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Measuring Income and The Potential For Poverty Reduction In Rural Kenya

Measuring Income and The Potential For Poverty Reduction In Rural Kenya

Author(s):  Argwings-Kodhek, Gem; Mathenge, Mary, Tschirley, David, Bridget A. Ochieng, Betty W. Landan
Introduction

Agricultural policy in Kenya often is made with little reference to statistics and hard data. Tegemeo Institute of Egerton University has been filling part of the information gap in the agricultural sector for the last decade, largely through sector specific pieces of work. Beginning in 1997 Tegemeo, in collaboration with a new partner, Michigan State University, began undertaking large household surveys.

Michigan State has a long tradition of undertaking large household surveys to inform policy makers in different parts of Africa. Household survey work by Tegemeo in Kenya began with two surveys, in 1993 and 1995 focusing on urban household consumption.

These surveys focused on measuring the impact of maize market liberalization on urban consumption patterns. These surveys were followed with a large rural household survey in 1997. The present paper presents results from a 2000 update of the same survey.

The household surveys allow the calculation of household incomes in 9 representative zones of rural Kenya. The data also allow the decomposition of that household income into its key constituent parts such as income from crops, livestock, off-farm salary and informal business income. The spatial distribution of the study sites, and the fairly large sample within the zones also allow for the sampled households to be analyzed and differentiated based on zone and income, but also according to education and gender, for example, of the household head. It is a rich data set whose surface is only scratched in this single paper.

Large household surveys are expensive to mount, and very involving. But it is possible to generate the majority of key indicators using a Proxy Methodology that is introduced in this paper. Using that method, good econometrically derived estimates of indicators of interest can be generated without the full cost and logistical problems of collecting full information from thousands of households. Proxy methods are particularly useful as they can be updated annually. This is the kind of information that Kenya will need to generate regularly in order to fully monitor the outcomes of its poverty reduction strategy.

Monitoring poverty cannot only be done through household surveys. In this paper Tegemeo will also present in summary form, a methodology called the PAPPA - Policy Analysis for Participatory Poverty Alleviation - that combines the numerical and statistical techniques of the large or proxy survey, with participatory techniques. The combination of the two methods provides more insight into poverty, and how to deal with it, than either the either statistical or participatory approaches on their own.

This paper begins by presenting the findings of the 2000 survey in terms of household income and income sources. The proxy methodology is then presented followed by an introduction to PAPPA. The paper closes by linking the different methods used in Tegemeo to the monitoring and evaluation work that government along with the private sector and civil society will be undertaking as part of the Poverty Reduction Strategy - PRSP- process.

 

Measuring Income and The Potential For Poverty Reduction In Rural Kenya

 

 

Contemporary Issues Determining the Future of Kenyan Agriculture: An Agenda for Policy and Research

Author(s):  Argwings-Kodhek, Gem
Introduction

Kenya’s agricultural sector has just gone through a period of market liberalization. The government has moved out of setting prices, imposing controls and subsidizing parastatals. The trade and exchange rate regimes also have been liberalized. The process of market liberalization is not yet complete, but already a number of sectors are finding the new regime not to their liking. This is evidenced by sometimes violent farmer reactions to what they see as a reduction in their incomes, loss of control of their organizations and political interference in the running of their affairs.

This paper will review where the agricultural sector currently stands with regard to the market liberalization agenda with a view to giving some context to the ongoing struggles. Much of this material has been presented before in a number of fora, but nowhere has it been put together in one place where the recurring themes and broad lessons can be addressed. The paper will look at the key policy issues in the commodity sub-sectors, as well as in the service inputs like credit, research and extension, policy formulation and guidance.

