BUSINESS SPOTLIGHT
Cry, the beloved small scale farmers
They feed the export sector. But why are they poor, living in indignity?
By Nduta Kweheria
Vegetables grown on African farms are sold in retail outlets in Europe and the Middle East, while the aroma of coffee, tea and cocoa fills the air in most coffee and confectionery shops. The scent of flowers fills the sidewalks. Yet, the African small scale farmers that produce these valuable products are poor – food insecure, living in dilapidated dwellings without adequate water or sanitation, unable to pay for health care or education. They can ill-afford three meals a day.
Hardly all; Kenya is a net importer of maize, rice and sugar
Most of Kenya’s adult population has grown up being taught that agriculture is the backbone of the economy. The fact that agriculture employs three in every five people in Kenya, accounts for 27 per cent of Kenya’s Gross domestic Product (GDP) and contributes 50 per cent of the export earnings means that its importance cannot be overemphasized.
So why are the majority of Kenya’s farmers poor and one in three of children malnourished? Why has the agriculture budget been consistently below 5 per cent despite government’s commitment in the 2003 Maputo Declaration to raise its allocation to 10 per cent? If it is the small-scale farmer that feeds agricultural exports, why isn’t their livelihoods reflect the 50 per cent Kenya’s export earnings?
High produce prices
A 2012-3 study, Global Financial Markets and the Right to Food: A Focus on Small and Marginal Coffee Producers in Kenya, found that even in times of highest coffee prices in the global market, small-scale farmers get no significant improvements in their livelihoods. This begs the question: Where does the money from the sales of Kenya’s coffee go?
According to the report, the poverty afflicting farmers is due to price volatility, limited understanding of global supply chains, lack of information on pricing, expensive inputs, delays in payments and the huge number of players (read brokers) wedged between the farmer and the retailer.
Small scale farmers receive seeds from millers, the cooperative or the exporting company. They must later pay for them at prices they did not negotiate as there appears to be no standard price for the research that goes into developing the right seed. So farmers pay what is charged as the seeds are advanced to them at the start of the season, and the un-negotiated seed price deducted months later (often at an interest) from the harvest. They have to pay for the seeds whether or not they produce the expected yield. Low productivity is blamed on the farmer’s laziness or careless agricultural practices rather than on the seed quality.
Even the most diligent of small scale farmers cannot win this argument as they hardly adduce the evidence to show that they grew the seeds as directed.
Farmers, particularly horticultural producers, also receive soil testing and technical advice on which seed to grow and the fertilizer or pesticide to use. However, this advice is often not from the agricultural extension officer whose salary and benefits are paid for by taxpayers, but in most cases from a technical adviser employed by the exporters. It follows that the small-scale farmer is paying double for agricultural extension services.
Small scale farmers pay Value added Tax (VAT) each time they buy seeds, fertilizer, pesticides, and any other commodity they use at homes. No wonder agriculture contributes over 45 per cent of GDP.
So it would be interesting to see how the Sh59.3 billion allocated to agriculture in this year’s Budget will be shared at counties’ level, and how it will go towards purchasing vehicles to transport agricultural extension officers to the farms of individual farmers. Interestingly, agricultural extension officers together with doctors, nurses, water engineers and all public officers will be paid from the meagre 21 per cent of the 2014-5 budget that will be shared by all 47 counties. The Sh59.3 billion will go into national government projects on agriculture (such as the Galana irrigation project), and coordinating the agricultural sector.
The story is the same even for small scale farmers that feed the local market. Kenya only grows half of the sugar and one third of the rice that it requires to satisfy the local demand. One would expect from the laws of supply and demand that farmers who grow a commodity that is in low supply and high demand to be rich. This is not the case. Even sugarcane and rice farmers are poor.
Cost of marketing produce
Small-scale farmers do not know who in Europe or the Middle East eats their vegetables or drinks their tea or coffee; or how it gets there. What is hardly ever discussed is that by the time the farmer is paid Sh70 – Sh140 for a kilo of coffee delivered, or Sh35 – Sh100 for a kilo of vegetables, the petrol or jet fuel cost of transporting the produce has already been deducted, the drivers and packers paid, export taxes and local levies in Kenya paid and the shareholders of the private company with which they have a farming contracts paid their profits.
All these are costs that are paid for before the small scale farmer is paid.
Should all the produce not to be purchased or its quality drop due to delays in transit, the value of this loss is first deducted as a cost of doing business before the farmer is told how much they will get.
Cooperatives respite?
Were the farmer to dispose of produce through a marketing cooperative rather than a private company, the produce price paid will not be any higher. Members of agricultural produce marketing cooperatives appear to be getting poorer; losing assets bought jointly rather than gaining profits. Members get indebted rather than receive dividends.
Kenyans must ask themselves why private and public companies appear to deliver more profits for shareholders than cooperatives and out-grower institutions involved in exactly the same business.
