Industry Analysis

Agricultural transformation is a decades-long process which involves modernization of on-farm production, shifting production towards more value addition. Agricultural transformation is critical to growing the economy, reducing the cost of food, alleviating poverty and therefore delivering 100% food and nutrition security. Apart from Singapore and Hong Kong, no country has achieved upper middle-income status without transforming its agricultural sector. Kenya is no exception. Millions of citizens depend on agriculture for income and food security, and the country’s economic growth therefore depends on enabling these people to achieve food security and contribute more fully to the economy. Kenya has taken big strides over the years to build its macro-economic foundations for agricultural transformation: ~33% of total GDP, ~60% of informal employment and ~60% of exports come from the agricultural sector, with the largest contribution coming from crops production.i Transforming the agriculture sector will cement these foundations for economic growth by providing the tools to combat price volatility, improving the environment for private investment, and developing more strategic approaches to lower the country’s dependence on food imports.

To  transform  Kenya’s  agricultural  sector and make it a  regional powerhouse, the Government has formulated the Agricultural Sector Transformation and Growth Strategy (ASTGS). The strategy is anchored in the belief that food security requires a vibrant, commercial and modern agricultural sector that sustainably supports Kenya’s economic development, national priorities, and commitments to the Malabo Declaration under the Comprehensive Africa Agriculture Development Programme (CAADP), and the United Nations Sustainable Development Goals (SDGs).Building  on  lessons  learned  from  prior 

strategies, ASTGS takes an evidence-based approach, as well as a  sharp focus on implementation and delivery with the counties 

at the centre. This approach is the basis for addressing the effects of climate change and the challenges that constrain agricultural 

output, productivity and natural resource management in Kenya today. Sustaining this evidence-based foundation will require data for rigorous performance management today, as well as the research and innovation to propel decision making and technologies that the transformation will require for the future. 

The ASTGS prioritizes three anchors to drive the 10-year transformation, with specific 

targets set for the first five years:

■ Anchor 1: Increase small-scale farmer, pastoralist and fisher-folk incomes:

– Raise average annual small-scale farmer incomes by ~40% from KES 465/day to 625/day (~35% increase)ii– Directly benefit ~3.3 million Kenyan farming households

■ Anchor 2: Increase agricultural output and value add:

– Expand agricultural GDP from KES 2.9 trillion to KES ~3.9 trillion (~6% CAGR)

– Grow contribution of agro-processing to GDP by KES ~130 billion over 5 years (~50% from KES 261 billion today)

■ Anchor 3: Increase household food resilience:

– Reduce the number of food-insecure Kenyans in the ASAL regions from 2.7 million on average to zero,iii while reducing the cost of food and improving nutrition

– Protect households against shocks: environmental and fiscal

The path to achieving these outcomes must address the unique challenges and opportunities for women and youth in the sector by incorporating tailored opportunities for these groups as an integral part of delivering the ASTGS. Women comprise more than half of Kenya’s population, youth between 18-35 

comprise ~35%, but these two groups are underrepresented in agriculture and as a result do not receive full benefits of participation in the sector.

1.Nine big ideas (“flagships”) underpin these anchors to define the strategy in the context of devolution: two flagships to increase small-scale farmer,pastoralist and fisherfolk incomes; two flagships to increase agricultural output and value-add; two flagships to boost household food resilience; and finally three enablers that run across the transformation:

ANCHOR 1: Increase small-scale farmer, pastoralist and fisherfolk incomes

1. Target ~1 million farmers in ~40 zones(initially) producing crops, livestock and fish served by ~1000 farmer-facing SMEs that provide inputs, equipment, processing and post-harvest aggregation 

2. Shift nationwide subsidy programme focus to empower ~1.4 million registered high needs farmers to access a wide range of inputs(seeds, crop protection, fertilizer, equipment) from a variety of private and public providers, using e-vouchers with digital service delivery

ANCHOR 2: 

Increase agricultural output and value-add

3. Establish ~6 large-scale agro- and food-processing hubs across the country through a rapid Public-Private-Partnership (PPP) process (i.e. one-stop shop)targeting both domestic and export markets

