INTRODUCTION

The AgriFI Kenya Challenge Fund Initiative aims to support productive and market-integrated smallholder agriculture in Kenya, improving the capacity of farmers to practice environmentally sustainable agricultural businesses in inclusive value chains (VCs). The anticipated impacts of the fund include benefits relating to gender, youth, climate, nutrition and food security. Through their interactions with smallholder farmers / suppliers and employees, SMEs bring about a variety of livelihood impacts. While the scope of their activities may be limited in terms of intentional impacts, positive developments can arise naturally, or incidentally, through the growth and development of their business models. Therefore, supporting SMEs with promising business models can achieve mutually beneficial commercial and development goals.

Through some of the early fieldwork research undertaken by Imani Development to support AgriFI implementation, it was evident that specific geographies were concentrated in both farmer organisations and buyers. This was particularly the case for smallholder avocado and mango farming. This being the case, there was a risk that the impact of AgriFI support might be to simply move existing farmers between companies, rather than to create new farmers. Another concern was that this might distort the competitive process in some way.

As an objective, the research sought to identify whether horticulture (particularly avocado and mango) market systems presented risks in achieving the desired development impacts of AgriFI, and to be clear about what drivers of impact existed in different scenarios.

The full report describes the market structure of these sectors in order to measure the real effects of additionality, job creation, social welfare, market distortion, and economic upgrading. It also outlines the key learnings that came out of the fieldwork research.

The following points should be key considerations for similar programmes engaging with avocado and mango supply chains in Kenya.

New employment in the Supply Chain

There is additionality in creating new demand, even when growth is achieved through “floor-crossing” of a group of farmers to a new buyer. Floor crossing describes the scenario when existing farmers growing crops of interest within a formal off-taker agreement shift towards an alternative, more favorable formal off-taker agreement. As farmer groups “cross the floor” between different companies, this will catalyse movement of farmers across market segments, and it is likely that the majority of casual farmers and new entrants that join the formal sector each season will enter at the lower to mid-range value market-segments.

Impacts are felt differently by new and existing farmers – segmented by things like experience, formalisation, resources and crop maturity. The net result of increasing farmer capacity is that recruitment drives to grow the farmer base supplying to processing and exporting SMEs will look towards the pool of existing farmers. As existing farmers professionalize, opportunities open up for new and casual avocado farmers to enter formal off-taker agreements in lower market segments. As a result, farmers have considerable upward mobility during off-seasonal contract renegotiation, and SME-driven phases of supply growth.

Among the efficiencies gained by the sector is the availability of agency workers as a flexible pool of processing workers – with training certifications in line with health and SPS requirements. The consequence of this is that many of the jobs created by SME expansion in this sector are likely to be ‘Full Time Equivalent’ employment, at least in part – i.e. the hours of processing required equate to 100 jobs, but those jobs may be filled by a pool of workers. A core of full-time workers exist in each operation, but this is likely to be small compared to the total number of workers involved in some capacity.

When it comes to integrating youth into tree crop value chains, youth tend to enter either at the services level to build up capital (such as brokerage and transport services), or at the production end through inheritance (or in some cases, entrepreneurship). In terms of production, there is a big difference between new farmers that inherit land and new farmers that buy land. Simply put – those that buy farms are self-selected prospective farmers. They arrive as investors looking to farm the land as a business. These new land owners are far more likely to have a structured business plan and to have the resources to execute it. Those that inherit farms, on the other hand, do not necessarily hold the same enthusiasm or resources.

Market Prospects

There is considerable and growing demand for Kenyan avocado and mango product – both in domestic and export markets. The most significant export growth market observed for Kenyan avocado and mango products is the Far East – particularly China, and especially in light of recent bilateral trade agreements. The most significant product growth is observed for fresh, whole Hass Avocado, and processed pulp and frozen cubed Apple Mango.

There are considerable access barriers facing both smallholder farmers and off taker SMEs looking to enter tree crop value chains and export markets. Barriers to entry include high product standards, the need for expensive processing equipment, long lead times (i.e. grafting), demand for certification and a high risk of post-harvest loss during picking and handling among many others.

Conclusion

The high potential for economic upgrading for participants in tree crop value chains translates into considerable potential to obtain impacts relating to some of the cross-cutting objectives of the AgriFI Kenya Challenge Fund. As a result of the high competition for smallholder farmers established in avocado and mango production, tree crop value can be increased once farmers are operational within the value chain. All these findings as well as those discussed in the full report, will be useful in guiding implementation and technical assistance as we work with SMEs in these value chains and assist them to implement their projects to scale.

About Martin

Martin is a VC Economist with extensive experience in industrial economics, agriculture and trade development. He is an experienced economic and management consultant with a demonstrated history of working in the research industry. Martin holds a Masters of Commerce (MCom) in Applied Economics from the University of Cape Town (UCT).