Even after doing it many times with the same result, government continues to ‘rescue’ farmers from debt bondage by using public funds to pay ‘cooperatives’ and other shylocks in the name of offsetting debts owed by farmers. This is almost always done just before elections. On receiving the funds, the money lenders release peasant farmers’ national identification documents so that they can register as voters. The payment is almost always followed by the head of the cooperative, broker or money lender resigning to ‘enter into politics’.
It is time to admit that all the ‘rescue’ and ‘reform’ initiatives done in this sector have failed. Since government has always had its hand in the cooperatives, maybe it is time to try a different model – let it (government) play a regulatory role. Or better yet, convert all cooperatives into companies, and apply the same stringent governance requirements in the hope of a different and better result.
The big picture
Agriculture and specifically, coffee and all the crops for the local and export market are the golden-egg-laying-goose for Kenya. Too many people in the economy earn from it. For the national government, agricultural exports improve the balance of trade and generate foreign exchange.
By supplying local retail markets, small-scale farmers improve the national statistics on food security and employment by simply ensuring that supply is high enough for food prices to be within the reach of all. Small-scale farmers thus give Kenya higher ratings on human rights indices such as the MDGs as performance on Goal One (reduce poverty by half the rate it was 15 years ago) uses employment and food security as indicators and most of the other seven goals rate access to the very things (human rights) that small-scale farmers would be able to pay for and access if they were justly remunerated for their produce.
If small-scale farmers do not make enough money to guarantee them dignity, they will be forced to abandon farming and look for other jobs elsewhere, thereby increasing the rate of unemployment. Kenya will continue to import maize, rice and sugar. Food prices will soar, decreasing the number of people that can afford three meals a day.
They will assert more pressure on public amenities. Inflation will rise as Kenya spends its meagre foreign exchange on importing foodstuff that can grow locally rather than on equipment and services that create new jobs. It is therefore in the best interests of the government (both the national and county) to empower small-scale farmers.
While government spends large sums of money to train youth as entrepreneurs, the training does not effectively focus on agribusiness. Even when training is offered to farmers, it is rarely transformative because it does not adequately support small-scale farmers to deal with their real challenges, including limited understanding of global value chains. The result is always the same: Farmers’ inability to cut out the middleman or reform their cooperatives.
Kenya’s commitments
A decade ago, Kenya was part of many African governments that made the Maputo Declaration and its platform for action. African Governments committed to spend 10 per cent of their GDP on improving agriculture. The Sh59.3 billion allocation to agriculture is only half of what Kenya committed to spend on this sector. Unless Kenya develops a budget law and policy that compels it to adhere to such commitments, the funds allocated to agriculture will fluctuate from year to year and never achieve the grand plan that was intended.
Under Devolution’s subsidiarity principle funds must follow functions. Thus, the requisite funds ought to be allocated to county governments for service delivery. This money is intended for equipment (vehicles for the agriculture or livestock extension officer to access farmers) or supplies (gloves or syringes for the local dispensary), and for paying technical staff performing all the functions devolved to counties.
Small-scale farmers also pay cess and other service charges. Essentially, the only reason why County governments get fund allocations from national government and are allowed in law to collect revenue is because they deliver a service. If agricultural extension officers are not visiting and advising farmers, and there are complaints on service delivery in health and water sector, it defeats the purpose or rationale of having devolved government.
Kenyan fertilizer
Five decades after independence, Kenya still imports fertilizer and pesticides despite the phrase ‘Agriculture is the backbone of Kenya’s economy’ appearing in each year’s Madaraka and Jamuhuri Day speeches. No one has been prosecuted for the 40 year-old corruption scandal that made it impossible for the country to acquire the requsite factory.
So far, none of the 47 County governments have in their first two years’ budgets or strategic plans included proposals to establish a waste treatment mechanism that can generate fertilizer or offered incentives to private corporations to do so.
ICT Challenge
One of the reasons why there is such a huge disconnect between small scale farmers and those who retail their produce in local or international retail outlets is their lack of access to market information and particularly pricing.
Farmers receive less than 20 per cent of the price of their produce – Sh140 per kg of coffee is paid to farmers, yet its price at the Nairobi Coffee Exchange is Sh800 per kg. Farmers, including those with internet enabled mobile phones do not have this information.
Farmers’ trainings, the digital villages and M-FARM concepts appear not to be telling farmers what they need to transform their lives.
Lifestyle not business
Finally, small scale farmers must also begin to see farming as a job – gainful employment. In most of the households of small scale farmers, land is owned by the male head of the household, who often does very little or no actual farm work. The day to day crop production is done by women and their post-teenage children, many of whom have dropped out of school, or by hired casual labour under the supervision of women.
If a sugarcane farmer receives a cheque of Sh300,000 for cane that has taken two years to grow and be harvested, it means that s/he has been paid a monthly salary of Sh6,250. If he and his wife and two other unemployed adult in the family worked on the cane, it means these four adults are each earning about Sh1,562 a month. This is not even in the halfway of the universal poverty line pegged at Sh3,250 per month.
Small scale farmers must know the true value of their produce and learn to approach farming as a business that must break even.
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