capacity building for sustainable exploitation of agro-based maritime resources.

State Department for Livestock

The department’s functions are: Livestock policy management; development of livestock industry; veterinary services and disease control; range development and management; livestock marketing; promotion of dairy industry; livestock insurance policy; livestock branding; promotion of beekeeping; and promotion of the tannery industry.

State Corporations and Agencies

Cognisant of the many functions of the Ministry, one would expect other Government departments, authorities, and semi-autonomous agencies (SAGAs) to help in delivery of these functions. The key institutions are:

Kenya Agricultural and Livestock Research Organisation (KALRO)

The Kenya Agricultural and Livestock Research Organisation (KALRO) is a corporate body created through the Kenya Agricultural and Livestock Research Act of 2013 to replace the former Kenya Agricultural Research Institute (KARI).

The main goals of KALRO are: promote, streamline, coordinate and regulate research in crops, livestock, genetic resources and biotechnology in Kenya; expedite equitable access to research information, resources and technology; and promote the application of research findings and technology in agriculture.

In striving to fulfil the above goals, KALRO is obliged to:

• Formulate policy and make policy recommendations to the Cabinet Secretary on agricultural research;
• Co-ordinate and prioritise areas for agricultural research in Kenya in line with the national policy on agriculture;
• Determine and advise the Government on the resource requirements for agricultural research, both at national and county levels;
• Regulate, monitor and ensure that all agricultural research undertaken by research institutes and other institutions, or persons undertaking agricultural research, are consistent with the national priorities specified in the relevant policy documents;
• Establish and exercise control over research institutes, committees and research centres established pursuant to this Act;
• Formulate or approve medium and long-term research plans, strategies and budgets of research institutes, committees and organisations established pursuant to this Act;
• Provide grants to research institutes and persons desirous of carrying out research and training programmes which are consistent with the national research priorities and plans of the organisation;
• Support and promote training and capacity building in relation to agricultural research;
• Promote dissemination and application of research findings on agriculture, and establishment of a science park;
• Liaise with and ensure the co-ordination of institutions, agencies and persons involved in agricultural research;
• Establish platforms for sharing of research information, advancing research and transfer of technology, and dissemination of information relating to advancements in agricultural research;
• Ensure continuance of performance improvement in agricultural research; and,
• Perform such other functions as may be conferred on it by this Act, or by any other written law.

National Cereals and Produce Board (NCPB)

The National Cereals and Produce Board (NCPB) is a State corporation established in 1985 through an Act of Parliament, Cap 338. The NCPB has the following mandate: commercial trading in grains, provision of commodity handling and other grain-related services, including carrying out various social functions such as strategic food reserve and famine relief in collaboration with National and County Governments; procuring and marketing of high-quality farm inputs; and provision of storage and grain maintenance.

The NCPB also offers post-harvest services like grain storage to a number of County Governments. It has also forged partnerships with the private sector on distribution of fertiliser and seeds, and hermetic bags. Other cereals handled by the board include rice (pishori and sindano), maize, and beans. The board also provides services such as weighing, grading and aflatoxin testing, clearing and forwarding, bagging, cleaning and drying, pest control, warehousing, leasing of property and agency business.

Agricultural Development Corporation (ADC)

The ADC’s mandate was established through the ADC Act (Cap 444) of the Laws of Kenya, as follows:

• Promote the production of Kenya’s essential agricultural inputs as the corporation may decide, such as seeds and pedigree livestock, including hybrid seed maize, other cereal seeds, potato seed, pasture seed, vegetable seed, pedigree cattle, dairy, beef, sheep, goats, pigs, poultry and bees.
• Undertake such activities as the corporation may decide for developing agricultural production in specific fields, such as training, knowledge and technology transfer through participation in field days, embryo transfer, artificial insemination and organising of Agricultural Show of Kenya events.
• Participate in activities in agricultural production which are related to the primary and secondary functions of the corporation and which, in the view of the corporation, are commercially viable in production of maize, wheat and potatoes; and commercial sale of milk, dairy, beef, goat and sheep products.

Agricultural Finance Corporation (AFC)

The Agricultural Finance Corporation (AFC), previously known as Development Finance Institution (DFI), was established in 1963 as a subsidiary of the Land and Agricultural Bank. It was incorporated as a full-fledged financial institution under the Agricultural Finance Corporation of Kenya Act 1963, Cap 323 of the Laws of Kenya. It was then tasked in assisting in effective and peaceful transfer of land to indigenous farmers, as well as injecting new capital to farm owners to spur development.

