It was interesting to read Shanta’s "heretical" thoughts and others that he provoked. While appreciating most of the comments made, a little reflection leads one to realize how difficult it can be to generalize about Africa’s agriculture growth performance and prospects. In this context, I would like to think a little bit about Kenya’s (in fact, East Africa’s may be more appropriate, but I do not think that I know enough) horticulture sector. I do not attempt to be comprehensive: just to give a few background notes about Kenya’s horticulture in the larger picture about its agriculture and growth. I would like to emphasize that these are random thoughts and not a rigorous examination of the subject.
There appears to be plenty to learn here for the foreign investors, the local/domestic partners, governments, aid agencies, academia, and the rest. However, appearances can be deceptive. Whether these lessons can be useful to rest of Africa is of course an open question. Perhaps, each country needs to find its own approach that works best given its context in the global economy (something closer to what Rodrick said, of course in the context of overall growth).
Kenyan horticulture is by no means a homogeneous sector. One can possibly see two faces of this sector. First, there is the export sector: glamorized, attention grabbing. Then, there is the domestic food and vegetables sector: hardly ever mentioned in serious discourse. Export horticulture covers a large number of fresh farm products that can be broadly classified as fruits, vegetables and cut flowers. At present, fruits and vegetables and fresh cut flowers are air freighted daily to various destinations around the world. If we forget for the moment, the adverse effects of the recent global crisis, the civil disturbances of early 2008, and the current drought, it is clear that the export horticulture sector had done remarkably well over the years.
The recent successes in Kenya’s horticulture exports can be explained by several usual suspects: history, comparative advantage, favorable external environment, institutions, economic and political stability (largely!). The story of horticulture, however, probably clouds the bigger story of agriculture and rural life in Kenya.
History seems to have played a positive role in the establishment and subsequent development of the export horticulture sector in Kenya. Apparently, export horticultural production in Kenya had started during the Second World War for the purpose of supplying food to the Allied Forces based in East Africa.
In the post-war era, the external environment had been largely in Kenya’s favor for the development of the export sector. In more recent years, horticultural exports of Kenya had competed with other exporters around the world perhaps aided by the duty free market access to the European Union. The preferential tariff regime with the European Union came to a close in December 31st 2007 and is replaced by negotiated reciprocal trade regime under Economic Partnership Agreements (EPA). The interim Framework Economic Partnership Agreement (FEPA) has been initialled with the Eastern African Community (EAC) and the European Commission in November 2007 was a step in the direction of a comprehensive Economic Partnership Agreement, for which negotiations are ongoing. FEPA provides the EAC member states duty free, quota free access to the European Union market as of 1 January 2008. These provisions effectively grant Kenya an access to the European Union equal to Least Developed Countries (LDCs).
In the past two decades, notwithstanding the mounting competition from Colombia, Ecuador, Israel, Zimbabwe, Zambia and Uganda, horticulture has become one of the biggest foreign exchange earners for Kenya (third highest after tea and tourism).
Some numbers may be helpful to understand the picture.
Export volume has grown substantially in recent years.
In 2008, export earnings from horticulture amounted to more than US$760 million compared to over US$200 million in 2000.
The relative share of horticulture in total exports seemed to have marginally increased over recent years (vis-à-vis tea for example).
Available national accounts data do not facilitate separation of horticulture sector growth. Perhaps the crops and horticulture sector data (CRPHOR line in the graph below) is indicative. Crops subsector includes tea and coffee. In general, there is a close correlation between overall agriculture growth and crops and horticulture growth. One must remember, however, the horticulture sector reported here consists of production for both export and domestic consumption.
One key factor here is that over a considerable period of time in the recent past, Kenya seems to have exploited well the comparative advantages it has in horticulture. Kenya has varied ecological zones (based on varying altitudes), which allow diverse agricultural activities. The tropical and temperate climatic conditions, which allow year-round production, are a primary factor that supports Kenya's rise in the fresh produce exports. Other factors include fertile soils and a relatively competitive labor force with good education and technical background. To meet stringent product quality requirements of markets such as the EU, exporters have brought in state-of- the-art technology. In addition, reliable air links (with two international airports) have facilitated easy transportation of fresh produce to foreign countries. Some of the bulky produce has been handled at the Port of Mombasa. However, the current road network must be a significant constraint to the speed of transportation of products to the export outlet.
Perhaps, factor productivity even in the export crops sector needs to be viewed in the background of the heterogeneity of the operations. Farms specializing in horticultural crops for export use irrigation extensively although the sector as a whole relies mainly on rainfall. The sub-sectors are characterized by a tremendous diversity: in terms of farm size, variety of crops, and geographical location of production. Farm sizes range from large-scale estates (with substantial investments in irrigation and high level use of inputs, hired labor and skilled management) to small-scale farms (usually under one acre). It would appear that the large farms are highly capital intensive, while the same may not be true of the other farms in the export crops sector. In short, productivity is as much a very complex issue as the sector itself.