The paper argues that the biggest single issue facing Kenyan agriculture is whether or not it will be efficient enough to compete at world prices, or at the levels of protection that domestic consumers, and the World Trade Organization (WTO) allow. If it is not then agricultural incomes, and by extension national income, will continue to stagnate and fall. However the blame should not be laid at the door of market liberalization which only made it more difficult to hide some of the distortions, taxes and subsidies in Kenyan agriculture that reduce overall economic growth. Facing up to these misapplications of resources is the first step to solving the puzzle of why agriculture continues to perform poorly even in the liberalized environment that was to make everyone better off.

The paper also allows Tegemeo Institute of Egerton University an opportunity to involve sector stakeholders in setting the agenda for 3 years of agricultural policy work it will be undertaking. Not all the key constraints, issues and options facing Kenyan agriculture are currently known. Much agricultural policy research and advocacy work remains to be done, and it needs to involve stakeholders in research design, implementation, and dissemination.

Tegemeo hopes to provide fora where informed discussion of the agricultural policy issues facing Kenya over the coming years can take place. The paper begins by looking at the import competing industries - livestock, maize, wheat and sugar - examining information needs, policy issues and potential areas of research that may inform players interested to ensure the survival of these sectors as import competition becomes more difficult to avoid under the WTO rules.

Part of the recipe for survival revolves around groups of producers getting involved in looking beyond their own production system, and recognizing that a number of their problems - e.g. policy dialogue and the provision of services - are best approached collectively. Tea and coffee are dealt with next in an analysis that suggests that collective action is no panacea, and needs to be closely monitored to ensure that the benefits of collective endeavors are captured by the intended beneficiaries.

A look at the credit, agricultural research, extension and policy making services suggests a similar lesson. Stakeholders need to play a bigger role in ensuring that funds spent in their name - particularly in the public sector - are effectively, and efficiently used.

Contemporary Issues Determining the Future of Kenyan Agriculture: An Agenda for Policy and Research

Marketing costs and their influence on farm-gate and consumer prices

Introduction

Kenya’s agricultural based economy is currently faced with challenges related to the salability of it’s agricultural produce and products. These challenges are will shape investments in agriculture, returns to these investments and ultimately the country’s economic growth. It is not just enough to produce, today these commodities must compete to find a market internationally, in the region and even at home. This simply means that Kenya has to shift away from it’s traditional supply-driven strategies and policies to a more demand driven sector. While providing incentives to producers remains an important strategy for the sector growth, it is equally important to cater for the consumer side. Consumers who form the larger majority must be protected not only from food of poorer quality but also policies that avail food that is costlier than world prices.

The rules in the market place have changed and have become very dynamic. Consumer preferences are increasingly more complex than they were in the past. They are also the more important players in the market, getting what they want, from any supplier who is able to meet their requirements for timeliness, quality and even growing practices. There is increased competition due to the lifting of preferential treatment, lowering and harmonization of tariff barriers and the institution of new technical barriers.

Farmers also are increasingly demanding a bigger role in marketing of their produce than has been traditional in the past, and in setting the legislative and regulatory environment necessary to keep them competitive in the New World marketplace.

Challenges facing the agricultural sector may be summarized as;
· Increasing, or maintaining access to both local and international markets
· Redefining marketing channels
· Post-farm costs and efficiency in marketing
· value addition to raw produce
· the financing of marketing activities

This paper uses one or two commodities to illustrate each of these issues and areas that may need intervention. The paper begins with a discussion of marketing costs and their influence s on farm level as well as retail prices of commodities and inputs. Horticulture and fertilizer marketing are used as examples.

The next section discusses issues of market access and market concentration where beef and horticulture are used to highlight this challenge. Challenges brought about by globalisation ang regionalisation are also discussed here. The following section uses coffee, dairy and pyrethrum examples to illustrate why it may be necessary to explore alternative marketing channels.

The role of farmer organisations in marketing is also discussed here. Challenges in processing and value addition form the following section where dairy and cotton are used as illustrations. The later sections of the paper discuss issues on legislation and regulation and how they impact on the agricultural sector’s growth.

Marketing costs and their influence on farm-gate and consumer prices

Factors Affecting the Distribution and Use Of Fertilizer in Kenya: Preliminary Assessment.

