Fahamu (Oxford)

2 July 2014

Kenya: Why Are Farmers Poor If Agriculture Is Kenya's Golden-Egg Layer?

analysis

Trade justice for small-scale farmers

Kenya's farmers produce enormous wealth for the country yet are largely poor. They must reject the farming model that keeps them perpetually poor, indebted, frustrated into alcoholism, domestic violence and seek trade justice

Vegetables grown on African farms are sold in retail outlets in Europe and the Middle East, while the aroma of coffee, tea and cocoa grown in her fields fills the air in most coffee and confectionery shops, outside of which the scent of flowers grown with her water fills the sidewalks.

Yet, the African small scale farmers that produce these valuable products of perpetual global demand are poor - food insecure, living in dilapidated dwellings without adequate water or sanitation, unable to pay for health care or education and unable to retire from farming as they lack a pension and other social protections.

While Kenya exports coffee, tea, flowers and other horticultural produce, many Kenyan households, including those of small scale farmers are food insecure - cannot afford three meals a day. 30 percent of Kenya's children are malnourished and Kenya is a net importer of good crops, mainly grains such as maize, rice and sugar.

Most of Kenya's adult population has grown up being taught that agriculture is the backbone of Kenya's economy. The fact that agriculture employs three in every five people in Kenya (60 percent); accounts for 27 percent of Kenya's GDP and contributes more than 50 percent of the export earnings (1) means that the importance of agriculture to Kenya's economy cannot be overemphasize. It is what it is; a particularly important aspect in the lives of every Kenyan.

So why are small-scale farmers, the majority of Kenya's farmers, poor and one in three of her children malnourished? Why has the agriculture budget been consistently below 5 percent despite government's commitment in the 2003 Maputo declaration to raise its allocation to 10 percent? Who is growing the cash crops that make up 50 percent of Kenya's earnings? If it is the small-scale farmer that is growing these agricultural exports why don't the livelihoods of small-scale farmers reflect having earned 50 percent of Kenya's export earnings?

HIGH PRODUCE PRICES IN THE LOCAL AND INTERNATIONAL MARKETS STILL LEAVE FARMERS POOR

A 2012-3 study titled "Global Financial Markets and the Right to Food: A Focus on Small and Marginal Coffee Producers in Kenya" found that even in times of highest coffee prices in the global market, small-scale farmers get no significant improvements in their livelihoods. This begs the question - where is the money from the sales of Kenya's coffee going if livelihoods of small-scale farmers are not improving?

The report says that this contradiction of farmers that grow a globally valuable product being poor is explained by price volatility; farmers limited understanding of global supply chains; lack of information on pricing; increasing costs of inputs; delays in payments and the huge number of players (read brokers) between the farmer and the retailer who must 'eat' before farmers eat; the soaring food prices, all of which result in high levels of debt among small scale farmers. So why are farmers in debt - at the schools their children attend; unable to pay hospital bills for family members that fall sick and with huge chunks of their coffee bonuses being hived off to offset debts? There are various ways in which small scale farmers lose their money.

Small scale farmers of the various cash crops grown in Kenya - coffee, sugarcane, vegetables, rice, etc receive seeds from millers, the cooperative or the exporting company.

They must later pay for them at prices they did not negotiate as there appears to be no standard price for the research that goes into developing the right seed. So farmers pay what is charged as the seeds are advanced to them at the start of the season, and the un-negotiated seed price deducted months later (often at an interest) from the money that should have been paid to each farmer.

They have to pay for the seeds whether or not they produce the expected yield. Low productivity is blamed on the farmer's laziness or careless agricultural practices rather than on the seed quality. Even the most diligent of small scale farmers cannot win this argument as s/he cannot adduce the evidence to show that she grew the seeds as directed.

Farmers, particularly those growing horticultural produce such as green beans, snow peas etc also receive soil testing and technical advice on which seed to grow; fertilizer or pesticide to use.

