Agriculture, which includes aquaculture, is a major contributor to Kenya’s economy. It is the leading economic sector, accounting for 22% of the gross domestic product (GDP). The sector also accounts for more than 50% of Kenya’s total exports and provides more than 16% of formal employment in the private sector. Growth of the national economy is therefore highly correlated with growth and development in agriculture.
The leading agricultural export earners are tea, horticulture, and coffee. Fresh produce accounts for about 30% of horticultural exports, which includes green beans, onions, cabbages, snow peas, avocados, mangoes, and passion fruits.
In 2016, Kenya was ranked as the 3rd largest exporter of tea after China and Sri-Lanka. In the same year, Kenya exported one billion USD worth of flowers making Kenya the largest African horticulture exporter to the EU with 16 percent market share.
Vast market potential
Developing the Kenyan agricultural value chains means strengthening the agriculture and the agribusiness sector. That is, all businesses involved in agricultural production including; farming, contract farming, seed & feed supply, agrichemicals, farm machinery, wholesale and distribution, processing, marketing, retail sales, and exports. There is vast potential for establishing production and trade links, as well as synergies between different actors along the entire agribusiness value chain.
A challenging sector
The development of the agricultural sector is however stifled with challenges which could potentially reduce its contribution to the GDP. Some of the most common challenges are:
- Lack of Information. This is very broad and covers various aspects:
- Lack of information on how to; control pests and diseases; reduce depletion of soil nutrients; control environmental degradation; and use the right types of seeds, pesticides, fertilizers, drugs, and vaccines. In the past, we have seen that lack of adherence to set standards can have a great impact on revenues. For example in 2015, the volumes of vegetable exports declined due to stringent checks for pesticides levels.
- Limited access to knowledge, technologies and agricultural information which can help control pre and post-harvest losses and lead to high productivity or high yields and sustainable agricultural practices.
- Lack of linkage between research and farmers leading to a gap in customer insights and lack of product diversification, hence farmers are not able to achieve a product-market fit.
- Lack of efficient and effective infrastructure and other facilities to support transportation and storage of farm inputs and produce. Most of the agricultural produce comes from the rural areas which are mostly cut off from efficient distribution and delivery during heavy rains leading to massive revenue losses. There is a need to invest in incubators, silos, coolers, reefers and all season roads to address this challenge.
- Lack of modern and mechanized farming methods to reduce over-dependency on rain-fed agriculture. More use of greenhouse and irrigation farming can increase the acreage under agriculture and reduce the need for labour- intensive farming methods. Mechanized production of other farm inputs like feed and fodders can increase the farm yields and reduce costs.
- Limited access to credit facilities that are not dependent on traditional forms of collateral like title deeds. This has stifled investment in modern farming methods.
- Energy challenges which affect the scale-up of agribusiness. However, Kenya has the opportunity to deliver economically competitive energy solutions using its abundance of renewable sources. In 2015, the expenditure on fuel and power as part of agricultural inputs accounted for the largest share of expenditure at close to 24%; this was closely followed by expenditure on fertilizers and manufactured feeds.
In spite of all the challenges, there are plenty of business opportunities which can be matched with expertise, knowledge, technology, and/or capital from Norwegian businesses with the aim of developing the agricultural value chain and creating value for Norway. Some of the identified opportunities are:
- Innovation in agriculture.
- Investment in ICT solutions to ease access of information and advice to farmers, and transform agriculture using technology.
- Development of innovative ways of providing credit access to farmers without using the traditional conditions where they need a credit history and collateral. This can be strengthened further by working with financiers to formulate products which fit the needs for smallholder farmers.
- Investment in renewable energy for the agriculture sector. Alternative energy solutions within agricultural farms have been installed but there are more potential projects waiting for investors.
- Opportunity for consultancy firms to transfer knowledge, technologies, and expertise in efficient farm operations; putting systems in place to enable farmers to operate in an economically, socially and environmentally responsible way; and enhance adherence to set standards and procedures in the global markets.
- Investment in agri-business value chains;
- Establishment of aquaculture farms and fish processing plants.
- Production of cost effective feeds for cattle and fish.
- Modern storage facilities for hire e.g. silos, cold storage facilities, and refrigerated transport.
- Production of quality packaging materials for highly perishable produce.
- Production of value-added agricultural products like fruit juices, cheese, and butter among others.
- Investment in construction of dams and bore holes, installation of irrigation systems, and green houses.
Doing business in Kenya
Through our market study about opportunities in Kenya, we have come to know that interested businesses should be aware of certain aspects of doing business in Kenya that may affect ease of operation:
- We advise companies to enter into strategic partnerships with local stakeholders who have knowledge and experience in the sector. We believe partnerships need to be based on trust and honoring signed agreements;
- They should also deal with local partners who possess adequate expertise to evaluate Norwegian technology which is usually advanced, sustainable and less expensive in the long term;
- The Norwegian companies interested in the market should take study trips, especially for technical staff and decision makers, before signing any partnerships;
- It is important to have the sector master plans in order to put the Norwegian technology in perspective and assess the opportunities better.
For more information:
Innovation Norway’s Regional office for East Africa/Commercial section of the Royal Norwegian Embassy: IN-EA@innovationnorway.no
Rita Brokstad, Director of Innovation Norway, East Africa : email@example.com