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March, 12, 2021
Reimagining Agriculture in Kenya: Five Steps for Building Resilience and Food Security After a Catastrophic Year
Nairobi, April 14, 2021 : Michael Omega, Rachael Wangari and Daniel Kitwa, from Intellecap Africa coauthored the article ‘Reimagining Agriculture in Kenya: Five Steps for Building Resilience and Food Security After a Catastrophic Year’ as part of our strategic content tie up with Next Billion.
To say that we need to reimagine the agricultural and food systems in Kenya would be an understatement. Indeed, 2020 brought an unholy trinity of crises that threatened both lives and livelihoods, and which served as a wake-up call about the fragility of the country’s agricultural sector and overall food system. First, the COVID-19 pandemic disrupted practically everything that was previously considered normal. This was followed by the largest desert locust upsurge in 70 years and flash floods that affected more than three-quarters of the country — including the food-producing counties in Kenya’s Western, Rift Valley and Central provinces.
The following numbers put these three threats into perspective:
-The announcement of the country’s first COVID-19 case in March 2020 and the resultant containment measures had far-reaching effects on the flow of goods and services across the food system, straining the livelihoods of millions of urban and rural dwellers while increasing food prices for consumers. As of last September, 6.2 million Kenyans were in a food-insecure situation, with an even higher number unable to access and/or afford safe and nutritious foods.
-Desert locusts are considered the most destructive pest in the world, with an average swarm (estimated between 40-80 million locusts covering one square km) eating the same amount of food in one day as about 35,000 people. Hence, the impact of the swarm covering 2,400 square kmsand containing billion of locusts that was reported in Kenya was more than catastrophic.
-The flash floods the country experienced were only comparable to the 2016 El Niño flooding that was responsible for severe food insecurity in the country. Between March and May 2020, the floods affected more than 233,000 people, with 116,000 people displaced and 194 deaths. Further, acres of farmland were destroyed and thousands of livestock killed, while key infrastructure such as roads, bridges and schools were left in ruins.
These grim statistics remind us that it is possible for a single catastrophic event to wipe out decades of progress for communities, while multiple catastrophes can easily overwhelm entire countries. And as the world gets increasingly connected, we’ve become more vulnerable than ever before to these types of compounding crises.
THE NEED FOR RESILIENCE IN KENYAN AGRICULTURE
Kenya’s recent struggles are also a reminder that climate change is already accelerating and intensifying natural disasters. The warming climate is closely intertwined with the performance of food systems, and crises that impact these systems often disproportionately affect the vulnerable. For that reason, resilience is a goal that should not only be discussed in boardroom meetings, brainstorming sessions and keynote addresses, but rather one that should be translated into the everyday business environment in cities and villages worldwide. Essentially, resilience should be a way of life, a lens through which policy is designed, strategy is implemented and commerce is facilitated. And the agricultural sector should be a key focus of these efforts.
Kenya, a perennial net importer of food, imported about KES 17.2 billion in December 2020 alone. For a country with an increasing population and a continued dependence on rain-fed agriculture, this spending is bound to go up if nothing is done about it. Kenya’s situation with respect to food security and its chronic dependence on imports is not unique in sub-Saharan Africa. However, its position as an economic hub in East Africa suggests that any efforts it makes toward building resilience in its food systems may offer transferable blueprints, models and pathways that can be implemented in other emerging markets and contexts. So it’s particularly valuable to explore solutions to Kenya’s current food security challenges.
The following points (in no particular order of importance) highlight some of the ways we can reimagine Kenya’s entire agricultural value chain and food system.
REIMAGINING FARM LABOR
Experts estimate the average age of the Kenyan farmer to be 61 years. In a country where 75% of the population is under 35 years, this essentially means that the sector does not attract the most productive labor assets — young workers. With older farmworkers, the risk of decreased productivity and overall output is ever-present. Further, this population is slow to adopt technology and innovation. We, therefore, need to explore policies, incentives and interventions that increase the youth’s participation in the agriculture labor force. This should be a holistic approach that includes enhancing access to technology, capital and knowledge for prospective young farmers so that the barriers for entry are not only reduced but ultimately eliminated over time.
REIMAGINING THE FOOD STORAGE INFRASTRUCTURE
For a country that loses up to 20-30% of its production post-harvest, increasing and innovating on both national- and farm-level storage should be a top priority for key stakeholders. At a national level, food reserve storage is a relatively cheap public insurance policy against the tremendous uncertainties caused by climate change for the country’s food system. However, the National Cereals and Produce Board — the national food reserve agent — has faced multiple financial and operational challenges that have led to calls for the privatization of the institution. At the farm level, the adoption of productive renewable energy in activities such as refrigeration (cold storage), drying (solar dryers) and especially milling can increase the nutritional and monetary value of farm produce, and lengthen its shelf life.
REIMAGINING AGRICULTURE POLICY
Public policy plays a key role in the agricultural sector’s prospects. Kenya’s leadership will need to explore new and ground-breaking policy frameworks that set a path toward resilience. For instance, some critical measures include: developing policies to enhance food processing; establishing “localized” (county-level) climate change action plans and climate risk policies; and expanding budgetary capacities to respond to climate-related events that impact farmers. These approaches should be developed at both the national level and at the county level where implementation happens. Continuous monitoring and progress checks should be embedded into the process flow, to ensure that momentum is not lost and transparency is maintained.