However, this advice is often not from the Agriculture extension officer whose salary and benefits are paid for by tax payers, but in most cases from a technical adviser employed private companies that export the produce. It follows that the small-scale farmer is paying double for agricultural extension services.

First, small scale farmers as taxpayers are paying Value added Tax (VAT) each time they buy seeds, fertilizer, pesticides, any food stuff or other commodity they use buy their homes.

They are also paying for licenses and various services and are taxed before they are paid for their produce. So there is no doubt that small scale farmers make up the taxpayers that contribute to the GDP, which explains the statistic that says that over 45 percent of Kenya's Gross domestic product (GDP) is from agriculture.

Despite having contributed close to half of their monthly pay, the agriculture extension officer doesn't show up to advise the farmer; granted that often it is due to lack of transport or poor supervision. Secondly, when a private company sends a technical adviser to the farmer to offer the same advice that an agricultural extension officer should have given, the cost of this advice is hived off before the farmer is paid for her produce.

So it would be interesting to know how much of the Ksh59.3billion allocated to agriculture in Kenya's 2014-5 budget is intended to go into counties for the purchase of vehicles to take agricultural extension officers to the farms of individual and groups of small-scale farmers; or to set up demonstration farms in one of their farms. Interestingly, none!

The expectation is that agricultural extension officers together with doctors, nurses, water engineers and all public officers delivering services that have been assigned to County governments will be paid from the meagre 21 percent of the 2014-5 budget that that will shared by all 47 Counties, which is also expected to buy vehicles for the extension officers and fuel them. The Ksh59.3b will go into national government projects on agriculture - such as the Galana project, improving irrigation, coordinating the agriculture sector etc.

The story is the same even for small scale farmers that grow produce for the local market. Kenya only grows half of the sugar and one third of the rice that it requires to satisfy the local demand. One would expect from the laws of supply and demand that farmers who grow a commodity that is in low supply and high demand to be rich, but this is not the case.

Even sugarcane and rice farmers are poor; unable to build permanent houses or install piped water or electrify and improved pit latrines on their farms; with children that are frequently chased out of school for parents' inability to pay the levies charged even in public schools or pay medical bills for family members hospitalized.

COST OF MARKETING AGRICULTURAL PRODUCE

Small-scale farmers do not know who in Europe or the Middle East eats their vegetables or drinks their tea or coffee; or who sells it there and how it gets there.

What is clear, though hardly ever discussed is that by the time the farmer is paid Ksh70 - 140 for a kilo of coffee delivered; or Ksh 35-100 for a kilo vegetables, the petrol or jet fuel cost of transporting the produce has already been deducted; the drivers paid and workers who pack the produce for the retail market paid; the packaging material paid for; export taxes in Kenya paid and tariffs or taxes charged by Countries that import Kenya's produce and the shareholders of the private company with which they have a farming contracts paid their profits.

All these are costs that are paid for before the small scale farmer is paid. Should all the produce transported not be purchased or its quality drop due to delays in transit, the value of this loss is first deducted as a cost of doing business before the farmer is told how much s/he will get for a kilo of her produce.

This explains the statistics say that two in every three people in Kenya (over 60 percent) are employed by agriculture. It is in reference to the self-employed small scale farmer that owns the land and grows the produce, the extension workers - private or public that give technical advice, the drivers or pilots that transport it, packaging materials and workers, produce inspectors, the brokers or shareholders of the companies that export the produce, government officers employed both at national and county level etc. all of whom are paid with the small scale farmers sweat. The only problem is that the farmer earns the least - less than the driver or even the security officers that guards the brokering companies' premises.

COOPERATIVES RESPITE FOR MEMBERS?

Where her produce is sold by a produce marketing cooperative in which s/he is a member, instead of by a private company with which the s/he has a farming contract, the produce price paid to the farmer is not any higher. Members of agricultural produce marketing cooperatives appear to be getting poorer not richer; losing assets bought jointly rather than gaining profits; members being indebted rather than receiving dividends.

