Project description

Title: Private sector development in agriculture
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Kenya
Lead executing agency: Ministry of Agriculture
Overall term: 2003 to 2013

Context

Agriculture is the most important sector of the Kenyan economy. It is characterised by small and medium-sized farming and processing operations which are the major employers for about three quarters of the rural population. Farmers and the processors of agricultural produce generate roughly half of the country’s gross national product, as well as 65 % of its export earnings. The most important export products are tea, vegetables, cut flowers and coffee.

Growth in the agricultural sector rose from two per cent in 2004 to 6.7 % in 2007. The proportion of the rural population now living below the poverty line is 49 %, an improvement of five per cent compared to 2003. Despite these positive developments, the overall economic situation of the Kenyan population remains grave. The growth of the agricultural sector could be much higher. Its capacity to promote rural development and poverty alleviation is not being fully utilised, mainly because farmers are poorly informed about the potential of regional and international markets. Further constraints on the agricultural sector include poor access to improved seeds and fertilisers, the inadequate network of rural roads, and the unfavourable legal and political framework for the private sector.

An additional problem facing rural development is the high rate of population growth, which is increasing the pressure on natural resources. This leads to soil degradation and deforestation as rural households need to consume ever greater quantities of fuel wood. Resource-friendly technologies for use in agriculture are largely unknown, and even where renewable energies exist, their potential has so far been little exploited.

Objective

Small and medium-sized agricultural producers and processing enterprises can utilise their full production and market potential, while managing their natural resource base in a sustainable manner.

Approach

The programme consists of three components.

• Improvement of the policy framework for agriculture and agribusiness
  The programme supports reforms that will improve the coordination of the sector, increase the transparency and effectiveness of public spending, and create an enabling environment for agribusiness development. It is supporting the Agricultural Sector Coordination Unit (ASCU) with financial contributions to a basket fund, and through the activities of a policy advisor placed with the unit. Established in 2005 to coordinate policy reforms, the ASCU operates through six multi-disciplinary thematic working groups addressing specific sector priorities. The programme supports the unit and its working groups with capacity development, advisory services and backstopping.
• Strengthening implementation capacities for value chain development
  The second component of the programme applies a business-oriented value chain approach that assists actors along the value chain (input suppliers, farmers, traders, processors and retailers, and the final consumers) to secure the best possible value at all stages of production, processing, trading and consumption. It highlights weak areas that could benefit from targeted promotion strategies, and it integrates service providers, advocacy groups, the government and other institutions in an ongoing dialogue. The programme also promotes development partnerships with the private sector to support actors within given value chains. It also organises cooperation between public and private agricultural extension services and seeks to expand the services provided by producers and processors’ associations.
• Promotion of resource-friendly technologies
  To increase the use of environmentally-friendly technologies and to reduce adverse impacts on the environment, the programme promotes biogas plants and fuel-efficient woodstoves.

Results achieved so far

GIZ’s advisory services have contributed significantly to the government’s reform process in the agricultural sector. Donor coordination and the dialogue between donors and government have also improved, which further increases the efficiency of the measures.

The products selected for value chain promotion are potatoes, mangos, passion fruit, sweet potatoes, dairy goats, beef, poultry and Omena fish. Advisory services and market improvements have helped increase productivity considerably, while also reducing the costs of production and transport. Farming and processing enterprises have become more efficient and competitive due to the promotion of rural service providers and private sector associations.

About 50,000 rural households benefited from the programme between 2008 and 2009. Despite post-election violence and a severe drought in 2009, half of these were able to raise their annual incomes through agricultural activities from an average of EUR 1,200 to EUR 1,500. Overall, this amounted to an additional EUR 7.5 million per year. The programme has successfully addressed a number of problems facing the supported value chains it supports, for instance:

• A national potato policy has been drafted and the standard weight of a bag fixed at 110 kg.
• Potato farmers have increased their yields from seven tonnes to as many as 25 tonnes per hectare. The increased production has created more than 8,500 new farm jobs each season, more than half of which go to women.
• After training in advanced and hygienic butchery techniques, beef butchers are now processing meat hygienically and to national standards. They have also reduced meat wastage from six to two kilograms per day – a five per cent improvement.
• Mango farmers have reduced their post-harvest losses by an average of 40 %. In all, about 2,000 new jobs have been created at different stages along the mango value chain.

In the environmental component, the programme and its partners had installed more than one million energy-saving stoves and 330 biogas plants by September 2010, which has helped to reduce deforestation and soil erosion. As the new stoves generate considerably less smoke, respiratory illness among the rural population has declined by 40 %. The biogas plants convert waste such as animal dung, slaughterhouse residues and waste water into gas and high quality manure. In the past, these waste-products landed in refuse heaps or were dumped untreated into nearby waterways.

Taken together, the biogas plants and the energy-saving stoves have brought annual savings of over a million tonnes of firewood, which is equivalent to more than 60,000 hectares of forest, and reduced carbon-dioxide emissions by 2 million tonnes a year. They have also created more than 5,000 new jobs.