Kenya’s Declining Diversification in Commercial Agriculture a Worry for the Economy

Analysts are sounding an alarm over the declining levels of diversification in Kenya’s commercial agriculture produce. According to a new report by ICEA LION, titled Increasing penetration of commercial agriculture vital to Kenya’s economic transformation.

“Diversification in commercial agriculture declined, with tea, coffee and horticulture comprising over 75 per cent of the value of marketed agricultural produce in 2018 compared to 67 per cent in 2013,” the report denoted.

“There is a need to urgently diversify the commercial agriculture base partly by stimulating domestic consumption,” it added.

The worry is underlined with the decrease in revenue for commercial revenue “as a proportion of the market value of agriculture sector output fell steeply from 27 per cent in 2013 to 16 per cent in 2018.”

“However, commercial revenue from livestock and related produce remained relatively stable at 40 per cent of the market value of livestock sector output between 2013 and 2018,” the report noted.

Additionally, annual revenues from commercial agriculture rose from Kshs 336 Bn in 2013 to Kshs 498Bn in 2018, an increase of almost 50 per cent.

The report stated that annual revenues from horticulture grew by 84% in that period; annual income from livestock and related products rose by 56 per cent and yearly revenue from tea and coffee increased by 35 per cent between 2013 and 2018.

“Annual income from cereals (predominantly maize and wheat) only increased by 18 per cent in the five-year period largely due to a 20% decline in market prices in that period,” it said.

ICEA LION Asset Management CEO, Einstein Kihanda said, “Kenya needs to increasingly commercialize its agricultural output in order to achieve structural economic transformation.”

From 2013-2017, the 19th Kenya Economic Update from the World Bank, notes the agriculture sector contributed on average 21.9 per cent of gross domestic product (GDP), with at least 56 per cent of the total labour force employed in agriculture in 2017. 

“Agriculture is also responsible for most of the country’s exports, accounting for up to 65 per cent of merchandise exports in 2017,” the bank notes.