REIMAGINING AGRICULTURE FINANCING
The cost of capital remains high for farmers and aggregators, especially given the risk-averse nature of the pool of local institutional capital available. Some farmers may not have a credit history outside of their co-operatives and SACCO funding partners, thus limiting their ability to tap into the additional sources of capital that exist. Access to finance should involve creating localized startup hubs away from the big cities, so that funding networks are available to agricultural players outside the country’s metropolitan areas. (Sadly, most incubation hubs are located in Nairobi.) The challenge then becomes how to localize these networks. Working with agricultural departments and the small and medium enterprise-focused infrastructure provided by counties can be one way of directing this support to businesses at the local level. Public and private investors can also explore innovative financing solutions such as: gender lens investing targeting women farmers; crowdfunding platforms that invest in African-owned farming infrastructure; portfolio-based lending where smallholder farmers can be aggregated and their assets securitized into a sizeable financing round; and impact-linked interest rate lending models.
REIMAGINING FARMING ITSELF
Behavior change among farmers should definitely be a key focus area in Kenya’s quest to become more resilient. This involves everything from the most basic of strategies, like crop rotation, to the most complex — such as a completely mechanized end-to-end approach to agriculture. Farmers need to unlearn common but less-effective methods, so as to relearn new ones. Behavior change should also involve consumers, who need to embrace new dietary patterns above and beyond the traditional staple foods, so as to trigger the market demand that would motivate farmers’ decisions, which are ultimately driven by what the buyer wants. For instance, can public school feeding programs incorporate diet choices that incentivize new, positive farming behavior and build new agricultural value chains, such as including new types of fruit orders, or even exploring camel or goat milk instead of cattle?
While the above list is certainly not conclusive, it represents a new way of thinking and includes the critical building blocks that define what resilience really means from an agricultural point of view. Kenya’s Vision 2030 aspirations are closely aligned with the United Nations’ SDG ambitions, and food security is part of the current government’s “Big Four” agenda. But while these intentions are encouraging and praiseworthy, long-lasting progress in boosting food security and agricultural productivity and improving livelihoods for farmers and vulnerable communities will only be achieved through an action-based and resilience-focused approach. Kenya must learn from past failures, build on our successes and strive to reimagine our future. To that end, the traumatic events of 2020 were an important lesson for us: As George Santayana said, “Those who cannot remember the past are condemned to repeat it.”
Farm laws 2020: Efficiency vs equity – Sudhanshu Dikshit and Vivekanandhan T of Intellecap writes for India Development Review (IDR)
Mumbai, March 30 –Intellecap’s Sudhanshu Dikshit and Vivekandhan T co-authored an article, “Farm Laws 2020: Efficiency Vs Equity” for India Development Review (IDR).
In the article, talking about the new farm laws, the coauthors opine that while there is agreement on the importance of improving food production and productivity, there are differing views on the ways to achieve both.
The new farm laws have become a politically contentious issue nationally, but if one were to steer clear of the political rhetoric, it becomes apparent that at the heart of the issue is the long standing efficiency vs equity debate.
Those on the efficiency side highlight the long overdue agri-sector reforms to move the sector from its stagnancy to higher levels of production and productivity. People on this side also bat for reduction of the government’s direct participation and an increased role for market forces (including more private players in agriculture).
On the other hand, those arguing for equity look at agriculture as a livelihood option for large numbers of small and marginal farmers. As a result, they oppose a reduction of the state’s role and express reservations about whether the farmers’ interests will be protected in a free market scenario.
Understanding how small and marginal farmers work
As per the Agriculture Census of 2015-16, approximately 86 percent of the farm holdings in India fall under the small and marginal category (up to two hectares). This small and marginal land holding, in turn, contributes to about 47 percent of the total agriculture land under cultivation. Looking at these figures, it is abundantly clear that small and marginal farmers’ productivity plays a critical role in improving the overall productivity of the sector.
Successive partitioning of agriculture land over generations has reduced the average size of the operational farm holdings, from an average size of 2.28 hectares in 1971 to 1.08 hectares in 2016. This small land holding is the core challenge for increasing farm productivity: The cost of producing one quintal of wheat varies drastically across different farm holding sizes.
Approximately 86 percent of the farm holdings in India fall under the small and marginal category
So, while one might argue that the productivity of a small farm holding is likely to be high because of better control on farm practices, it is important to understand that in these smallholdings, contribution of self and household labour is not monetised as a cost. There is actually an opportunity cost to this household labour; however the absence of gainful employment opportunities in rural areas makes way for this disguised unemployment.
While large and medium farmers are in a better position to leverage technology and manoeuvre economies of scale to their benefit, small and marginal farmers are unable to do either.
Small holder farmers face challenges regarding economies of scale on farm inputs as well as outputs. In comparison with large and medium farmers, they spend more on per unit of farm inputs (seeds, fertilizer and pesticides) but experience lesser realisation on per unit of commodity sale. This disparity does not get compensated in a free market scenario wherein small holder farmers have to compete on equal footing with large and medium farmers.