Author(s):  Mose, Lawrence
Introduction

About 80% of Kenya’s population lives in rural areas, and most of these households are dependent on agriculture for a large part of their livelihood. Increased productivity of the millions of people engaged in agriculture is clearly required for living standards to rise. But since Kenya’s arable land mass is largely fixed and already under cultivation, expansion of cropped area is not a realistic option to increase the livelihoods of Kenya’s rural population, growing at 3.34% per year.

There are two basic avenues for labor productivity in agriculture to rise: intensification of agriculture, i.e., increasing crop yields per unit of labor through the use of improved farm technologies, and greater diversification into higher-valued crops. Both of these strategies are likely to require increased use of fertilizers and other productivity-enhancing inputs.

Yet despite the crucial role of increased fertilizer use in raising agricultural productivity and rural incomes, fertilizer use in Kenya for the past decade has been stagnant, hovering around 285,000 metric tonnes annually. Predictions that the liberalisation of the domestic fertilizer market would dramatically stimulate the use of fertilizers have not materialised. But data on aggregate trends in fertilizer use, while useful in clarifying the problem, are not particularly useful in identifying the micro-level constraints on fertilizer distribution faced by stockists and its profitable use by smallholders.

There is currently a lack of information on the characteristics of households that use fertilizer and those that do not. This information may be useful in identifying the constraints that need to be addressed in order to realise the predicted benefits of market liberalisation on fertilizer use and agricultural productivity in Kenya.

The report identifies the major factors constraining the profitability and access of fertilizer use by smallholder households in Kenya. The report first describes the fertilizer distribution system after market liberalisation and fertilizer use patterns among smallholders. After identifying the major constraints on fertilizer use from the standpoint of distributors and farmers, the report then discusses potential policy options for improving fertilizer profitability and accessibility in support of agricultural intensification and diversification.

Findings and policy implications are based on two sources. The first source is a survey of 1,540 rural farm households conducted in May/June 1997 covering 24 districts. The second data source is a structured survey conducted in September 1997 of 59 firms involved in fertilizer retailing in 17 districts representing markets where the earlier sampled farmers purchased fertilizers.

The paper is organised into several sections. Section 2 presents the methodology of the study. This is followed by a description of the fertilizer distribution system and a description of household- and region-level fertilizer use patterns. Finally, policy implications on fertilizer use are presented.

Factors Affecting the Distribution and Use Of Fertilizer in Kenya: Preliminary Assessment

Determinants of Agricultural Productivity in Kenya

Author(s):  Owuor, Joseph
Introduction

Agriculture in Kenya accounts for about a third of gross domestic product; 76 percent of the population live in rural areas; agriculture employs 85 percent of the rural labour force. Rural labour force has been growing at 3.5 percent while agriculture has been growing at 2.6 percent (World Bank 1991; GOK 1993). Seventy percent of Kenya’s merchandise exports are agricultural; and 33 percent of manufacturing sector output is based on agricultural products (Pearson 1995). Because of agriculture’s contribution to total output and employment, for sometime to come, attempts to improve living standards must give particular attention to increased incomes and productivity in the agricultural sector.

Enhancement of agricultural productivity is thus an important condition in alleviating rural poverty, and increasing household food security and stimulating growth in non-farm activities. Unfortunately, there is limited household-level information available in Kenya to allow planners, policy makers and donors to make a comprehensive assessment of the factors that determine agricultural productivity in Kenya. Such information would be extremely valuable in identifying major constraints on productivity growth and in formulating strategies to overcome them.

This is especially important as the country adjusts to market liberalisation process. Kenya like many countries in the Eastern and Southern Africa region, is undergoing rapid transition and adjustment in its agricultural sector. Throughout the adjustment process, concerns have arisen regarding the overall implications of the market liberalization process for national agricultural growth and food security.

This paper examines the determinants of agricultural productivity variations across households.

