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Small farmers band together once again for higher growth

Article - September 28, 2011
Kenya’s cooperative movement, formerly a cornerstone of the agricultural sector, is regaining momentum. It is improving management and providing farmers with a better chance to compete globally
Coffee, tea, flowers and cooperatives are perhaps the most significant buzzwords when discussing Kenya’s agricultural sector. While the first three are self-explanatory, the fourth gives a glimpse into the country’s colonial and post-independence periods, as well as a general overview of about three-quarters of Kenyan society.

More than 100 years ago, British farmers in Kenya founded a cooperative movement. Because they were scattered throughout the Kenyan countryside, they required inputs to be purchased collectively and needed assistance with the marketing of their produce. Over the years, these cooperatives gained quite a lot of momentum and when the native Kenyans inherited the lands, they also inherited these institutions. According to Joseph Nyagah, Kenya’s current Minister of Cooperative Development and Marketing, this is why Kenya’s agricultural sector in the 1960s was much more advanced than in most other black African countries.

Organisations created many decades ago include the Kenya Farmers’ Association, which imported fertilisers, chemicals and all inputs that Kenyan farmers required; the Kenya Cooperative Creameries (KCC), which died out in the 1990s but has been revived since 2004; and the Kenya Planters Cooperative Union (KPCU), formed by coffee farmers and which has shared a similar fate to that of the KCC.

Corruption and mismanagement in the 1980s and 1990s led to the demise of many cooperatives. These had been regulated by the Government, but owing to pressure from the World Bank and the IMF, the state pulled out to allow the private sector to take over. Rather than raising competition, the move to liberalise the cooperatives failed as they were unprepared for this sudden freedom and the farmers began seeing a decline in profits. Consequently, people left agriculture in pursuit of more lucrative activities, and the sector slowly came to a near-halt.

When President Kibaki came to power in 2002, he decided to reverse the trend. “When the new president took over he realised that this could not go on,” recalls Mr Nyagah. “He comes from the Kenya region, the home of the cooperative movement, and the first thing he did was re-establish the Ministry of Cooperatives, separate from agriculture because he knows the role of cooperatives, particularly in central Kenya. We then passed a new Cooperative Act in 2004.

“The Government used to finance cooperatives to help them and now they provide a policy to ensure that there is no cheating, the books are kept well and the auditing is correct. They ensure that you procure properly and do not employ just your friends.”

With a good dose of technical assistance and training from Scandinavian countries, where the cooperative movement is fully developed, Kenya has gone on to form the Cooperative Alliance of Kenya (CAK), the Cooperative College of Kenya, the Cooperative Bank and the Kenya Coffee Cooperative Exporters Limited (KCCE), among others.

Although Kenya’s agricultural and horticulture cooperatives do not control as much of the export market as they did in their heyday, they are growing. According to the Ministry of Cooperative Development and Marketing, as much as 80 per cent of the population derives their income either directly or indirectly through cooperative activities. By 2007, agricultural cooperatives’ turnover had reached KES 8.4 billion (£63 million). Nowadays, the cooperative movement contributes some 43 per cent of GDP and to 30 per cent of the Savings and Credit Cooperatives (SACCOs).

One of the most significant effects of the revitalised movement has been a gradual return of people back into the waning agricultural sector, as well as growing investment.

“Within the agricultural sector, you are going to see us investing in more joint ventures and value addition in the horticulture sector,” explains the Minister. “We call PPPs CPPs (cooperative-private partnerships). If you want to invest in Kenya, you should talk to the cooperative movement. We own a bank, money and land.”

In short, Kenya’s cooperative movement offers the resources yet needs partners who can supply the expertise and management. Mr Nyagah identifies opportunities in grain handling, sugar mills, fertilisers and other inputs.

Although the agricultural sector contributes just under a quarter of Kenya’s GDP, it is the largest contributor to foreign exchange, and employs some 75 per cent of the country’s workforce. Coffee and tea are the biggest components, followed by fresh-cut flowers.

Kenya is the world’s third-largest tea producer and the leading producer of black tea, the variety that accounts for 90 per cent of tea sales in the Western world. Production is divided into two categories: privately owned large plantations and smallholder farmers. While the former is in hands of major corporations such as Brooke Bond Kenya, James Finlay Kenya, Eastern Produce Kenya and Williamson Tea Kenya, the latter is responsible for about 60 per cent of production and has its own cooperative, the Kenya Tea Development Agency (KTDA), which processes and markets the tea.

Kenya’s export earnings have been boosted of late by global price hikes in both tea and coffee. Additionally, the country has become the world’s largest flower exporter and is today the EU’s biggest source of flower imports. The UK is Kenya’s second biggest market for flowers, which receives more than one million flowers every week.