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Why Kenya’s economic backbone is weakening

Kenya’s economic growth averaged 6.1 per cent in the first half of this year due to improved performance of the agriculture sector but the reality on the ground does not paint a rosy picture.

Experts say drastic measures need to be implemented to turn around the sector which has a huge knock-on effect on other sectors and contributes directly to the national economy through income generation, employment, wealth creation and foreign exchange earnings.

Funding of the sector has been a major hindrance, and Kenya is yet to reach 10 per cent of its national budget going by the Maputo Declaration of 2003. The declaration calls for an allocation of at least 10 per cent of total national budget towards agriculture.

With an average expenditure on agriculture in Africa standing at 4.5 per cent, Kenya’s expenditure was below average at two per cent in 2015/16 financial year and 1.33 per cent in 2016/17. In the 2015/16 financial year, the government allocated Sh45.6 billion to the Agriculture, Livestock and Fisheries ministry, despite the National Assembly approving a Sh2.1 trillion budget.

The sector was allocated Sh32.2 billion in 2011/12, Sh32.5 billion in 2012/13, Sh45.9 billion in 2013/14 and Sh37 billion in 2014/15. However, challenges including low absorption rates affected the actual funds that trickled down to the sector. According to the 2017/18 draft Budget Policy Statement, the National Treasury has allocated Sh46.6 billion for agriculture, rural and urban development.

On average, the sector contributes about 26 per cent to the gross domestic product and accounts for 60 per cent of total export earnings. Further, it accounts for 65 per cent of Kenya’s total exports and 18 per cent and 60 per cent of the formal and total employment respectively.

Despite high expectations of the sector, Kenya is a net importer of commodities such as maize, wheat, rice and sugar as mismanagement of the sub-sectors ensued, leading to “protecting inefficiencies” under the parastatals after the introduction of structural adjustment programmes (SAPs) in the 1980s.

The poor state of affairs started immediately policy changed following a conflict with donors in the 1980s, declining farm land, population increase, and increased competition for products such as pyrethrum, tea and coffee. The changes forced by donors including World Bank and the International Monetary Fund saw SAPs ushering in price decontrols, tariff adjustments, cost sharing and reforms in State corporations.

This had direct impact on important crops such as maize, wheat, sugarcane and rice as liberalisation of the economy started biting. The collapse of the Guaranteed Minimum Returns (GMRs) marked the start of the decline in production of the crops as farmers were left at the mercy of brokers and vagaries of the marketplace.

“Inconsistent policies have also been blamed for poor performance of the sector. Policies that ignore the role of agriculture in economic growth are misplaced particularly when the economy depends on agriculture,” says Mary Mathenge, director of Tegemeo Institute of Agricultural Policy and Development, Egerton University.

“These protectionist policies led to poor performance in the sector whereby we were protecting inefficiencies, leading to higher cost structures and we ended up losing out by having high prices,” she told People Daily, adding that this gave other players the opportunity to dig in.

“This has been allowed to continue over the years, but the question is: at whose cost?” she posed. Mathenge says pyrethrum is a classic example of a sector where it would take a lot of effort to make farmers start farming the cash crop again. “We lost our competitive advantage and we find ourselves in a place where there isn’t enough investment to allow growth and build capacity to support institutions,” she said.

Climate change is another growing concern which has changed the way farming is done and irrigation farming is now key. Insurance has also been a major challenge in the agriculture sector and issues of crop insurance should be considered based on realities on the ground.

“The business of government is to regulate and provide an enabling environment for business and not to intervene directly. That should be left to the market actors,” says Mathenge.

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