4. Unlock ~50 new large-scale private farms (>2,500 acres each) with ~150,000 acres  under  sustainable  irrigation from existing projects (e.g., rehabilitate dams) with government-provided infrastructure (e.g.,power, roads) and protected land ownership

ANCHOR 3: 

Boost household food resilience

5. Restructure governance and operations of the Strategic Food Reserve (SFR) to better serve ~4 million vulnerable Kenyans through: i. reserves optimized for emergency responses only; ii. buy/sell guidelines published with pre determined emergency release triggers for stocks and cash; iii. private sector warehousing; iv. price stability managed through Treasury (i.e., minimum price controls and cash transfers)

6. Boost food resilience of ~1.3 million farming, pastoralist and fishing households in arid and semi-arid lands (ASALs) through community-driven design of interventions,and more active economic bloc coordination of development partner and private sector resources 

ENABLERS

7. Launch three knowledge and skills programmes: i. field-and-forum curricula for ~200 national and county government leaders who will drive the strategy; ii. skill building for public and private sector flagship implementers (including agri-business skills for ~1,000 farmer-facing SMEs); iii. management/technical training for ~3,000 youth-led and digitally-enabled government extension agents

8. Strengthen research and innovation as launch priority digital and data use cases to better drive decision making and performance management

.First wave of use cases includes: i. digital subsidy delivery programme; ii. production forecasting and digital performance monitoring of small-scale farmers and SMEs; iii. forecasting and monitoring SFR buy/sell needs

9. Actively monitor two key food system risks: i. sustainable and climate-smart natural resource management including health of water basins, soil quality and land use; and ii. rapid-response crisis management for pests and diseases, climate and global price shocksDelivery will be a collaborative effort chaired by His Excellency the President of Kenya or the Deputy President and comprising the Cabinet Secretaries from the Ministries of Agriculture

and Irrigation (MoALF&I); Devolution and ASAL areas; Environment and Forestry; Industry, Trade and Cooperatives; Lands and Physical Planning; Ministry of Transport, Infrastructure, Housing and Urban Development; Water and Sanitation; and The National Treasury. 

The MoALF&I will formulate, implement and monitor agricultural policy and regulation, while developing and coordinating programmes to support crops development, livestock, fisheries, irrigation and research that are critical to delivering the ASTGS. Furthermore, the MoALF&I Cabinet Secretary will ultimately be responsible for delivering the targets for the sector.The Agricultural Transformation Office (ATO) will  support  inter-ministerial  coordination, performance management and mutual accountability across the sector, and should play its role in close collaboration with the MoALF&I, but reporting to the President or Deputy President. The ATO Director will work closely with the MoALF&I Cabinet Secretary on  his/her  transformation  mandate.  The ATO will also collaborate closely with the Joint Agricultural Sector Steering Committee (JASSCOM) and the Council of Governors as the latter bodies support the counties to domesticate the ASTGS. This domestication is critical not only for ongoing County Integrated Development Plans (CIDPs), but also as the counties draft their own 10-year Agriculture Sector Development Plans (ASDPs).Early estimates show that the strategy has the potential improve the lives of ~3.3 million 

small-scale farming households (~15 million Kenyans), and contribute additional agricultural GDP of up to KES ~170 billion p.a. in five years (~up to KES 460 billion). An additional ~up to KES 230 billion p.a. can be added to total GDP from other sectors (e.g., construction and manufacturing) as a result of transformation in agriculture.

The ASTGS is expected to cost up to KES 440 billion over five years: ~KES 230 billion in agriculture-specific costs, and ~KES 210 billion in agriculture-supportive spend including power, roads and price stability within National Treasury. With the right approach, up to 80% of costs can be financed through public private partnerships (PPPs), particularly in the agro-processing and arable land flagships. Therefore, Government of Kenya (GoK) and development partners would need to finance 20% of cost which includes subsidies, extension and the enablers. To meet this obligation, the GoK needs to raise an additional KES 8-10 billion 

per year to cover their financing obligations to the strategy (~30% increase in current disbursed budgets).