Looking at the farm laws through the lens of small and marginal farmers
In this context, it becomes important to analyse the new farm laws 2020 and see how they may potentially play out for small holder farmers.
If free market forces are unleashed on an existing set of actors, the existing power dynamics will determine who gets how much
The larger intent of the farm laws is to increase private sector investment across the entire agriculture value chain. Among the laws, the contract farming act enables legal provisions for private sector to enter into contractual arrangements with farmers and improve primary production. These contract farming arrangements have the potential to leverage private investments to improve farm level infrastructure like irrigation facilities, poly houses, trellis, etc. Improving infrastructure, along with the price assurance provisions in contract farming can provide the right incentives for small holder farmers to move away from subsistence cereal crop farming to commercial cash crop farming. This market oriented incentive for small and marginal farmers has the potential to reduce, and in certain cases, replace the existing need for support from development intervention agencies like nonprofits and government departments.
However, the above economic argument does not factor in prevailing power dynamics among different economic actors in the current agriculture market. Practitioners with even little exposure to ground realities will appreciate that if free market forces are unleashed on an existing set of actors, the existing power dynamics among the actors will determine who gets how much. This is the fundamental premise of the equity school of thought, which has concerns regarding the protection of small holder farmers’ interests and hence they are opposed to the removal of government participation.
The average farmers’ share in the end consumer rupee for 16 major food items is in the range of INR 28 paise to INR 78 paise
In its publication Supply Chain Dynamics and Food Inflation in India (2019) the RBI has estimated the average farmers’ share in the end consumer rupee for 16 major food items is in the range of INR 28 paise to INR 78 paise. The report also highlighted that among factors critical for increase of farmers’ realisation, are the literacy levels and the availability of market information, as these two factors empower the farmers to negotiate better with their buyers and get a better price for their outputs. In the absence of market information and low literacy, small and marginal farmers are at a greater risk of being exploited by other market players (traders, processors etc).
Where do we go from here?
As a country, we do have examples of market liberalisation in many sectors, the most prominent one being the economic liberalisation of the 90s. Those reforms did increase production and productivity. The private sector had championed these initiatives and they were duly aided by increased supply of credit, access to technology, and favourable government policies. As a consequence, employment opportunities increased in these sectors and the overall economy boomed. It therefore appears that as long as there is growth in market demand, micro and small producers can coexist with large producers.
But there are larger questions that we must consider-
- Is it prudent to compare the predicament of relatively well organised sectors like manufacturing to that of agriculture, which is less organised and has higher levels of disaggregated production?
- Have we exhausted all other means and is this the only route left to improve total crop production and average crop productivity?
- Have we focused on small and marginal farmers as a separate constituency in our efforts to improve food production?
- In the overall efficiency vs equity debate, there is no opposing view regarding the importance of improving production and productivity to meet the future food demand in the country. However, there are differing views on the ways to achieve it. By taking a free market approach, the new farm laws have been criticised as inequitable, as they fail to account for empowering small and marginal farmers.
Intellecap Acquires 100% Stake In NR Management Consultants
Intellecap, the advisory arm of Aavishkaar Group announced 100% acquisition of NR Management Consultants India Private Limited (NRMC) to drive capital towards Natural resource driven Carbon Sequestration solutions to mitigate Climate change.
Intellecap is a global consulting firm dedicated to finding solutions that mitigate global risks of inequity in areas such as Impact investing, Climate Change and Gender. NRMC has deep research focus and understanding of natural resources and rural development in India and South East Asia. Drawing on its focus on nurturing entrepreneurship, Intellecap, through this acquisition looks to strengthen its Global positioning in Climate Change by incubating new initiatives and channelize strategic pools of capital to achieve tangible outcomes.
Speaking about the acquisition, Vikas Bali, CEO, Intellecap said, “Our objective of acquiring NRMC is focused on strengthening our resolve to build an effective Natural Resource based climate resilience strategy and drawing capital and delivering inclusive interventions through them. We see Climate change as humanities biggest challenge and Intellecap and Aavishkaar Group are committed to being significant part of the solution to this global problem. I invite all likeminded institutions, DFIs, Donors and commercial investors with focus on Climate Change to join hands with us, as together we can deliver real change and impact”
Speaking about the acquisition, Vineet Rai, Founder and Chairman, Aavishkaar Group said, “I am thrilled by this acquisition by Intellecap. Aavishkaar Group identifies Climate Resilience Investing as a Global Mega trend for the next decade and Intellecap has a big responsibility to lead the group in showing us solutions that would help us allocate capital effectively to combat Climate risk and offer true Resilience.”
“Intellecap and through it, the Aavishkaar Group offers a wide umbrella to NRMC expertise in Natural Resources. We all acknowledge that Climate change is the biggest challenge humanity is facing and with this partnership we would be able to use our knowledge and deep understanding of associated development challenges to drive capital toward real solutions that address climate resilience,” said Jayesh Bhatia, Founding Director, NRMC.