Until the recent global crisis, there appears to have been a steady demand for horticultural products of Kenya. The demand comes from a number of diverse sources. Among the developed countries, The European Union (EU) is the principal importer of Kenyan products. The Netherlands imports the bulk of flowers for sale through the auction system. Britain, Germany, The Netherlands and France are the major importers of fruits and vegetables. Also, the Middle East market is an important outlet for Kenyan fruits. Other importing countries include Saudi Arabia and South Africa, Sweden, Italy, Switzerland and France.
On the institutional side, the domestic production and marketing setups had been largely beneficial over the years. Export horticulture in Kenya is essentially controlled by the private sector consisting of large and small-scale farmers and exporters scattered across the country. Nonetheless, the government seems to have helped in creating a regulatory and supportive environment that facilitates rather than impedes export promotion. It is said that over the years, the Government has made minimal intervention in the export horticulture sector. Some observers give credit for the good performance of the sector to the non-interference approach of the government. They argue that this approach has encouraged autonomy in production and marketing decisions thus fostering significant local private initiatives and dynamism within the sector. In the current institutional setup, Kenya has two export platforms, which target export businesses (Manufacturing Under Bond (MUB), and the Export Processing Zone (EPZ)} and a generalized and flexible export support program that provides import duty exemptions for imported inputs into the production of exports and duty free goods for the domestic market (called TREO – Tax Remission for Export Office).
Under the Agriculture Act in 1967, the government set up the Horticultural Crops Development Authority (HCDA). The objective here was to develop and regulate the sector. HCDA offers technical and marketing services to various stakeholders in the sector. A recent count estimates that over 60 companies are engaged in the supply of fresh vegetables, fruits and cut flowers both for export and domestic consumption. Technical and marketing support to the companies are provided through Fresh Produce Exporters Associations of Kenya (FPEAK). In addition, it is said that the companies assist each other in technical and marketing matters. Similarly, the Flower Council of Kenya (KFC) is another agency that supports and lobbies on behalf of the flower growers and exporters.
Other factors that may have contributed to the success of the export horticulture sector in Kenya may include:
- taking advantage of spin-off opportunities from tourism (cheaper cargo transportation costs)
- at least until recently, a relatively stable, liberal macroeconomic policy environment (favoring foreign investment and international trade)
- linking smallholders to high-value export markets
- investment in irrigation( important spillover effects).
In the recent past, big bucks coming from abroad have grabbed the headlines for the export agriculture sector and may in fact have pushed to the background the domestic horticulture sector. There had been little said about the latter. However, with well over 38 million (1968 estimate) mouths to feed, it can easily be seen that domestic fruit and vegetable production and marketing must surely be a very important ingredient of agriculture growth in particular and gdp growth in general. Indeed, exports probably constitute only a relatively small fraction of Kenya’s overall horticultural sector. Available estimates for the past decade show that over 90% of all fruit and vegetable production was consumed domestically, and the domestic market accounted for over 90% of the total growth in volume of fruit and vegetable production. It is interesting to note less than 2% of smallholders produce for exports while over 90% of smallholder farmers produce horticultural products for domestic consumption. While the significant growth in the export horticulture contributed to increased rural incomes and reduced rural poverty, the more substantial impact would have come from what happened in the domestic horticulture in Kenya. It can be surmised that the latter has relatively more potent backward and forward linkages that would determine growth and poverty reduction in the country. Since the attention of this note is on horticulture, we have not attempted to highlight the roles that other agriculture sectors (such as animal husbandry). Undoubtedly, a realistic evaluation of the poverty impacts has to take all other sectors into consideration.
What this points to is that in the immediate future, given Kenya’s population growth and food demand, the domestic market for horticultural products would appear to demand considerable attention. In consideration of a proper balance with exports side, apparently something needs to be done to help the struggling smallholders to encourage exporting. In this regard, assessing the competitiveness of local production and marketing arrangements vis-à-vis neighboring countries (especially Tanzania, Uganda, Ethiopia) probably assumes high priority. As can be seen, the issues here can be quite complex.
While writing this note, I came across the "Update from Waso Village, Kenya" in Sam Stanyaki’s blog (see WB website, Oct 26, 2006). Talking about the severity of the recent drought, a young samburu says:
"I have learnt a very hard lesson. I have seen many suffering - animals and people too. Our community land is becoming smaller day by day. Soon we will find no space for grazing and bringing up children. As a young samburu, it is very difficult to part ways with my cattle rearing tradition. But I have no option but to try to do other things than keeping cattle."
Few weeks ago, I travelled across southern Kenya and northern Tanzania, which under the severe drought there looked like a dust bowl that is inhospitable to human and animal habitat. Having seen how the Mazai and Samburu live, I could relate to their current plight. The young samburu reminds us about something more important. Statistics may say one story, but real life could be something quite different. Perhaps, growth and development is about uncovering those bigger stories and providing help to suffering humanity in a country: rather than focusing on the statistical artifacts that mask those stories.