Agricultural sector development Support programme (ASDSP) transforming Kenya Agricultural sector through support to environmentally resilient and socially inclusive value chain development

1. Harnessing the most emerging
markets through value chain
development
Agritec Exhibition
15th to 17th July 2016
1

2. Kenya Agriculture at a Glance
2
Contributes
30% to the
national
GDP
Accounts
for 80% of
the national
employmen
t
Contributes
40% of
Governmen
t Revenue
Accounts
for 60% of
total
exports
Agricultur
e
30%
Manufact
uring
12%
Services
10%
Financial
Services
16%
Transport
10%
Others
23%
Contribution to GDP: 2015
30%
39%
32%
20%
3%
1%
0.0% 20.0% 40.0% 60.0%
Kenya
Burundi
Tanzania
Nigeria
South Africa
United Kingdom
Agriculture as % of GDP

3. The Context- Tapping the Food Market
• Growth African Food Market => Tripple : Usd 313 B 2013
to Usd 1 Tr 2030
• African food imports increased about 3 times between
1990 and today
• Food 2011 Kenya Imports $ 1.5 B, export $ 245 M (6:1)
• Non Food agric 2011 Kenya Import $ 190 M, Export $
441 M (1:2.5)
• Total Agric. Import $ 1.7 b, export $ 687 M (2.5)
• Import index increased 3X, while export index 2X, 10 Y
• Total value food crops, about & 3.7 b, non food $ 1.6 b=
about $ 3 b internal value
Tapping this market in direct sales and associated services is
an enormous opportunity but there is a big gap betweeen
actual and potential

4. Challenges to commercialisation at Household level
• Low Income
– On farm KES 75,101/hh (5.6 pers)= 37 KES/ capita/day= a dollar in 3 days
– Total hh income KES 95,125 = 50 KES day/= half a dollar
• Food Insecurity
– 62 % food insecure, food diversity 2 out of 12
• Low Profit
– Negative gross margins at subsistence level production
• Low Productivity:
– Maize 1,6 t/ha, Kuwait 25 t/ha
– Banana 23 t/ ha, Indonesia 55 t/ha
– Milk 1.8 t/lactation, Israel 12 t lactation
• Small land size
– Average size 1.8 ha ( 15% used for commercial production
• Low Mechanization
– Cropped area/ worker 0.82 ha, SA 5.9 ha
• Low Input Use
– 39% use fertilizer (40 kg/ha)
– 20% use AI

5. MSMEs as Catalysts for Growth
5
42.6% 41.9% 41.7%
32.3% 32.5% 32.5%
20.1% 20.5% 20.6%
5.0% 5.1% 5.2%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
2012 2013 2014
Distribusion of Enterprises
Micro Small
8.7% 9.1% 9.3%
91.3% 90.9% 90.7%
0.0%
50.0%
100.0%
2012 2013 2014
Value Addition
Micro and Small Enterprises
Medium and Large Enterprises
Micro
8%
Small
33%
Medium
47%
Large
12%
Employees by Enterprise Size
 a major creator of employment opportunities
 a major contributor to GDP
 a potential agent of innovation and value
addition
A stronger MSME sector remains….
However, the sector requires…..
 Well structure incubation services
 Financing structure
 Enabling environment
 Linkage to markets and market information

6. ASDSP Agricultural Sector Development Support
Programme
6
GOAL
3
“transform Kenya’s agricultural sector into an innovative,
commercially oriented, competitive and modern industry that will
contribute to poverty reduction, improved food security and equity
in rural and urban Kenya”
Promotion of 29 Value
chains in 47 counties
through viable
product development
process
Cluster name VCS Total
White meat Chicken( indigenous chicken & broilers), fish 40
Dairy Cow milk, Camel milk 35
Red meat Beef, camel meat, shoats 14
Fruits Mangoes, passion, bananas 13
Cereals Maize, rice, sorghum 13
Vegetables Local vegetables, Snow peas& French beans, Sukuma
wiki, tomatoes,
10
Tubers Irish potatoes, cassava, sweet potatoes 6
Honey Honey bee 3
Industrial crops Cotton, pyrethrum, African bird eye chilli 3
Pulses Green grams 2
Nuts Groundnuts 1

7. ASDSP & KEY INTERVENTION STRATEGIES
7
Devolution of ASDSP
county operations
Harmonisation & Alignment
with government strategies
Resilience Focused
Approach
Commercial & “pull –
focused” VCD
Sector Focus
Governement
execution,
Transparency and
Accountability
Right based
Approach
VC- focused
Organisational
Structure
Demand Driven,
Stakeholder led,
Partnership based
Increased impact
Through Synergy of
effort
ASDSP

8. ASDSP & VALUE CHAIN DEVELOPMENT
8
Organisational
development
Creation of Linkages,
Viable businesses,
Private sector involvement
Strong marketing
institutions
Promotion of
Value Chains
through:
Value Chain
Prioritization
Development of Action
Plans ( Vision and
Growth Paths)
Capacity building
Joint resource
Mobilisation
Facilitating
Coordination
Environmental
Resilient
Social Inclusion

9. Sustainability and
Growth
Organization
Business Capacity
linkages
Strong Chain Relation;
Organization
Business Relations
Trust
Strong Market
Institutions;
Standard regulations,
policies, services,
coordination and
support
Value Chain
Growth Path

10. PURPOSE
PROCESS
Focus
Resources on;
Coordination
Resource
Mobilisation
Negotiation
Areas to Address;
Efficiency
Relations
Institutions
Pool Resources
Ownership
Implementation

