Wednesday, 16 July 2014

The critical role markets play in access to information in the Agricultural Value Chain

A food's stall. Photo I Leonard Wamalwa

Open air markets in the hinterlands of Kenya are not just venues for transacting business. Unlike, the ones within Nairobi, Mombasa, Nakuru, they are also meeting places for relatives, friends who end up passing information about their members from the extended family.

They are a stopover market for fruit and vegetables - these are delivered round the clock from all over the neighboring regions and indeed even neighboring countries for those situated along the borders.

A similar scenario that is always witnessed is that, before dawn, retail traders and the owners of small stalls around the market arrive in to buy their provisions for the day and take them back so as to be able to sell from opening time.

There is great competition for the freshest, the tastiest and the cheapest produce, especially, vegetables and fruits because, most of the small stallholders have developed a keen eye for what are best to buy.

The vegetables are cultivated in kitchen gardens for domestic use, a practice that has persisted over several generations.

Surpluses are sold by small scale female farmers mostly in rural markets to raise cash income to meet household needs. Most of these purchases are done by the female folk who act as brokers, intermediaries who also end up to sell the same to other places.

Closer look at most rural open markets justifies that agriculture plays a critical role for the rural economies.
Markets Supply Chain via Booniyaad Project Report June 2013

Wangare Mumbi, a fresh fruit’s seller at Kamkuywa market in Bungoma County who has been into the business now 20 years, say business is good however, because of the market dynamics they have to sell at a low price to their disadvantage.

“There are so many sellers of the same product; I am forced to reduce the price, every month there are so many bananas, this makes me sell at a loss.”

Leafy vegetables have to be produced close to consumers due lack of facilities to preserve and transport perishable produce to the markets. The supply of these vegetables is also limited during the dry months.

Markets contribute to the four pillars of food security namely food availability, food access, food stability and food utilization.  In Kenya, open-air markets play a fundamental role in ensuring food availability and accessibility especially in the rural areas.

However, market liberalization has left many poor farmers in marginal areas with poor infrastructure and few marketing outlets which have put them at a disadvantage. Farmers are unable to sell their produce at good prices and are unable to buy for food due to high prices during the deficit or dry seasons. This has eroded most farmers’ ability to cope with incidences of food insecurity. This is according to Ken Gatobu Mwithirwa‘s Thesis Influence Of Integration Of Open-Air Markets On Food Security In Meru South And Mbeere Districts, Kenya.

Nduta Kweheria, writes, why are farmers poor if agriculture is Kenya’s golden-egg layer?

She says, First, small scale farmers as taxpayers are paying Value added Tax (VAT) each time they buy seeds, fertilizer, pesticides, any food stuff or other commodity they use buy their homes. They are also paying for licenses and various services and are taxed before they are paid for their produce. So there is no doubt that small scale farmers make up the taxpayers that contribute to the GDP, which explains the statistic that says that over 45 percent of Kenya’s Gross domestic product (GDP) is from agriculture. Despite having contributed close to half of their monthly pay, the agriculture extension officer doesn’t show up to advise the farmer; granted that often it is due to lack of transport or poor supervision.

Secondly, when a private company sends a technical adviser to the farmer to offer the same advice that an agricultural extension officer should have given, the cost of this advice is hived off before the farmer is paid for her produce.

Naomi J. Halewood and Priya Surya in, “Mobilizing the Agricultural Value Chain,” they argue that:

“Improving efficiencies in the agricultural value chain is central to addressing these challenges. Increasing productivity in agriculture is also critical to reducing poverty. Greater productivity can boost farmers’ income, especially for smallholder farmers and fishers, who have limited resources to leverage in growing and marketing their produce. Creating a more efficient value chain also requires engaging many stakeholders, from farmers growing crops and raising cattle to input suppliers to distributors.”

Farmers need access to reliable communication facilities and must meet high costs that come with large business operations such as loss from spoilage, brokerage charges and strict food safety standards.