Today, AFC remains the leading Government credit institution mandated to provide credit for the sole purpose of developing agriculture. Since agriculture is the cornerstone of Kenya’s economy, with 80 percent of the population living in rural areas and relying on agriculture as the main support system, the corporation plays a critical role in providing much-needed credit.

The loan products offered by AFC are for machinery, agribusiness, livestock and fisheries development, cash crop development, horticulture and floriculture loans, water development, seasonal crop credit, and school-based loans.

Agri-business loans

They are designed to benefit agri-business traders and aim to provide start-up capital for those seeking to start, or are engaged in, agricultural microenterprises. There are huge opportunities for the youth in agricultural, micro and small medium enterprises across the value chain. Beneficiaries of this loan facility are expected to engage in wealth creation and employment generation.

Features of the agri-business loans include: individual and group loans, with repayment periods of up to three years and interest rate of 15 percent per annum. Items financed include marketing and processing of farm produce. For one to be eligible for a loan, their business must be viable. Tangible security must be offered for the loan, as well 20 percent equity contribution to the business project.

National Irrigation Board (AIB)

The boards’ website says: ‘We are at the forefront of improving food security’. This is in line with one of the Big Four Agenda − food and nutrition security. The National Irrigation Board (NIB) was established as a State corporation in 1966 through the Irrigation Act Cap 347 of the Laws of Kenya. The objective of establishing NIB was ‘to provide for development, control and improvement of irrigation schemes for purposes incidental thereto, and connected therewith’. The board is in-charge of public irrigation schemes in Kenya; namely, Mwea, Bura, Tana, Ahero, West Kano, Perkerra and Bunyala irrigation schemes.

The board runs the following:

• Mwea Irrigation Agricultural Development (MIAD centre;
• Ahero Irrigation Research Station and two other subsidiaries;
• Mwea Rice Mills Ltd (MRM); and,
• Western Kenya Rice Mills (WKRM).

Kenya Agri-business and Agro-industry Alliance (KAAA)

This alliance is a private, not-for-profit membership organisation dedicated to strengthening Kenya’s agro-industrial competitiveness. This is achieved through programmes highlighting trade and development potentials, and broad issues that encompass several individual agribusiness sectors and require a “value chain” approach.

The KAAA is the only national private sector group embracing Kenya’s agribusiness and its allied industries in collaboration with private and public stakeholders to influence policies that strengthen agribusiness.

The KAAA CEO says: ‘Having access to international linkages, KAAA seeks to strengthen Kenya’s agricultural sector international outreach through stimulating private enterprise, trade and investment solutions in Third World agro-industrial development. The alliance also fosters heightened public awareness of agriculture’s vital importance in national and global economic health’.

Productivity

Sugarcane

The Kenya Economic Survey 2020 shows that the performance of the sugarcane sub-sector in terms of the area under cane production declined by 2.5 percent from 202,400 hectares in 2018 to 197,300 hectares in 2019.

This reduction was largely attributed to the closure of Mumias Sugar Factory in early 2018. The area harvested also declined from 73,100 hectares in 2018 to 71,900 hectares in 2019 as a result of the lengthy closure of Kwale Sugar Company, and Mumias Sugar Factory.

Consequently, the total cane production decreased by 12.5 percent from 5.3 million tonnes in 2018 to 4.6 million tonnes in 2019, due to low cane supply. The situation in the sub-sector was made worse by extreme weather conditions experienced in the last quarter of the year, which made it hard to lift cane from the fields. The average yield also declined by 7.4 percent from 55.1 tonnes per hectare in 2018 to 51.0 tonnes per hectare in 2019.

Domestic sugar production and imports for the period 2015 to 2019 are shown in figure 2. Overall, total domestic sugar production dropped by 10.2 percent from 497,100 tonnes in 2018 to 440,900 tonnes in 2019. This decline in sugar production was attributed to low cane supply in 2019. On the other hand, sugar imports rose by 61.4 percent, from 284,200 tonnes in 2018 to 458,600 tonnes in 2019, to fill the production deficit and meet the rising domestic demand. Sugar exports were minimal, having decreased from 2,000 tonnes in 2018 to 800 tonnes in 2019.

