This archive report was first published on 6 July 2021.
Published on July 6, 2021, Kenya's economy is heavily reliant on agriculture, but the country's agro-processing industry is struggling to take off.
According to the Kenya National Bureau of Statistics 2020 economic survey, the country's reliance on foreign foodstuff has posted a sharp increase, with the Import Dependency Ratio (IDR) worsening from 15.4 per cent in 2018 to 16.4 per cent in 2019.
The IDR for vegetable and animal products also worsened, from 18.9 and 2.9 per cent in 2018 to 19.4 and 4.2 per cent, respectively, in 2019, indicating increased reliance on imports of these commodities.
Dr Tim Njagi, a development economist and research fellow at Tegemeo Institute of Agricultural Policy and Development, Egerton University, attributes the lack of commercialisation of the agricultural sector to the high costs involved in starting and running an industry.
"Starting an industry requires manpower and machines, and they are not cheap. If we can address the high cost involved in running an industry, then we are on a sure path to success," Njagi says.
Recognising the high cost of starting and running a manufacturing industry, the state has resolved to help the sector by advancing finance to SMEs engaged in manufacturing.
In the 2021-2022 budget, the state issued Sh616 million to small and medium businesses involved in the production of goods.
However, Njagi cautions that the funding needs to be sustained for a while for the benefits to be realised.
"The cash pumped into the manufacturing sector, targeting SMEs, is laudable, but the state needs to sustain this for a while for the benefits to be realised, but the issue arises when the funding is done sporadically," he said.
According to the latest data available from the government parastatal in charge of SMEs, the bulk of SMEs are in the service industry, while a small percentage are involved in agri-business and construction industries.
Small-scale farming is also limiting the establishment of manufacturing plants, as the country barely produces enough to satisfy its population.
According to the 2020 economic survey, the agricultural sector performance decelerated from 6.1 per cent recorded in 2018 to 3.6 per cent in 2019.
Maize production declined from 44.6 million bags in 2018 to 39.8 million bags in 2019, while cane deliveries to factories declined from 5.3 million tonnes in 2018 to 4.6 million tonnes in 2019.
However, milk production increased by 5.3 per cent from 634.3 million litres in 2018 to 668.2 million litres in 2019.
Njagi says that for a food factory to sustainably run, it must ensure a consistent supply from farmers, which is a challenge due to the small-scale nature of most farmers.