“As information becomes more accessible through the use of mobile devices for stakeholders throughout the agriculture value chain, people are gradually moving toward more efficient ways of producing agricultural products, increasing incomes, and capturing more value by linking fragmented markets. Key benefits include increases in productivity and income for farmers and efficiency improvements in aggregating and transporting products. Although elements of the mobile agriculture platform are emerging in developing countries, the full potential has yet to be realized.”
Kenya Seed Company displays information on how weed control improves the crop yield.

The agony many traders undergo is an eye opener to the concerned parties in government to know that:
Without good access to markets, a poor household cannot market its produce, obtain inputs, sell labor, obtain credit, learn about or adopt new technologies, insure against risks, or obtain consumption goods at low prices.

The key to doing this is having access to new market opportunities as well as the complementary assets needed to take advantage of them while at the same time confronting new challenges.

The public sector has key roles to play as a legislator and regulator, to ensure that markets do not discriminate directly against the poor, women, ethnic minorities, or other groups; combating corruption; creating a stable political and macroeconomic environment in which economic activity and trade can flourish; and ensuring the provision of key public goods, including rural transportation, communications, marketing infrastructure, market information, and rural education.

A small fruit farmer cannot increase the value she creates and takes home from the market unless the trader or processor who buys from her is also part of a higher-value chain.  The projects that have been most successful at raising small farmer incomes have involved creating a new equilibrium of interests along the market chain, in which the farmer is a participant.

The informal nature of the trade complements government initiatives to create jobs for those who were denied formal education or have been forced out of other employment. But will the informal nature of the trade be its downfall?

Whilst it is true that agriculture and livestock products provide society with employment, this is not reflected in revenue for government. Put quite simply – it is not the government that reaps the many benefits of Kamkuya market, it is the people.

This has also been well reflected in, The Farmer’s Perspective: Bridging the Last Mile to Market,” a Team Booniyaad Project Report June 2013. The report findings state that:

“The farmer’s existing knowledge and expertise, or their experience in the context of the local operating environment is rarely taken into account when programs or solutions are designed.”
One, the farmer is an entrepreneurial businesswo/man:
“Every actively engaged farmer we met, whether big or small, growing cash crops or mixed use, already upwardly mobile or just taking the first steps out of subsistence level survival, first and foremost think of themselves as entrepreneurs. The farm is their livelihood, a business activity whose returns must be weighed against the investments made in time and money.
And as businesspeople, farmers will grow what sells, hence the prevalence of maize and beans seen in the majority of the lower income farms in Kenya. Demand is guaranteed for these staples in the local market.”
Two, the farmer is a customer, not beneficiary, of innovation:
“Mobile solutions seem to lack contextual relevance or value, they are less likely to be adopted, again acting as their own barrier to local impact.”
Subsequently, Naomi J. Halewood and Priya Surya say the mobile services cited here are simply tools, and without the proper supporting pillars:

  • Business models – There is a need for increased funding to make business models until they can become financially viable.
  • ICT skills - Information needs in developing countries are highly localized; therefore, nurturing a domestic ICT skills base in the workforce is crucial to the development of mobile applications and services in the agricultural space.
  • Supporting infrastructure - To make the more powerful mobile devices, such as smartphones and tablets, more accessible and affordable, governments will need to ensure that the private sector is capable of offering mobile broadband services at affordable prices.

A woman selling her produce at a local market in Bungoma.

If well managed, by serving the interests of the farmers and traders, open air markets can play a valuable role in promoting and facilitating economic efficiency, by facilitating exchange and the coordination of many different kinds of resources, goods and services.

The Booniyaad Project Report reiterates that and for the information to be of value to the farmer, it should be one that leads to rational choices.
"What the farmer needs is 'relevant information that empowers him to make rational choices'
 However, they note that most technological models face different hurdles:
"Many projects still seem to struggle with defining information that is actionable to the farmer and her context, and thus raise a barrier to understanding the intent and value that the service can provide."
This can only be achieved when the government will provide avenues to help the producers to find ways to engage in agricultural markets on more favorable terms, specifically: Moving into new high-value agricultural market chains.

