Agriculture needs to be at the heart of Kenya’s growth strategy

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Every good student of economics will have come across the idea of the invisible hand by Adam Smith. Essentially, he puts forward the notion that if everyone acted in their own self interest, then the market forces of supply and demand would lead to an optimal allocation of resources.

If Adam Smith lived in Kenya today he would have no problem if the fertile farm lands of Kenya were converted into real estate ventures because according to his theory, a new crop of farmers will simply arise in a different part of the country to continue with the noble work of food production.

However, recent events in the maize sector seem to be challenging these established ideas. For one, maize production is not keeping up with the population size. Kenya is producing about 56 million bags annually, and for a population of nearly 50 million people, that averages to slightly over 1 bag per Kenyan per year. Is this enough for a youthful growing economy? Secondly, there is the risk of discontentment within the farming fraternity, not least because of delayed payments which hamper their ability to pay school fees for their children.

And lastly, the economic argument that if these angry farmers switch to other sectors of the economy then the free market will simply introduce a new group of farmers, has proved to be false. If anything, what really ends up happening is a steep rise in importation -Kenya moved from importing 1.6 million bags in 2016 to 14.7 million bags in 2017!

Fortunately the solution to this problem is within reach. To begin with, we need to recognize that agriculture is unique from every other sector of the economy and cannot be purely subjected to market forces of supply and demand. The simple reason for this is that has an element that is tied to national security and a preservation of the human species. Consider what would happen if one of the key importation markets that Kenya relies on for maize supply would one day adopt a hostile disposition towards Kenya. A real crisis would ensue!

Once agriculture is recognized as a matter of security and not a mere creature of free-markets, the problem of supplying poor farm inputs, poor seeds, counterfeit fertilizers will be considered acts of sabotage and will attract heavy penalties. And rightly so, because poor quality farm produce threatens both the health and stability of a country. Indeed, the ability of a country to standardize quality across the entire food value chain is a necessary condition for having a vibrant and productive agricultural sector.

Once the problem of quality is resolved, demand for Kenyan produce will dramatically increase both domestically and internationally. And naturally financial capital will be attracted to the agriculture sector solving the perennial problem of low access to credit which has greatly hampered the development of the sector. Expansion of farm operations will lead to job creation for the youth, which will dramatically see unemployment levels reduce. Considering that the average age of a farmer in Kenya is 60 years old, having a youthful labour force joining the sector will also ensure there is continuity on all areas of food production.

Champions of unbridled global free trade will naturally resist any form of government intervention in agriculture. However, even if one was to look at an economy such as the United States- the bastion of capitalism and free trade – one would observe that the US has a very comprehensive subsidy program to support its farmers equalling $25 billion in cash annually to farmers and owners of farm land. Kenya should not shy away from emulating such policies to its farmers who are essentially the principle producers in the economy.

The benefits of having a vibrant agricultural sector accrue to other sectors-most notably manufacturing which draws heavily from the raw materials produced across farms. Furthermore, high food quality and quantity ensures nutritional levels are higher and disease prevalence is lower resulting in lower health care costs. A higher quality of living will attract Foreign Direct Investment and we shall see other sectors such as real estate roaring back to life. Infrastructure will also benefit from investment to ensure that all harvests make it to the market in a timely fashion. And finally, there will be the softer issues of heritage and culture when agricultural farms are handed down from one generation to another and thereby providing a rich avenue for knowledge transfer.

Ken Gichinga is Chief Economist at MentoriaEconomics; Twitter: @kgichinga

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