Horticulture

According to the Kenya Economic Survey, the output of fresh horticultural produce has been growing over the years since 2015. Conversely, earnings from exports of fresh horticultural produce declined for the first time by 5.9 percent, from Sh153.7 billion in 2018 to Sh144.6 billion in 2019, as a result of lower prices in the international market. Output of fresh horticultural produce rose marginally by 1.8 percent, from 322,600 tonnes in 2018 to 328,300 tonnes in 2019.

Earnings from cut flower exports decreased by 8.0 percent from Sh113.2 in 2018 to Sh104.1 billion in 2019, accounting for 72 percent of the total earning from horticulture exports. The output of cut flower exports rose by 7.8 percent from 161,300 tonnes in 2018 to 173,700 tonnes in 2019. The output of exported cut flowers rose from 161,200 tonnes in 2018 to 173,700 tonnes in 2019.

The quantity of fruits exported increased by 8.3 percent from 75,600 tonnes in 2018 to 81,900 tonnes in 2019. Export earnings from fruits increased by 3.1 percent from Sh12.8 billion in 2018 to Sh13.2 billion in 2019, accounting for 9.1 percent of total earnings from horticulture exports.

As shown in figure 3 below, the performance of monthly export output of horticulture was poor from June to December 2019, standing at around 25,000 tonnes or below for most months.

On the other hand, earnings from export of horticultural products ranged from Sh10 billion in July and September to Sh15 billion in December 2019 − the best performing month in earnings but the lowest performing in export quantities.

The quantity of vegetables exported declined by 15.2 percent from 85,800 tonnes in 2018 to 72,700 tonnes in 2019. The value of vegetables exported fell marginally by 1.7 percent from Sh27.7 billion in 2018 to Sh27.2 billion in 2019.

Naivasha, especially around Lake Naivasha, is the key export flower producing region in Kenya. Other flower producing areas are Mount Kenya region, Nairobi, Athi River, Kitale, Thika, Nakuru, Kericho, Kiambu, Nyandarua, Uasin Gishu, Trans Nzoia and Eastern Kenya.

The main export destinations for Kenyan flowers are:

• The European Union (EU), with The Netherlands being the key market.
• The United Kingdom, Germany and France.
• Emerging markets: United States of America, Japan, Dubai and Russia.

It is important to note that the COVID-19 pandemic has dealt a major blow to the flower industry in Kenya since early this year, leading to a drastic drop in operations.

Tea

In 2018, the area under tea was 234,300 hectares, compared with 269,400 hectares in 2019. However, tea production declined by 6.9 percent to 458,500 tonnes in 2019, from 493,000 in 2018. Smallholder subsector tea production reduced from 272,500 tonnes in 2018 to 258,100 tonnes in 2019, while the estate sub-sector production declined to 200,700 tonnes in the same period. Subsequently, the average yield fell from 2,383 kg/ha in 2018 to 1,888 kg/ha in 2019 for the estate subsector.

Similarly, in the smallholder sub-sector, the yield recorded decreased from 1,922 kg/ha in 2018 to 1,583 kg/ha during the period under review. The low production was mainly attributable to extreme weather phenomenon characterised by drought during the first half of the year.

Kenya Tea Development Agency (KTDA)

The Kenya Tea Development Authority was established under the Agriculture Act (Cap 318 section 91, Legal Notice No. 42, effectively replacing the Special Crops Development Authority which had been operational since 1960. KTDA took over the management of the small-scale tea farming sub-sector, while large-scale tea growers process and market their tea through 39 factories which are operated on private basis.

Evolution of the Kenya Tea Development Authority to Kenya Tea Development Agency Management Services Ltd in 2009 is graphically shown in figure 4. In 1999, the KTDA order revoked the legal notice No. 44 and, in the same year, the Sessional Paper No. 2 of 1999 recommended the privatisation of KTDA (Authority). A year later, the authority was privatised through the establishment of the Kenya Tea Development Agency Ltd, under the Companies Act 486 (as a private limited liability company).

