NAIROBI, Kenya, Feb 2 – The use of technology and rural urbanisation will be necessary components to boost Kenya’s agricultural sector that is currently operating below its potential – utilising less than 60 percent of the available land for farming.
Kenya National Federation of Agricultural Producers (KENFAP) chairman Leonard Nduati Kariuki said with 75 percent of working Kenyans engaged in agriculture, the sector is over populated and needs to shift most of the human capital towards rural urbanisation to be more productive.
“We need less people employed in agriculture, but using technology. So, what do we do with the surplus people who get off agriculture? The answer is rural urbanisation. That is where the subject of value adding comes in,” he said.
Having fewer people doing basic production allows for more people to process raw materials and build the value addition levels in the sector, he added.
Kariuki who was speaking during a forum organised by Dalberg Global Development Advisors to promote the G20 challenge on inclusive business innovation on Thursday, added that until farmers are willing to embrace modern farming methods, it is crucial for them to form groups to be more competitive and marketable.
In 2009 Kenya exported 15 percent more tea than Sri Lanka, but made 75 percent less in revenue than its Asian counterpart whose tea was value-added.
Often, producers in Kenya are confined to exporting raw or semi-processed low value produce, and have to grapple with inefficient input and output markets.
Kariuki pointed out the need for more farmers to tap into opportunities for value adding their produce, an area he said many lose out due to pricing discrepancies especially when their products reach bigger markets.
“A kilo of coffee in the United States goes for over $20. The farmer here would be very lucky, even when there is a boom to get 80 US cents per kilo of coffee,” he said.
Founding Dean of Strathmore Business School George Njenga said the reason for this stark difference in pricing between the point of production and the point of sale is caused by warehousing costs.
“Out of the $20 for one kilogram of coffee in US, $12 goes to the land and premises. The guys who make money from coffee are not the growers or the guys who roast it or package it. They’re the guys who sell it,” he said.
The same case is seen in horticulture where one stock of flowers is bought in Kenya for 20 cents and is hiked up to €1.20 per stock sometimes reaching €4 when it arrives in Europe, often attributed to distribution and packaging costs.
Some shortfalls that have really hampered the local agricultural scene range from a lack of affordable, quality farm inputs, inadequate extension services, poor access to markets and financing, and inefficient post-harvest handling.
In terms of accessing markets Kariuki said for most farmers a big issue is research and knowing what produce is in demand.
“Farmers in Kinangop are complaining they don’t have a market for their potatoes. We’re importing potatoes for our fast food joints because they say the potatoes grown in Kenya are not the type required or properly processed,” he revealed.
Ultimately, Kariuki said the face of agriculture needs to change, by luring more youth into the sector through combining primary production with an aspect of value adding.
With farming considered a risky sector to lend to for most banks, financing for farmers who do get it is almost impossible for them to service with high interest rates.
As a result, IFC Kenya Country Manager Aida Kimemia said organisations like hers have taken steps to help farmers by changing the risk profile of the borrowers and risk perception of the financier toward the farmer.
“One of the things we have done in Ethiopia is look at a risk mitigation product for coffee farmers. We have taken over some of that risk from the bank and reduce the risk of the sector and enable the bank to feel comfortable to provide access at commercial rates.”