The main objectives of this paper are threefold: 

(1) To describe agricultural productivity across households; 

(2) Examine factors that explain variations in agricultural productivity across households; and 

(3) To identify strategies for enhancing smallholder Agricultural productivity in Kenya.

Determinants of Agricultural Productivity in Kenya

How Can Micro-Level Household Information Make a Difference for Agricultural Policy Making? Selected Examples from the KAMPAP Survey of Smallholder Agriculture and Non Farm Activities for Selected Districts in Kenya.

Author(s):  Kodhek, Gem; Jayne, Thomas, Nyambane, G; Awuor, T; Yamano, T
Introduction 

Agriculture forms the foundation of Kenya’s economy. However, the information base on agriculture - including basic indicators on farmers’ input, production, and marketing behavior, household food consumption patterns, etc. - is weak and largely outdated. Agricultural policy is largely made on the basis of conventional wisdom about the way things work. In a dynamic, evolving economy, long-standing perceptions may become increasingly inconsistent with current reality, particularly when the system has been exposed to dramatic changes such as structural adjustment, market liberalization, and the advent of new technology.

In such a setting, entrenched perceptions about the way farmers, traders and consumers actually behave may lead to unintended and even counterproductive government policy. This paper aims to demonstrate how monitoring the rural economy through timely, periodic and reasonably representative household surveys can inform debate on existing and emerging policy issues.

Agricultural policy in Kenya revolves around the widely accepted goals of income growth, commercialization, food security and equity considerations. But progress toward these goals cannot be measured, and expenditures in their pursuit be prioritized or justified, in the absence of data on how the agricultural economy really works. While agricultural data is collected by various organizations in Kenya, it is frequently reported in ways that cannot usefully shed light on major policy issues or inform key policy debates. The weak state of agricultural sector data makes planning on the basis of available data extremely hazardous. This leaves analysts and policy makers with little apart from intuition, conventional wisdom and political expediency as guides to policy making.

Tegemeo is contributing to improved policy making through availing policy relevant data to sectoral policy makers. This paper presents baseline data (1996/1997 season) on a set of indicators of the state of agriculture and rural welfare that are useful for monitoring policy objectives mentioned earlier % income growth, commercialization, food security and equity. The paper also provides information on rural conditions and perceptions that are not commonly reported by other statistical organizations in Kenya.

The report is organized into
sections as follows:

Section 2. Sample Design and Selection

Section 3. Sources and Levels of Rural Household Income

Section 4. Agricultural Production and Input Use

Section 5. Household Food Consumption Patterns

Section 6. Household Crop Purchase and Sale Behavior

Section 7. Household Perceptions of Changes in the Performance of the Grain Marketing System

Section 8. Equity

Section 9. Conclusions

The paper has several conclusions and recommendations:

· Much of the ‘conventional wisdom’ on which policy is based is not supported by evidence, and often is incorrect. An example of incorrect conventional wisdom is that most farmers in Kenya prefer high maize prices and derive an important part of their income from selling maize. While this view does fit a certain, relatively small strata of farmers in selected areas of Kenya, most farm households in Kenya stated a preference for low maize prices as they are net buyers of this commodity.

· The large proportion of farming households, even in what are always thought of as maize surplus zones, that buy maize may warrant further consideration of the costs and benefits of policies designed to raise local maize prices, such as the current maize import tariff and producer support price schemes.

· Dealing with the agricultural sector as if it were a homogeneous monolith may give misleading impressions and can have impacts that go contrary to overall sectoral policy objectives. Agricultural policy making in a resource-constrained environment may be more effective if based on an understanding of the limits in achieving certain outcomes for all farmers in all regions and for all crops. Important regional differences suggest that tailoring policies with their regionally desegregated impacts in mind can lead to improved outcomes.

· Poor food deficit households have characteristics distinct from cash crop and wealthier households that suggest that if the alleviation of poverty is an important goal of agricultural policy, more attention needs to be focused on such households.

