This archive report was first published on 22 June 2020.
Kenya's Transformation Agenda Under Threat ¶
Kenya's agriculture growth and transformation strategy, launched in 2013, aims to increase smallholder productivity and incomes. However, the government's policies sometimes undermine these objectives, as seen in the case of sorghum farming.
Sorghum is mainly grown in areas with low rainfall and high temperatures. For decades, there was little incentive to grow the crop due to high production costs, low market integration, and consistently low yields of about 0.7 tons per hectare. Ethiopia, on the other hand, has consistently attained a national yield of 2.5 tons/ha.
However, thanks to the government's policy supporting the use of sorghum for commercial beer brewing in 2004, demand for sorghum increased, giving smallholder farmers an opportunity to transform their agriculture and livelihoods.
First, sorghum beer processing provided a stable market. Contracts entered between the main brewer and farmers guaranteed farmers a market and stable prices. Farmers responded by increasing their production, with some attaining up to 3.3 tons/ha, translating to an increase in incomes of about 220%.
Contract farming for sorghum beer processing expanded from three counties in 2010 to the current ten counties, with four more in the pipeline. During this period, the number of farmers grew from 2,300 to 48,000, and the farm-gate price per kilogram increased from 23 to 37 KES. Yield improved due to better agronomic services and inputs provided on credit by the industry.
Second, researchers were given an incentive to support the industry and responded by doubling the number of improved varieties from 20 in 2012 to 40 in 2017. These improved varieties are higher yielding, drought tolerant, pest and disease resistant, and tailored for specific soils, rainfall, and temperature.
Third, the policies on flour blending provide additional uses for sorghum in agro-processing. Despite this growth, Kenya remains a net importer of sorghum.
However, the sorghum value chain faces severe disruption due to the National Treasury's proposal to reduce the excise duty waiver for beer made from locally grown sorghum, millet, or cassava from 80% to 60%. This measure is intended to increase tax revenue for the government but will likely result in increased prices for end consumers, forcing the processor to cut down on production and reduce demand for the raw material.
Reduced demand will not only lower sorghum prices but increase costs for farmers forced to invest in storage and management of unsold produce. More jobs will be lost along the value chain as economic activity scales down.
Existing evidence shows that such a policy move is counterproductive. In 2013, a similar proposal was implemented, resulting in the price of sorghum beer increasing, demand plummeting, and contracts for farmers being cancelled. This had a negative impact not only for farmers but for others in the value chain, like input sellers, grain aggregators, and transporters. Instead of the government raising revenue, it actually lost Ksh 2 billion in forgone tax revenue due to losses accruing to the sorghum beer processors and others in the chain.
The policy measure was rescinded in 2015. The new regulation is ill-timed, given the current economic shocks facing the agriculture sector. The desert locust invasion in 2019 and excessive rainfall in 2020 posed significant threats to productivity, and the COVID-19 pandemic has disrupted the economy in a way never experienced before.
The adverse policy also contradicts other government policies and investments. The government has invested heavily in the sorghum and millet value chains through projects like the Kenya Climate Smart Agriculture Project, the National Agricultural and Rural Inclusive Growth Project, and others.