The KTDA provides services such as managerial production, transportation, procurement of production inputs, marketing of processed tea and payment of tea proceeds to growers. There are an estimated 400,000 small-scale tea growers in Kenya, who process and market their tea through 69 factories controlled by KTDA. The Agency prides itself in being responsible for 60 percent of the tea produce in Kenya

Performance of the Agency, as shown in figure 5 and 6, indicates a marginal increase in pre-tax profit from Sh2.531 billion to Sh2.838 billion in 2018 and 2019, while the average percentage return to farmers dropped from 73 percent to 67 percent in the same period. However, as indicated in figure 7, there was a slight drop in the dividend paid out, from Sh691 in 2018 to Sh683 in 2019.

The Cabinet Secretary for Agriculture, Livestock, Fisheries and Co-operatives, Peter Munya, in a press statement on 16th April 2020, highlighted key challenges that the tea sector is grappling with. Some of these challenges, as elaborated in the press statement, are: A dysfunctional tea auction system; control and predatory behaviour of KTDA and its subsidiaries in the tea value chain; and low and unstable tea prices.

In regard to the challenges linked to KTDA, the Minister proposed a study to be undertaken to ‘evaluate the impact of KTDA’s commercial behaviour on the entire value chain, including the earnings to smallholder tea growers.

Kenya Tea Growers Association (KTGA)

The Kenya Tea Growers Association (KTGA) was established in 1931 to promote the interests of members, who were mainly large-scale tea producers, in cultivation and manufacture of tea, and to promote good industrial relations and sound wage policies for the workers.

The association has 18 members and five strategic partners, namely; Federation of Kenya Employers (FKE), East Africa Tea Trade Association (ETTA), Kenya Private Sector Alliance (KEPSA), and Agricultural Employers Association (AEA).

East Africa Tea Trade Association (ETTA)

The East Africa Tea Trade Association (ETTA) is mandated to promote and facilitate the interests of all stakeholders in the tea trade in Africa through creating an enabling business environment geared towards global standards and delivering tea products to customers in the most profitable way. There are 10 member countries of ETTA, five of which are from outside East Africa region, namely; Malawi Madagascar, Mozambique, Democratic Republic of Congo and Ethiopia.

The ETTA is a private organisation bringing together tea producers, sellers, brokers, tea packers and warehouses. According to the association’s website, it has 300 companies from East and Central African region (East Africa Tea Trade Association, 2020). The core business of ETTA is tea auction, lobbying and advocacy, marketing, membership support, and information provision.

Tea auction is usually carried out in Mombasa, but the association also has tea auction live streaming. Currently, the association has 84 producer members involved in production, trading and value addition. The function of producers is to represent brokers at the Weekly Tea Auction in Mombasa. (The weekly auction was temporarily halted because of the COVID-19 pandemic but there are plans to resume operations with the use of hotels for extra space).

Livestock

According to the Kenya Economic Survey (2020), 2,781,700 cattle and calves were slaughtered in 2018 compared with 3,080,800 in 2019, an equivalent of 10.8 percent increase. The total number of goats and sheep delivered to slaughterhouses rose from 10,247,600 in 2018 to 11,302,700 in 2019. The number of pigs slaughtered increased by 6.5 percent from 388,200 heads in 2018 to 413,500 heads in 2019.

Kenya Meat Commission (KMC)

The commission’s mandate is to ‘consistently purchase quality livestock, process it efficiently into high quality meat and meat products, and develop sustainable markets while ensuring prudent financial management for sustainability and profitability of the Commission’. The KMC Cap 363 outlines the main functions of the commission as follows; procure quality livestock; process and pack high quality meat and meat products; maintain sound financial systems for commercial viability; and research and development of new products.

The Kenya Meat Commission has a slaughter capacity of 1,000 large animals per day and 1,500 small stock per day in Athi River, while the facility in Mombasa can slaughter 250 large stock and 500 small stock per day. The meat is sold either as carcasses or as value-added products. The commission’s value addition line comprises processed products such as topside, silverside, rump steak, T-bone steak, fillet and rib roast. Other products include meat balls and burgers.

KMC also converts all waste into bone meal and tallow. By-products from the production process include hides and skin, hooves, horns and blood meal.

Poultry

Poultry farming in Kenya has the potential to transform the economy through generation of employment and wealth. The market for chicken and eggs in Kenya is huge, especially in fast-food restaurants in major towns and cities. The number of people who don’t eat red meat due to associated health risks, and religious restrictions on consumption of pork, has increased the demand for chicken. There is increasing demand for indigenous chicken (kienyeji).