How Can Micro-Level Household Information Make a Difference for Agricultural Policy Making? Selected Examples from the KAMPAP Survey of Smallholder Agriculture and Non Farm Activities for Selected Districts in Kenya.

Maize Productivity And Impact of Market Liberalization in Kenya

Author(s):  Karanja, Daniel, Jayne, Thomas, Strasberg, Paul
Introduction

Most countries in Africa are facing an imminent food crisis. Whereas at independence most of these economies were self-sufficient in food production, the combination of recurrent oil crises of the 1970s, increasingly adverse weather, poor macroeconomic and sectoral performance in the 1980s and 1990s, and declining public investment in infrastructure undermined the capacity of these economies to supply sufficient food from domestic sources.

Further, rapid population growth and a persistent decline in the natural resource base resulted in a decline in per capita food production and unmet food demand. The ultimate effect of these is reflected in a growing reliance on food imports and food aid, increased poverty and civil strife. Increasing food productivity is, thus, vital for enhancing future food security, peace and health.

With an expected doubling of Africa’s current population to about 1.3 billion by 2020, addressing the continent’s food crisis will require great wisdom and vision. However, since most African households are engaged in agriculture, the alleviation of poverty, hunger and malnutrition will be expedited through improved agricultural productivity caused by greater investment in economic growth that provides demand for rural nonfarm products and greater technical change (Byerlee and Eicher 1997).

Kenya is no exception in many regards. It has a predominant agrarian economy. The major staple crop, maize, is grown in almost all agro-ecological zones in two out of every three farms. In the past two decades, the country has shifted from being a net food exporter to a persistent net importer due to policy and demographic factors mentioned above. Domestic maize demand outstrips domestic production in six out of ten years, leading to increasing reliance on imports to bridge the gap.

This is in spite of a tremendous maize production potential exhibited between 1964-75, fueled by the introduction of maize hybrids and related technologies, often dubbed “Kenya's Green Revolution” (Karanja 1996). Figure 1 shows trends in maize area, yield and production from 1963-1997.

That Kenya must increase its farm productivity and income is no longer debatable but is a great necessity. Over 85% of the population derive its livelihood from agriculture, most of whom engage in maize production. With maize occupying such a central position in Kenyans' diets and farm production activities, it is imperative that ways and means of improving maize productivity be sought.

Evidence from recent years indicates that average maize yields and area have stagnated at below 2 tons per hectare and about 1.5 million hectares, respectively (Figure 1). Given the limited arable land area and low irrigation development capacity, there is no doubt that Kenya will have to rely relatively more on yield improvement than area expansion for future increases in maize production. The Kenya Agricultural Research Institute has an uphill task of generating and adapting better maize technologies to local conditions, more so the latter than the former, on low and dwindling research funding.

Meanwhile, the extension program of the Ministry of Agriculture should seek a more cost-effective means of using its extensive network of extension agents to supply farmers with basic and sound agricultural advice. Moreover, past success in maize production was achieved by exploiting the tremendous synergy between the technology development, dissemination and seed multiplication and distribution programs (Karanja 1996). Lack of adequate funding, poor research-extension-farmer linkage, low private investments in maize research and development, and high human capital turn-over are problems that must receive adequate attention and resolve if a new way forward is to be charted.

Needless to say, the government must continue providing an enabling environment through clear policy goals and commensurate investments in infrastructure, education and information technology which are public good assets that have in the past proven to be important pre-requisites for agricultural and economic productivity growth. Although numerous studies in the recent past have explored and discussed ways and means of increasing maize productivity in Kenya, this study takes the issue further and explores the impact of recent market reform policies, specifically maize market liberalization, on maize productivity.