Kenyans must ask themselves the difficult question of why private and public companies appear to deliver more profits for shareholders than cooperatives and out grower institutions involved in exactly the same business. It would appear like the definition the term 'cooperative has slipped to mean 'a badly run company that takes from shareholders rather than generates profits for them; the opposite of a company'.

Even after doing it many times with the same result, government continues to 'rescue' farmers from debt bondage by using public funds to pay 'cooperatives' and other shylocks in the name of offsetting debts owed by farmers. This is almost always done just before elections. On receiving the funds, the money lenders release peasant farmers' national identification documents so that they can register as voters.

The payment is almost always followed by the head of the cooperative, broker or money lender resigning to 'enter into politics'. It is time to admit that all the 'rescue' and 'reform' initiatives done in this sector decades are not working.

Since government has always had its hand in the cooperatives, maybe it is time to try a different model; get government out of the cooperative and instead leave it to play a regulatory role. Or better yet, convert all cooperatives into companies, and apply the same stringent governance requirements in the hope of a different and better result.

SEEING THE BIG PICTURE OF AGRICULTURE AS THE GOLDEN-EGG LAYING GOOSE

Agriculture and specifically, coffee and all the crops for the local and export market are the golden-egg-laying-goose for Kenya. Too many people in the economy earn from it. For national government agricultural exports improve the balance of trade and generate foreign exchange.

By supplying local retail markets, small-scale farmers improve the national statistics on food security and employment by simply ensuring that supply is high enough for food prices to be within the reach of all.

Small-scale farmers thus give Kenya higher ratings on human rights indices such as the MDGs as performance on Goal1 (reduce poverty by half the rate it was in 2000) uses employment and food security as indicators and most of the other seven goals rate access to the very things (human rights) that small-scale farmers would be able to pay for and access if they were justly remunerated for their produce.

If small-scale farmers do not make enough money to meet their basic needs and live in dignity, they will be forced to abandon farming and look for other jobs, thereby increasing the rate of unemployment. Kenya will continue to import maize, rice and sugar. Food prices will continue to rise, decreasing the number of people that can afford 3meals a day.

They will assert more pressure on public amenities. Inflation will rise as Kenya spends its meagre foreign exchange on importing foodstuff that can grow locally rather than on equipment and services that create new jobs. It is therefore in government's best interests (both national and county governments) to look out for the best interests of small-scale farmers.

While government has spent large sums of money to train youth as entrepreneurs, the training does not effectively focus on encouraging youth to venture into agribusiness.

Even when training is offered to farmers, it is rarely transformative because it does not comprehensively cover content that would support small-scale farmers to deal with their real challenges namely - their limited understanding of global value chains, lack of pricing information and ICT services, lack of skills to help them organise and govern cooperatives and other farmer organisations better.

The result is always the same; - farmers' inability to cut out the middleman or reform their cooperatives. If anything, by paying off cooperatives and shylocks and coming up licensing procedures (e.g. under coffee) that widen the gap between the farmer and the produce retailer, government is complicit in the disenfranchisement of small-scale farmers.

A BUDGET POLICY TO KEEP KENYA'S COMMITMENTS

A decade ago, Kenya was part of many African governments that made the Maputo Declaration and its platform for action. In it African Governments committed to spend 10 percent of their GDP on improving agriculture.

The Ksh 59.3billion allocation to agriculture is only half of what was Kenya for its part committed to spend on this sector. Unless Kenya develops a budget law and policy that compels it to adhere to such commitments, the funds allocated to agriculture will fluctuate from year to year and never achieve the grand plan that was intended.

Under devolution's subsidiarity principle funds must follow functions. It follows then that having the agriculture function under county governments' means that requisite funds ought to be allocated to county governments for service delivery.

This service delivery money is intended for buying equipment (e.g. vehicles for the agriculture or livestock extension officer to access farmers) or supplies (e.g. gloves or syringes for the local dispensary); and for paying technical staff performing all the functions devolved to counties i.e. agriculture, livestock and fisheries officers, environment, water and sanitation engineers, soil scientists, veterinary officers and other public officers. Small-scale farmers also pay CESS and other service charges.