Other types of poultry include: duck, turkey, geese, and exotic chicken breeds (broilers, etc). The various chicken breeds include broilers (from KARI, now KALRO); improved kienyeji chicken by Homerange Kenya/KALRO; layers; Sasso; and Kuroiler by Limuchicks Holdings. Indigenous chicken production accounts for about 80 percent of the market. Nevertheless, the sub-sector’s viability is hampered by high cost of feeds, inadequate production information, unstructured markets for indigenous chicken breeds, medication and low or poor return on investment.

Dairy produce

Production of milk increased by 5.3 percent, from 634.3 million litres in 2018 to 668.2 million litres in 2019. But the output of processed butter, ghee and cheese declined by 18.9 percent and 20.5 percent to 1,013.4 tonnes and 305.4 tonnes, respectively, in 2019.

On the other hand, the quantities of milk and cream processed rose by 50 percent, from 486.4 million litres in 2018 to 491.8 million litres in 2019 (Government of Kenya, 2020).

Kenya Dairy Board (KDB)

According to the Kenya Dairy Board’s website, the core mandate of the Board is to regulate the diary sub-sector through enforcement of the Dairy Industry Act CAP 366. The board undertakes inspection and licensing of milk handling premises, and surveillance on the quality and safety of milk and milk products along the value chain. The ultimate aim is to protect consumers and facilitate trade by enhancing quality and safety of milk and milk products so as to remain competitive.

The Board issues the following licences: processor; mini-dairy, cottage industry, cooling plant (above 5,000 litres per day), cooling plant (below 5,000 litres per day), milk bar, primary bar and dairy manager’s licence. The board also issues permits such as milk carriage permit, import permit, and export permit.

Statistically, the dairy cattle population is 4.5 million heads, with an annual milk production of 5.28 billion litres. There are 1.8 million smallholder dairy farmers. The dairy industry creates about 1.2 million direct and indirect jobs. The formally marketed milk per year is 600 million litres.

Apiculture

Beekeeping (apiculture) in Kenya is mainly practised in arid and semi-arid lands (ASALs) and has recently emerged as one of the potential activities in agribusiness. Traditionally, honey has been harvested from the wild for subsistence use, especially in ASALs, because of the abundance of bee flora.

Honey and apicultural activities are usually cheap to start and manage, considering that they require less labour, capital and land. The benefits of beekeeping and bee products include crop pollination, honey products for use in food processing, medicine, industrial manufacturing and natural healing. In Kenya, apiculture is practised mainly in Kitui, Machakos, Baringo and Nakuru.

According to ‘farmers trends (2020)’ – an online agricultural portal – traditional beekeeping in Kenya is faced with lack of capacity to produce commercially viable honey products, hence the low income generated. This is due to poor harvesting techniques, use of ‘old-school’ type of beehives, and lack of knowledge and marketing capacity − which expose beekeepers to exploitation by middlemen.

The country’s annual honey production is about 25,000 metric tonnes (20 percent of the full potential) per annum, out of the full potential of 100,000 tonnes per year (Muma, 2020). Kenya is the third honey producer in the region after Ethiopia and Tanzania. About 91,000 people are employed in beekeeping, translating to about 547,440 people who are supported by the sub-sector (Muma, 2020). Beekeeping is mainly seen by the youth as an occupation of the old, yet with the right capacity building, the youth are likely to benefit from the industry at value chain stages.

Rice

According to the Kenya Economic Survey 2020, the total area under rice in 2018 rose by 17.9 percent to 32,300 hectares in 2019, while the number of plot-holders rose by 11.8 percent to 15,700 hectares during the same period. Overall, the total paddy rice production rose by 42.6 percent from 112,600 tonnes in 2018 to 160,600 tonnes in 2019.

Paddy rice production by Mwea Irrigation Scheme rose by 34.5 percent to 121,000 tonnes in 2019, which is equivalent to 75.3 percent of the total paddy rice production. Other schemes also experienced a rise in paddy production except Bunyala, which had a 1.5 percent decrease due to a reduction in the area cropped. The gross value of rice output declined from Sh6.9 billion in 2018 to Sh10.1 billion in 2019. On the other hand, payment to plot-holders grew significantly from Sh3.8 billion to Sh6.9 billion in 2019.

