I watched with interest as a high profile agriculture forum
was happening in Nairobi earlier this month. Most of the speakers were eminent
personalities who have worked their way to positions of leadership, business,
policy think tanks and political leadership.
When I retreat the narrative that Agriculture is the
backbone of our Economy is always present. Many are the developments that are
happening in the sector and it is also getting competitive.
Recent visits by high political leaders from India and Israel
to Kenya should be food for thought for us. India is a populous nation 1.4
Billion people and almost 6 times bigger than Kenya my country.
India’s
agriculture is reported to contribute about 14% of the GDP and employs directly
or indirectly 50% of the population. India is also an exporter of several
agricultural produce. India has mechanized part of its agriculture and largely
feeding itself.
Israel is a fraction in land size compared to my country
Kenya, is the largest producer of fresh produce and a leading exporter of
agriculture technology.
Kenya is food reliant, our production is mainly subsistence
for food crops. Commercial agriculture and taking shape but is not competitive.
One of the cited challenges by farmers is access to markets and capital to fund
the farming operations.
According to 2015 World Bank Data, Agriculture in Kenya is
reported our agriculture contributes 31% of the GDP and has two thirds of the
population directly or indirectly working in the sector, pointing to a need to
innovatively look at the sector to grow it.
The agriculture forum spoke of opportunities that exist. The
production, the entrepreneurial, employment, social political stability,
financing business among many others. All the proposals focused to the future.
Agriculture is evolving. The growth of value addition
ventures is on the rise. The growth of towns creating settlements is making new
demands for food produce. Agribusiness is being touted as one way to address
the high levels of unemployment.
The Government and any Government has a role to play. The
main roles are creating functioning agricultural markets, availing extension
services, creating an information source and dissemination system, Legal
framework and social protection.
Israel presents a perfect example that it is possible to
change the agriculture sector and profit from it with wise investments
irrespective of the odds. India’s case is that despite the numbers proper use
of land can provide more than enough.
To Kenya the Agriculture potential is great. The concern is
to seize the moment and make it happen. The undeniable facts are that food
security and proper nutrition are issues that will be on our agenda for long. A
large number of ailments is coming from unhealthy eating and in some parts of
the country there are instances of insufficient food supply and stunted growth
in younger population.
The country is spending monies on food imports and hence the
need to upscale our production and make savings. There are business
establishments focusing on agricultural produce value addition which is proving
a viable business. It is thus worth saying that Agriculture is one of the ways
to eradicate poverty and can be developed into enterprise.
Current scenario
Agriculture like any other sector has been changing.
Diversification into several crops or sectors is happening, there is an
increasing investment being channeled into agribusiness. Farmer associations to
market produce still exist despite the challenges though their operations are greatly
reduced.
The key to change agriculture is in financing and
empowerment through information to the stakeholders in farming. Agriculture as
a business also requires right timing, optimal resource employment and
management.
Value chains which are associations between farmers and
several players involved in production of a particular produce. The essence of
forming value chain is to create synergy in the production for the benefit of
all the players.
Value chain structuring involves the creation of a support
arrangement that facilitates production at the farm level with all players
being beneficiaries in the production process. It starts with problem or
potential identification, developing solutions for the identified problems and
setting up a support arrangement for production.
Activities will include sourcing for funding, input supply,
farm production support, harvesting, value addition, storage and distribution
to the market. Of key importance is to realize that just as any business all
this comes with risks.
One of the challenges faced by the sector is volatility of
prices, poor agronomy, weather vagaries and yield risks. The mitigation of
these risks will largely change production in any value chain.
Understanding the intricacies of agriculture financing, good
agronomy practices and market dynamics are the realities that any value chain
will have to address.
Most lenders are still developing agricultural based
products and have in the past treated agriculture financing like the other
products. To effectively handle the financing arrangements the price and cost
of production needs to be considered. The cash flow cycle for the financed farmers
should be matched with the repayments to reduce the risk of default. Lenders will
also take credit life risk insurance and crop insurance to cover for any
unforeseen losses.
Price risk for the produce and yield risks are determinant
of the success of a value chain. Price risk
is mostly beyond farmers because of the forces of demand and supply. Yield risk
can be addressed by good agronomy practices, obtaining weather, yield or price index
based crop insurance. Effective monitoring through the production time is also important
in handling yield risk.
Companies involved in trading in agricultural produce are
extending their reach to farmers by availing resources to equip farmers with
the right capacity. For example companies involved in exporting fresh produce
will have their field officers on the ground with contracted farmers to equip
them on a continuous basis.
Kahugu Muiruri
September 15, 2016 …. See Part 2
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