The latter is critical considering the level of expectations that greeted the reform process back in the early 1990s. Removal of input and grain price controls was meant to reduce the government's budgetary burden, mainly through diminished activities of the National Cereals and Produce Board, and encourage private sector participation in maize trade. This was considered useful in two ways (1) to reduce transaction costs of marketing and distributing maize, thereby improving trade incentives for both traders and farmers; and

(2) to improve access to food by low-income urban consumers and net buyers in maize-deficit regions. The impacts of market liberalization have ranged from greater private sector participation in maize trading to perceived reduction in farm gate maize prices.

However, these impacts are hard to discern for three reasons. First, they are difficult to isolate from other macro-economic policy and weather-induced effects. Two, the reform process has neither been smooth nor complete. Instead, it has been subjected to frequent reversals and holding patterns. Only recently have decisive reform measures been taken. Finally, weak and partial data has reduced the capacity to investigate the impact of reforms on productivity. This paper explores the determinants of, and investigate the impact of market reforms on, maize productivity.

Maize Productivity And Impact of Market Liberalization in Kenya

Successes And Challenges of Food Market Reform: Experiences From Kenya, Mozambique, Zambia, And Zimbabwe

Author(s):  Jayne; Mukumbu; Chisvo; Tschirley; Zulu; Weber; Johansson; Santos; Soroko
Introduction

Governments in Eastern and Southern Africa have fundamentally transformed their food economies over the past decade. This restructuring has taken place amidst severe macroeconomic crises and periodic drought. Despite the accumulation of empirical analyses showing that the food market reforms have generated some impressive achievements, these conclusions remain controversial and contested by important policymakers in each country in the region. The reforms have created acute political dilemmas for governments amidst protests to protect important groups whose interests are perceived to have been threatened by the reforms.

As a result, policymakers have faced difficult decisions in defining a consistent and effective role for the state in the newly emerging food marketing systems.

The major challenges facing policymakers in the region are:

1. How to design agricultural marketing systems to better serve as a catalyst for farm productivity growth, particularly for smallholders;
2. How to cost-effectively deal with price instability for both consumers and producers in the newly liberalized marketing system in a manner that limits governments’ exposure to political risks;

3. How to develop the commitment to a consistent and stable policy environment to support long run private investment and insulate the new systems from disruptive
policy lurches in response to short-term political crises;

4. How to design a process of collaboration between policymakers, donors, researchers, and the private sector to maximize the probability of achieving improved agricultural policy and performance.

Arching over each of these challenges is the need to better understand how to stimulate investment in the food system by the private sector. What kinds of incentives do the private sector positively respond to? And, conversely, what kinds of actions have been shown to impede private sector investment? The need for a better understanding of how government actions affect private incentives may be critical to avoid situations in which perceptions that “the private sector will not respond” become a self-fulfilling prophesy.

This paper describes the different food policy courses pursued in recent years by four countries in Eastern and Southern Africa, and documents their differential effects on farmer and consumer behavior. Results are based primarily on a survey and synthesis of recent analysis. The paper highlights lessons learned from the different policy paths pursued in each country, and thus provides insights into the costs and benefits of alternative strategies for promoting national food security and enhancing producer and consumer options.

The paper also identifies key “second generation” constraints that continue to impede national food security objectives and discusses potential strategies for overcoming them.

Kenya, Zimbabwe, and Zambia were among the last in Africa to liberalize their staple food sectors, and perhaps face the most serious challenges in overcoming historically entrenched controls on food marketing in Africa. While initially implementing similar maize marketing reforms at approximately the same time during the early 1990s, these countries have in recent years taken strikingly different policy paths, with Kenya’s reform process moving beyond that of Zimbabwe or Zambia in its comprehensiveness.

By late 1998, Kenya’s food policy environment was more similar to Mozambique, which undertook food market reforms earlier and more extensively than the other countries. Zimbabwe and Zambia, on the other hand, represent cases where the state has retained a major role in various food marketing functions and where the commitment to a liberalized market-oriented system appears weakest.

Successes And Challenges of Food Market Reform: Experiences From Kenya, Mozambique, Zambia, And Zimbabwe

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