Government Budgetary Allocation, 2019-2020 financial year

In the financial year 2019-20, Sh59.1 billion was allocated to agriculture, rural and urban development. Out of this, the Government allocated Sh42.6 billion to support enhancing of food and nutrition security to all Kenyans by 2022. In its endeavour to achieve food and nutrition security under the Big Four Agenda, the Government put in place a strategy of aligning all policies under the Agriculture sector to target ‘increasing food production, boosting smallholder productivity and reducing the cost of food’ (Government of Kenya, 2019a).

Some of the projects and programmes that benefitted from this allocation are: Sh7.9 billion for irrigation programmes; Sh3.0 billion to cherry coffee revolving fund; Sh1.8 billion to boost cereal enhancement; Sh1.0 billion for crop diversification; Sh0.6 billion for armyworm mitigation; Sh2.0 billion for national value chain support; Sh0.7 billion for digitalisation of land registries; and Sh0.6 billion for livestock and crop insurance scheme.

Budget 2020-2021

During the 2020-21 budgetary allocation, the Government set aside Sh7.9 billion as a stimulus for reviving agriculture and food security, through assisting small-scale farmers and the flower industry. The flower industry has been particularly hit by the effects of the COVID-19 pandemic. Out of the Sh7.9 billion total allocation, Sh3 billion was set aside for subsidising supply of agricultural farm inputs through the e-voucher system targeting 200,000 small-scale farmers. The Government also allocated Sh3.4 billion for community household irrigation to reduce overreliance on rain-fed agriculture and guarantee food security in the country.

According to ICPAK and Oxygéne (2020) analysis of the National Budget, food and nutrition security – one of the Big Four Agenda – received a total of Sh52.8 billion.

Projects

The ‘Empowering Novel Agribusiness-Led Employment (ENABLE) Youth Programme

The programme is co-founded by the African Development Bank (AfDA) and the Government, and it commenced in 2018 to 2022. Its objective is to create gainful employment, generate income for the youth and bridge succession gaps in agribusiness and related value chains. This youth initiative focuses on enhancing entrepreneurship in agribusiness through skill development and creating an enabling environment for the youth to become owners of profitable agribusinesses.

The ENABLE Youth Kenya programme is being implemented in eight Youth Agribusiness Incubation Centres (YABICs). They are:

Regional Pastoral Training Centre in Narok County;

• National Aquaculture Development Centre in Kirinyaga County;
• Kenya School of Agriculture in Nyeri County;
• Dairy Training Institute (DTI) in Nakuru County;
• Pwani University in Kilifi County;
• Kisii University in Kisii County;
• Ramogi Institute of Advanced Technology (RIAT) in Kisumu County; and,
• University of Eldoret in Uasin Gishu County.

The programme is divided into pre-incubation stage (including activities such as innovation assessment, business planning assessment, training, etc); incubation stage (training, advanced business planning, accesses to financing, etc.); and post-incubation stage (technology development, networking, partnerships, access to financial services, coaching and mentorship, marketing linkages, business plan development, etc.)

Agricultural Sector Development Support Programme II (ASDSP II)

It is a follow-up to ASDSP I, which was completed in June 2017. The main purpose of ASDSP is to develop sustainable priority value chains for improved income, employment, food and nutrition security. The programme addresses four critical challenges to achieving agricultural commercialisation, identified during ASDSP I.

These are: low productivity along the value chains; inadequate entrepreneurial skills among the value chain actors (VCAs) and among the service providers; low access to markets by VCAs and; weak and inadequate structure and capacity for consultation and coordination within the sector.

The programme is operational in all the 47 counties at a cost of Sh5.692 billion, out of which the Swedish International Development Agency (SIDA) contributed Sh3 billion, the European Union (EU) Sh600 million, the Government of Kenya Sh800 million, and County Governments Sh1.292 billion – with each county contributing Sh5.5 million per year.

In 2019, ASDSP II made a number of achievements, namely; updated national and counties VCA/VCO database (disaggregated by gender); developed guidelines for operationalisation of key structures; sensitised 300 staff and stakeholders on programme implementation mechanisms/guidelines, procured technical advisory services, and developed the 2019-2020 work-plan and budget – implementation of which is on-going – among other achievements.