Essentially, the only reason why County Governments get fund allocations from national government and are allowed in law to collect revenue is because they deliver a service. If agricultural extension officers are not visiting and advising farmers, and there are complaints on service delivery in health and water sector, it defeats the purpose or rationale of having devolved government.

County Governments must be careful not to make themselves irrelevant by not delivering the services they were created to deliver. All in all, it is the best interests of County Governments to promote the service delivery - best interests of small-scale farmers. County governments must motivate and supervise agricultural extension officers to ensure that they actually show up on farmers and advise farmers.

NO FERTILIZER MADE IN KENYA 50 YEARS AFTER INDEPENDENCE

Five decades after independence, Kenya still imports fertilizer and pesticides despite the phrase 'Agriculture is the backbone of Kenya's economy' being in each year's Madaraka and Jamuhuri Day speeches and more recently in the state of the Nation and State of the County address.

None of the Ksh 59.3 billion allocated to agriculture in the 2014-5 budget appears to be for the building of an fertilizer processing plant in Kenya. No one has been prosecuted for 2-3decade old corruption scandals for misappropriation of funds intended for this purpose at the time.

So far, none of the 47 County governments have in their first two years' budgets or strategic plans included proposals to establish a waste treatment mechanism that can generate fertilizer or offered incentives to private corporations to do so.

ICT CHALLENGE

One of the reasons why there is such a huge disconnect between small scale farmers and those who retail their produce in local or international retail outlets is their lack of access to market information and particularly pricing information. Farmers receive less than 20 percent of the price of their produce - Ksh 140 per kg of coffee is paid to farmers, yet its price at the Nairobi Coffee Exchange is Ksh 6-800 per kg, while still largely unprocessed.

A cup of good coffee, hence one teaspoon (5gms) of coffee goes for Ksh2-300 in Nairobi. Yet the International Coffee Organization (ICO) and many other websites publish the weekly and even daily prices if coffee in the international market. Farmers, including those with internet enabled mobile phones do not have this information. Farmers' trainings, the digital villages and M-FARM concepts appear not to be telling farmers what they need to transform their lives.

FARMING AS A LIFESTYLE NOT A BUSINESS

Finally, small scale farmers must also begin to see farming as a job - employment that must be gainful for all those it employs. In most of the households of small scale farmers, land is owned by the male head of the household, who often does very little or no actual farm work.

The day to day crop production work is done by women and their post teenage children, many of whom have dropped out of school, or by hired casual labourers under the supervision of women.

If a sugarcane farmer receives a cheque of Ksh 300,000 for cane that has taken 2 years to grow and be harvested, it means that s/he has been paid a monthly salary of Ksh12,500 per month in those 24months.

If he and his wife and two other unemployed adult in the family worked on the cane, it means these four adults are each earning about Ksh 4,000 a month. This barely puts such a family above the poverty line pegged at USD 1.25 per day (about Ksh 3250 per month) and less so if any of these adult children are married and have children too.

Small scale farmers must know the true value of their produce and learn to approach farming as a business that must break even - do the maths.

Hopefully doing such maths will result them getting angry enough to bother to learn about global value chains, track produce prices on their phones, demand better governance from the cooperatives, build warehouses, cooling plants and local jaggeries to either store or mill their own produce until they can get a better price for it from the broker.

However, even before it becomes unacceptable to government for its producers to pull down Kenya's poverty ratings, farmers themselves must reject this business or farming model that keeps them perpetually poor, indebted and frustrated into alcoholism, domestic violence and other ills through which producers' poverty is manifesting in Kenya today.

Nduta Kweheria

ENDNOTES:

1. Kenya National Bureau of Statistics (KNBS)

THE VIEWS OF THE ABOVE ARTICLE ARE THOSE OF THE AUTHOR/S AND DO NOT NECESSARILY REFLECT THE VIEWS OF THE PAMBAZUKA NEWS EDITORIAL TEAM

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