The government’s Bottom-up Economic Transformation Agenda (BETA) is a bold step towards achieving economic and inclusive growth through the agricultural value chain approach. This value chain strategy will transform the agriculture sector by increasing productivity, reducing the cost of living, eradicating hunger, creating jobs, and promoting inclusive growth.
It is not just a commitment but a necessity to enhance the linkage between agriculture and manufacturing to achieve these goals, as the Kenya Association of Manufacturers (KAM) emphasized. Agriculture is a critical component of our economic transformation, contributing 21.2% to GDP in 2022 and employing 299,700 people in the formal sector, making it the second largest private sector employer after manufacturing, with 329,600 formal employees.
However, it is unacceptable that exports of processed agricultural and livestock commodities have stagnated at around 16%. This sector faces challenges such as poor incentives, underdeveloped supporting infrastructure and institutions, and low productivity. Adopting a value chain approach and the linkage with the manufacturing sector through agro-processing and agro-based manufacturing is not just a recommendation but an imperative to transform agricultural output.
KAM has initiated the Agriculture for Industry (A4I) strategy to support the government’s value chain approach, which seeks to bolster integration between agriculture and manufacturing. KAM works with all its members in Agro-processing Sectors (Food and beverages, Textiles and apparel, Leather and footwear, Agro-processing, and Agrochemical) to address challenges in the agro-processing value chains.
KAM has identified several key value chains, including cotton, leather, dairy, grains, tomatoes, potatoes, pyrethrum, and nuts, and the challenges that hinder their seamless linkages with the manufacturing sector. Several challenges highlighted, such as information asymmetry, insufficient incentives to produce high-quality products, high post-harvest losses, limited capital input, and low mechanization of agricultural processes, result in low productivity.
This situation is unacceptable, and we cannot allow agro-processors to continue to procure low-quality raw materials at an exorbitant price. Therefore, KAM is working with its members to collect aggregate demand data for different value chains to procure agro-based raw materials from farmers.
For instance, the current processing capacity for dry pyrethrum flowers is about 6,000 metric tonnes per year against an estimated domestic production of 886 metric tonnes in 2022 (Economic Survey, 2023). Through A4I, KAM aims to bridge the domestic production gap of required agro-based raw materials by manufacturers. The demand data, quality standards, and indicative pricing will significantly minimize the information asymmetry that exists between farmers and manufacturers.
The County Governments offer great promise towards driving this agricultural transformation agenda. The collaboration of both levels of government towards developing the County Aggregation and Industrial Parks (CAIPs) is commendable. This initiative is unique since it brings together Aggregation Centres and Industrial Parks. Aggregation Centres offer small-scale farmers a centralized location to take their crops for basic value addition such as grading, sorting, cleaning, packaging, and distribution for value addition or sale in the domestic or export market.
On the other hand, Industrial Parks bring together private firms to these common user facilities to gain economies of scale and positive externalities by sharing infrastructure and taking advantage of opportunities for bulk purchasing and selling, training courses, extension services, modern technologies, recycling, and use of agro-industrial waste/residues. All 47 counties hosting the multifaceted industrial and aggregation parks must explore the economies of scale through Regional Blocs.
Through initiatives such as CAIPs, Kenya has an opportunity to build an ecosystem to adopt modern technology for value addition, enhance forward and backward linkages with better markets, increase value-added products and growth in manufacturing, and improve working relationships with players in agriculture and manufacturing sectors, government, development partners, and the public. It is not just a recommendation but a requirement to consult with all stakeholders in the value chain for Kenya to strengthen local value chains, especially to support existing manufacturing industries. Also, proper policies must be implemented, and a conducive regulatory environment must be created. We cannot afford to wait any longer and must act now to build a vibrant and sustainable agricultural sector.
The writer, Rajan Shah, is the Chairperson of the Kenya Association of Manufacturers (KAM) and can be reached at [email protected]