Kenya Climate Smart Agriculture Project (KCSAP)

The Kenya Climate Smart Agriculture Project (KCSAP) is a Government initiative supported by the World Bank. It is being implemented from 2017 to 2022, with the main objective to: ‘increase agricultural productivity and enhance resilience/copying mechanisms to climate change risks in the targeted smallholder farming and pastoral communities in Kenya, and in the event of an ‘eligible crisis or emergency’, to provide immediate and effective response’ (https://www.kcsap.go.ke/).

The project has four components, namely; up-scaling climate smart agricultural practices, strengthening climate smart agriculture (research and seed systems), accessing agro-weather market (advisory services), and project coordination and management (monitoring, evaluation and impact).

National Agricultural and Rural Inclusive Growth Project (NARIGP)

It is a Government of Kenya initiative implemented through the State Department of Crop Development, with funding from the World Bank. The project has been running from 28th July 2017 and is expected to be completed in 2022 after a five-year period.

The objective of the project is “to increase agricultural productivity and profitability of targeted rural communities in selected counties, and in the event of an eligible crisis or emergency, to provide immediate and effective response”. The project is being implemented in 21 counties, namely; arid areas (Turkana and Samburu); semi-arid areas (Makueni, Kitui, Embu, Meru, Kwale, Kilifi and Narok); and medium-to-high rainfall areas (Kirinyaga, Kiambu, Murang’a, Nakuru, Bungoma, Trans Nzoia, Nandi, Vihiga, Kisii, Migori, Nyamira and Homa Bay).

Small Scale Irrigation and Value Addition Project (SIVAP)

The proposed Kenya Small Scale Irrigation and Value Addition Project (SIVAP) targets 11 counties within a few arid and semi-arid lands, namely, Kitui, Makueni, Machakos, Tana River, Bomet, Meru, Tharaka-Nithi, Nyandarua, Murang’a, Kajiado and Nyeri.

The overall objective of SIVAP is to contribute to poverty reduction by enhancing agricultural productivity and income, as well as food security among the beneficiaries. The project has four main components, which are:

1. Enhanced irrigation infrastructure and water resources development;
2. Improved access to markets and strengthening value chains;
3. Institutional strengthening and capacity development; and,
4. Project coordination and management.

The project is being executed by the Ministry of Agriculture, Livestock and Fisheries and will be completed in 2021after running for six years from 2015.

Regional Pastoral Livelihoods Resilience Project (RPLRP-Kenya)

The Government implemented the Regional Pastoral Livelihoods Resilience Project (RPLRP-Kenya), financed by the Government and the World Bank. The project ran from 2014 to 2019. Its objective was to enhance livelihood resilience of pastoral and agro-pastoral communities in drought-prone areas in IGAD region and enhance the capacity of countries to respond to an eligible emergency.

The project, which is categorised in the areas of Natural Resource Management, was also implemented by other groups and countries, namely; Inter-Governmental Authority on Development (IGAD), Uganda and Ethiopia.

In Kenya, the project was implemented in 14 arid and semi-arid counties, including Baringo, Garissa, Isiolo, Kajiado, Laikipia, Lamu, Mandera, Marsabit, Narok, Samburu, Tana River, Turkana, Wajir and West Pokot). Specific activities of the project include market access and trade, pastoral livelihoods support, and pastoral risk management. All the planned preparatory activities for the project have been achieved.

Conclusion

Food and nutrition security is one of the Big Four Agenda and, indeed, is a key national mandate. The country’s socio-economic development is anchored on a healthy population and an economy that is resilient to the effects of climate change, global swings in staple food prices, and the effects of emerging pests and diseases. Such risks destabilise the livelihoods of most Kenyans and the economy.

The Government has put in place policies, strategies, legal and institutional frameworks to help nurture agribusiness – whose potential is yet to be fully realised. The agribusiness strategy was developed in 2012 to help grow the sector in Kenya. In addition, the Government – through the Agriculture Ministry – developed the Kenya Youth Agribusiness Strategy 2017-2022, which aims at including the youth in agribusiness and debunking the perception of agriculture as an occupation for the old.

Cognisance of the importance of agribusiness, the Government has continued to enhance budgetary allocations to the sub-sector while creating an enabling environment for value addition and export of final goods/products, as opposed to raw materials and semi-manufactured goods which fetch less earnings.

References

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