This includes both access to new markets and capacity to enter them and making use of existing agricultural markets; both access to agricultural input and output markets and the capacity to use them.

Saturday, 14 June 2014

Satao: Kenya’s biggest elephant killed by poachers

Satao, the world's biggest elephant, with his family in the Tsavo National Park in Northern Kenya. Photograph: © Mark Deeble & Victoria Stone 2014
Satao lived in Tsavo East National park in northern Kenya and was celebrated as one of the last surviving great tuskers, bearers of genes that produce bull elephants with huge tusks reaching down to the ground. This news follows hard on the heels of the slaughter of another legendary tusker, Mountain Bull, deep inside the forests of Mt. Kenya .

Of all the elephants that have died in Kenya, these deaths are the hardest to bear. The grief in Kenya at the slaughter of our iconic elephants is translating into floods of tears, emotional poems, and outrage on Twitter and Facebook.

I had suspected for days that Satao was dead. The rumours were too many and they came from too many different people for them not to be true. Bad news travels fast in Kenya. Moreover, like everyone who had ever heard of Satao, I was already concerned for his safety.

I am appalled at what that means – that the survival skills that the bull has painstakingly learnt over half a century have been rendered useless by the poachers’ use of mass-produced Chinese goods; GPS smart-phones, cheap motorcycles and night vision goggles.
I think the old bull knows that poachers want his tusks, and I hate that he knows.
More than anything, I hate the thought that poachers are now closing in on one of the world’s most iconic elephants.  - MARK DEEBLE

Sunday, 11 May 2014

Attaining inclusive growth requires policies that favor the agriculture sector

When all Kenyans have opportunities to create and grow their own small businesses, to own an affordable home, save college funds for their children, to invest and save for retirement, the country will have a sustainable and flourishing economy.

However, this is not the case.

Kenya is at a center stage where despite the immense percentage joining the job market from the tertiary institutions in line with the Vision 2030 -where its development will be driven by middle-level skills that are technical and hands on – the quality is being questioned.

This is a reflection across the East African Region, The Daily Monitor in its article, Ugandan pupils worst at counting, reading in EA from the Uwezo East Africa 2013 findings show there are large differences in learning achievements among the three countries with Kenya performing better at 68 per cent in both numeracy and literacy skills compared to Tanzania at 50 per cent and Uganda at 38 per cent.

However, despite Kenya doing better, the report titled, “Are Our Children Learning? Literacy and Numeracy Across East Africa 2013” stated that, “…it is home to the worst performing districts in the region demonstrated in stark inequalities.”

On the other hand, a report released by the Kenya Institute of Public Policy Analysis and Research (KIPPRA) “Kenya Economic Report 2013 - Creating an Enabling Environment for Stimulating Investment for competitive and Sustainable Counties,” shows that Kenya’s labour force has relatively low education attainment compared to middle-income countries. About 65 per cent of the population has only primary or incomplete secondary education, while another 10 per cent has never attended school.

This is in contrast to the Vision 2030 goal where Economic transformation requires skills and innovation, which make the development of human capital key for county development.

In contrast, the report cites that the financial sector plays a critical role in the development process. However, it calls for strategies that can enhance long term capital.

The key is bridging the poverty gap currently between 44 and 46 for the last six years where poor people in the rural areas have, on average, much lower incomes compared to the poverty line, and their income distribution does not seem to change much over the years.

This is because many are employed within the informal sectors that are characterized by low productivity, low pay and high levels of unpaid family employment. Informal sector employees are also often excluded from social security schemes, and labour protection legislation.

Grain Fish Money Africa Progress Report 2014 released during the 24th World Economic Forum Africa Abuja, Nigeria by the Africa Progress Panel noted that, “Africa may be showing impressive headline growth, but too many of our people remain stuck in poverty.”

“This year’s Africa Progress Report finds that if we want to accelerate Africa’s transformation, then we have to significantly boost our agriculture and fisheries, which together provide livelihoods for roughly two-thirds of all Africans,” Kofi A. Annan, Chair of the Africa Progress Panel.

