Transforming Kenya's Agricultural Inputs Sector

KMT Agri-Inputs Case Study

Transforming Kenya's Agricultural Inputs Sector

Despite the importance of agriculture to the Kenyan economy, it has not been performing to its potential. There is limited diversification away from staple crops, such as maize, and average yields remaining below those of comparable countries. Kenyan farmers use relatively low levels of inputs. This lowers productivity and therefore farmers’ returns and their ability to reinvest in their crops.

Scenario

What could we see?

Low and inappropriate consumption of inputs (fertilisers, chemicals and seeds) per hectare of arable land, resulting in low productivity
Less diversification of crop production (60% of total crops produced in MT was maize
Low incomes of farmers

Symptoms/Effects

What was the market suffering from?

Lack of product-specific knowledge transfer from manufacturers/suppliers to the downstream actors
Uncompetitive market system characterised by dominance of parastatal companies in distribution of fertilisers and maize seeds
Increased sales of counterfeit seeds and fertilisers

Contributory Factors

Why did those symptoms exist?

Transaction oriented supply chain focused on maximising short-term gains rather than a long-term customer-driven business practice.
Seed sector governance and regulation not fit-for-purpose, with public bodies lacking capacity and private sector lacking representation.

While several factors have affected productivity, the structure of the agricultural inputs market has been a major cause of poor performance. This stems from two main issues;

The short-term oriented business practices of actors in the inputs supply chain

Seed sector governance and regulation

Taken together, these have had severe impacts on smallholder farmers and created several intersecting negative cycles.

Tackling Underperformance – KMT’s Vision For Transforming The Agri-Inputs Sector

KMT believes that through the right support and facilitation, transformational change is possible within the agri-inputs sector, delivering higher agricultural productivity, long-term growth, and better value to farmers.

KMT has developed two main strategies focused on the two key challenges

Strategy 1: Fostering long-term customer-oriented business strategies along the chain.

Strategy 2: Improving seed industry governance and regulation.

Signs of Sector Transformation

Change in suppliers’ behaviour

KMT’s partnership with Toyota Tshusho has not only allowed them to rapidly expand sales of crop-specific blends but has also encouraged other fertiliser companies to adopt innovative marketing strategies to increase sales.

Change in distributors’ behaviour

Distributors that received KMT support have significantly improved financial performance and grown customer networks. They have also implemented better distribution practices and maintained continuous engagements with agro-dealers and farmers.

Change in agro-dealers’ behaviour

Agro-dealers that have maintained close ties with distributors through the preferred stockist model have seen significant improvements in their sales.

Change in farmers’ behaviour

Farmers who attended demonstrations, field days or expos organised by KMT-supported distributors or suppliers have begun to adopt good agricultural practices and diversify crop production based on KMT reporting data.

Impact of increased use of crop-specific fertiliser

266,092 farmers accessing crop specific fertilisers

of which

186,477 farmers increased income by at least 10%

3.5 bags per acre increase in maize production per farmer using crop specific fertilisers

resulting in

£62.5 per acre as additional income earned by those farmers

While there is much work to be done, the future looks promising for KMT’s vision of a vibrant agricultural inputs sector

Impact of increased use of lime and soil testing services

84,914 farmers accessing lime and soil testing services

10 bags per acre increased in maize production per farmer using lime

resulting in

£160 per acre as additional income earned by those farmers

About This Study

Organization Of The Study

Section 1

Agriculture in Kenya why change is needed

1.1 The importance of agriculture in Kenya
1.2 Kenyan agricultural performance – low productivity and dominance of maize
1.3 The drivers of underperformance in Kenyan agriculture

Section 2

Tackling underperformance – KMT’s vision for transforming the agri-inputs sector

2.1 KMT’s vision for a reformed agricultural inputs sector
2.2 Strategies to achieve this vision

Section 3

The evolution of KMT’s Last Mile Distribution Strategy

3.1 Two approaches to last mile distribution
3.2 Lessons and challenges
3.3 Signs of sector transformation

Section 4

Seeds self-certification and scratch-off labels

4.1 KMT’s seeds work to date
4.2 Lessons and challenges
4.3 Signs of sector transformation

Agriculture In Kenya - Why Change Is Needed

The importance of agriculture in Kenya

Agriculture is the backbone of the Kenyan economy.

Employment

It employs more than 40% of Kenya’s total population and about 70% of its rural population.

GDP Growth

The sector generates a third of Kenya’s GDP. In Kenya, 1% of agricultural growth is estimated to drive 1.6% overall GDP growth.

Exports

In 2016, the sector was valued at KES 2.3 trillion (roughly 22 billion USD), generating 60% of Kenya’s exports.

Kenyan agricultural performance – low productivity and dominance of maize

Despite the importance of agriculture for Kenya, it has not been performing to its full potential.

Average yields for major crops remain below those of other comparable nations. For example, in 2003, Kenya had similar average maize yields to Uganda and Zambia. But by 2012, average maize yields in Zambia and Uganda were 1.4 to 1.5 times those in Kenya. Over the period, Kenyan maize yields increased 6%, compared to Uganda’s 39% and Zambia’s 58%.

2003
2012

Maize productivity is particularly important, as it remains the dominant crop in Kenyan agriculture, comprising more than 60% of production (with an increasing share from 2003 to 2012).

Commercial crops such as tea and coffee account for less than 10%. Maize’s dominance has discouraged smallholder farmers from exploring alternatives, such as other cereals and vegetables, as they fear these may not attract buyers.

2003
2012

The drivers of underperformance in Kenyan agriculture

Yield gaps are driven by factors including;

Limited and/or delayed access to high-quality seeds

Poor farming practices

Significant post-harvest losses

Low levels of mechanisation

Growing uncertainty related to climate change

The Way Forward

Building on successes to date, over the next 3-5 years KMT plans to engage up to 70 companies in the scale up of its last mile distribution work.

As a result, it is expected that three million smallholder farmers will have improved access to key agricultural inputs, adopt good agricultural practices and ultimately increase farm yields and income.

KMT plans to increase agricultural lime availability from the current 10,000 MT to 26,000 MT by 2022 and 33,800 MT by 2027

This will be achieved by engaging with the Kenya Association of Manufacturers (KAM), KEPSA, and the Ministry of Agriculture to convene thematic industry learning workshops and identify ways to promote the replication of commercial models for agricultural lime.

Additionally, KMT envisions that a total of 2,720,000 smallholder farmers will access quality crop seeds by 2022 and 3,060,000 smallholder farmers by 2027.

To achieve all of this, KMT will need to work very closely with industry players such as STAK, AAK, KEPHIS, KALRO and County Governments.

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