11. POORLY FUNCTIONING VCS
High market and price volatility of input and out put
markets
Low production and high post harvest losses
Inadequate skills and strategies on market access
Weak value chain integration – buyers/processors
operate below installed capacity while producers
lament on lack of markets
AGRITEC AFRICA – JUNE 15 -17. 2016; KICC

12. WELL FUNCTIONING VCs
• Volumes: Productivity increases (output per acre,
milk yields) and production increase (acres under
production)
• Income generation: profit per acre
• Business orientated investment
• Outreach: how many producers are involved? How
many are employed in the VC?
• How much is produced for the market?
• Collective action – to reduce cost of doing business
and to provide an assured market for producers
and, an assured supply for off-takers .
AGRITEC AFRICA – JUNE 15 -17. 2016; KICC

13. ASDSP & PARTNERSHIPS
13
Partnership is core to ASDSP Business Model
Private
Sector
Businesses
1
Public
Sector
Institutions
Developme
nt Agencies
Research
Institutions
Financial
Institutions
and
Investors
ASDSP partners with organisations with strong sector understanding of the interventions
which includes:

14. Market Opportunities 1- Organization for inputs
supply and marketing
Trends in value of farm input
imports to Kenya ASDSP interventions
• 1) Inputs
- ASDSP aggregates farmers into
cooperatives/ Unions/groups for
improved input supply & Marketing
- Market opportunities
– 1) to link with private sector for
contractual engagement on
inputs and produce
– 2) Pilot new technologies and
innovations for improved
productivity and marketing
– 3) More business focus and
access to credit

15. Marketing Opportunities 2- Processing
Processing potential
- Only 16% of Kenya’s agricultural produce is processed
- Market opportunities and ASDSP intervention include , linkages,
contracts and information

16. Marketing opportunity 3-Financing as Catalyst for
Growth
1
6
Role of ASDSP
 Facilitate capacity building the MSMEs
 Encourage eco-innovation in new Product
Development
 Facilitate linkage to financing
 Facilitate market linkage
 Facilitate linkage to insurance services
Agricultu
re, 5% Manufac
turing,
16%
Trade,
20%
Real
Estate,
18%
Others,
41%
Credit to Private Sector
Enterprises: 2014
Commercial Bank Loans 2012 2013 2014
Private sector
lending(bln)
1,054 1,213 1,452
Lending to Agriculture 5.6% 4.9% 5.1%
12%
18% 19%
24%
11%
0%
10%
20%
30%
Private Enterprise Lending Growth: 2012 -
2014
To increase private sector investment and
funding to agriculture and agribusiness
Agricultu
re 5%Manufac
turing
16%
Trade
20%Real
Estate
18%
Others
41%
Credit to Private Sector
Enterprises: 2015

17. Results –Example 1
Cow milk Value Chain - Nakuru County ( 2 years)
 Production cow/day from 5 to 7 litres
 This means from 1530 l/lactation period to 2135 l/
lactation period
 Milk spoilage reduced from 20% to 10%
 Prices increased from KSH 27 to KES 35
 Livestock statistics from department of Livestock
Production which says the County produces 290M
litres milk /year and average production per cow is
622 l/lactation.

18. Results- Example 1, Cont
Cow milk Value Chain - Nakuru County – 2 years
Yield/kg
/lactati
on
Product
ion for
county
(Tons)
Loss
(Tons)
Total
After
Loss
(Tons)
Value
(Billio
n
KES)
Contribut
ion to tax
(Billion
KES)
Consumpt
ion (tons)
Surplus for
export
outside the
county -tons
or (people)
Before 1530 226,400 45,280 181,120 4.89 0.98 168,300 12,280
(129,000)
After 2135 315,924 31,592 284,332 9.95 1,99 168,300 116,032
(1,17 M)
Differenc
e
1,225 85,924 -13,638 103,212 5.06 1,01 0 103,212
( 1 M)
Enough to pay 70,000 workers for a year

19. Results, Example 2
Maize Value Chain – Trans-Nzoia
• Production Increased from 15-20 bags (3,375 kg/ha to 4,500
kg /ha)
• Increase in price from KES 1600/bag to KES 2600/bag
• Reduction in post harvest losses from 30% to 20% (10%
reduction)
• Last year the county produced 5 million bags
Yield
kg/ha
Productio
n for
county
(Tons)
Loss in
county
(Tons)
Total
after loss
(Tons)
Value
(Billion
KES)
Contributio
n to tax
(Billion KES)
People to
feed (N0)
Before 3,375 450,000 135,000 315,000 5.6 1.12 1,750,000
After 4,500 600,000 120,000 480,000 13.9 2.78 2,667,000
Difference 1,125 150,000 15,000 165,000 8.3 1.66 917,000
The increase in value can also pay 115,000 workers for a year

20. Conclusions-1
• Despite Kenyan agriculture to a great extent is
subsistence it grows by 4-5% annually and is a key
driver of the economy.
• If the sector could be truly commercialized the
growth could be double digit, the sky is the limit
• Traditional export crops ( tea, coffee,
horticulture) have a lot of value- but food (crops,
livestock, fish) probably offers a larger potential
considering internal, regional and international
markets
• To get a large internal market social inclusion is a
strong driver.

21. Conclusions 2
• A value chain approach where public and
private sector join hands offer a strong
alternative in tapping the most emerging
market
• It offers a way to ensure a business approach,
efficiency and sustainability through
combining investment in hardware with
investment of capacity building in the human
resource.