The forum centered by the theme of forging inclusive growth and creating jobs for Africa’s growing population.

The report says education is a constraint. "When it comes to transformation, a skilled workforce maters - and Africa has a large skills deficit. In an increasingly knowledge based global economy, these education gaps limit the potential for trans-formative growth."

The Panel proposed five key areas as practical areas that could meet the challenges.

A key recommendation was of inclusive growth and expanded opportunity as essential to eradicate poverty linked to the Post 2015 development agenda. According to the report, “The percentage of Africans living in extreme poverty has declined by 10 points since 1999, but the absolute number of poor has increased with population growth. Almost half of Sub-Saharan Africa’s people – 413 million – live below the US$1.25 threshold for extreme poverty.”

“The percentage of Africans living in extreme poverty has declined by 10 points since 1999, but the absolute number of poor has increased with population growth. Almost half of Sub-Saharan Africa’s people – 413 million – live below the US$1.25 threshold for extreme poverty.”

To make a turnaround, it says,
 “For Africa, the policy objective should be on growth with redistribution; in other words, making sure the poor receive a higher share of any increment to growth than their current share. This challenge turns the spotlight squarely on the composition of growth and the imperative to increase agricultural productivity.”

Other policy recommendations include:

  • Africa to accelerate a uniquely African green revolution;
  • Stop the plunder of natural resources;
  • Invest in infrastructure and develop more inclusive financial systems to achieve a breakthrough in improving people’s lives by closing the twin deficit in infrastructure and inclusive finance and;
  • Mobilize resources for inclusive growth;

On the other hand, the International Monetary Fund (IMF) Regional Economic Outlook for Sub-Sahara Africa- Fostering Durable and Inclusive Growth report released in April 2014 notes that Sound economic policies, stronger institutions, and higher levels of public and private investment have ensured a sustained economic growth in most African countries. As a result led to higher standards of living, poverty reduction and improved social indicators.

However, “Poverty remains pervasive and living standards need to improve further.”

And to make growth more inclusive, IMF says the overarching policy challenge is to create conditions for taking advantage of a possible demographic dividend.

It  proposes two policy areas that need to be focused on.

First, expanding job opportunities is essential for both further raising per capita GDP growth and reducing poverty. We show that household enterprises are the most likely source of jobs for the majority of the population in sub-Saharan Africa, at least over the short and medium term. 
Policies should focus on removing obstacles to investment in the service and agricultural sectors—where the bulk of household enterprises perform their activities. The resulting productivity gains would favor the structural transformation process that would shift labor out of agriculture. 
Second, financial inclusion can play a key role in improving welfare for the poor, and in removing financing obstacles to entrepreneurial activity. Here, the policy emphasis should be on creating an enabling environment to reduce transaction costs by exploiting new technologies, such as mobile and agent banking.

Fostering inclusive growth requires policies that favor both raising income and lowering Poverty.

  • Maintaining a stable macroeconomic environment, especially low and stable inflation; 
  • Upgrading infrastructure; 
  • Diversifying the structure of the economy through reforms that increase competitiveness and gradually reduce the share of agriculture in GDP; and 
  • Fostering sound financial systems that safely deliver financial depth and inclusion.

In comparison with the Africa Progress Report, IMF emphasizes on the need to invest more in human and physical capital, both private and public in order to raise agricultural productivity and encouraging economic diversification.

This can be achieved by governments providing the following:
A business environment that does not overburden them with taxation or regulation. At the moment, household enterprises often pay taxes at a higher rate than large businesses, but receive little in return. 
Supplementary services such as security, sanitation, electricity, transport, and water supply, among others, that could be thought of as the business infrastructure of the economy.
Technical training on job-relevant skills, including business and financial literacy skills to help improve human capital. 
Raising productivity in the agricultural sector through appropriate land reform accompanied by improvements in physical infrastructure and increased crop yields. This could assist the structural transformation process and generate widespread economic gains. 
Policies for financial inclusion that permit their access to financial services (including credit, banking services, and insurance products).