When one looks at the vision 2030 strategy papers and feels the current sentiment of the policy makers and implementers in Kenya, one realises that there is a strong focus on ICT investments and a dream to make Kenya a high-tech Nation that will be well placed to be a trend-setter in the ICT industry in Africa. This in turn, they hope, will lead to improvements in internet banking, internet shopping, Business Process Outsourcing and other IT related benefits. The scene set is very appealing especially to a young Kenyan like myself, when I think of the myriad of ways I can make money due to the impending IT boom. However, upon closer inspection I have realised that we can't be more misinformed about the focus of our vision 2030. They say that you must learn to crawl before you can walk, the vision 2030 program with its focus on the IT sector wants Kenya to run a marathon and we are not yet even born.
The models and poster boys of sustained economic development are the East Asian Tiger economies. Their platform for growth as they obtained independence and transformed into capitalist societies was focused on labour intensive industries. China through Deng Xiaoping reformed the agricultural industry by removing the state controls that were recently set by Chairman Mao. These reforms under Mao, especially the Great Leap Forward led to droughts and mass starvation. Under the reforms, Deng Xiaoping introduced capitalist incentives as farmers were allowed to sell their produce privately and keep the profits, of course after giving the government its share. This led to companies like Nestle moving into the country to buy milk from the farmers. Most farmers bought extra cows and of course saw their incomes rise.
The same platform was achieved in other countries like Malaysia, Thailand and Singapore. From a strong agricultural base through good government support, these countries were able to raise their average incomes for the greater population. From this, the increased incomes lead to demand for manufactured goods which then lead to the growth of the manufacturing industries in these countries. A chain reaction then occurred as rising incomes lead to the diversification of their economies. China these days produces cars, laptops and other high-tech equipment. Hong Kong used to produce plastic toys, tyres and other basic goods in the 70's, but now they produce high-tech medical equipment and other sophisticated goods. On another note the advertising bill for companies in China is second only to that of the USA, reflecting both a diversification of the economy and an increase in incomes.
Conversely, India decided to take the route of improving technological infrastructure without greatly investing in Agriculture. This has lead to a stagnation of the economy and is evident from the statistics, India has one of the largest gini coefficients at 36.8%, the gini coefficient is a measure of income inequality. Furthermore, the richest 10% of the country earn 31% of GDP while the poorest 10% earn a paltry 3.6%. With the booming IT sector, it is a sad fact that only 1% of the population is working in this sector. The GDP per capita stands at $2,300 and is lower than that of Djibouti and Swaziland. Furthermore, India has one of the toughest regulatory mechanisms in the world. These ubiquitous controls have earned the nickname of "license raj". The situation is eerily similar to that one in Kenya and its why I have decided to write this. If an economy is to prosper, the majority of the population should be earning respectable incomes, it is usually a standard that the poorest should be earning at least 2$ a day.
These facts lead me to my beloved country and its fascination with running the marathon while we are still embryos. Kenya's agricultural sector contributes towards 80% of the employment in the country, it contributes to about 27% of GDP and yet it only receives 5% of the budget allocation. Furthemore of this 5% a great deal about 68% is used as recurrent expenditure, these are mostly administrative expenditures. Proper estimates by the ministry of agriculture put recurrent expenditure at 17 billion shillings and development expenditure at 8 billion shillings. This under allocation to agriculture is akin to a businessman underpaying his best salesman while he overpays his worst salesman. If he continues in this way, it is more likely that the good salesman will become disillusioned and probably not work as hard as he can because there is no incentive to do so.
The government needs to support the agricultural sector and commit itself to this aim. The infrastructure system in terms of irrigation, roads, water, sanitation and even aviation need to be thoroughly upgraded. Most farmers in Kenya find it very expensive and inefficient to transport their produce to the market, this often leads to waste and a loss of money on the farmers side. It is evident from the weekly commodity prices that transport is a big impediment for farmers. The theory of arbitrage suggests that when there is good information and mobility of factors, prices for a similar product within an economy will level out and be the same. What this means is that if District A is selling fish at 50 shillings per kilo and District B is selling at 70, profiteering merchants will buy from district A and sell to district B, the resulting supply and demand situations will lead to a leveling of prices at say 60 shillings per kilo. From the weekly price list, a 90kg bag of maize in Bungoma sells for 1,600 shillings while the same bag sells for 2,700 shillings in Busia. Clearly merchants would rather not buy from Bungoma and sell to Busia because the transport costs will wipe out all their potential gains.
The tax system also needs to be addressed so as to benefit farmers, the 2009 Economic Review of Agriculture and the medium term strategy paper for Agriculture both produced by the ministry of Agriculture define the multiplicity and complexity of the tax system as major impediments to agricultural productivity within the country. Farmers are faced with expensive fertilisers, farm inputs and fuel expenses therefore making it very expensive to farm. These factors have led to many of them sub dividing their farms and selling them to property developers. Government should in form of either tax cuts or direct subsidies make it extremely cheap for these farmers to benefit from their farms. . The case of Malawi, which has become a net exporter of food is a good example of what a country can achieve if it subsidises its farmers. Andrew Daudi from the Malawian ministry of agriculture says that it is a long term trend in sub-saharan Africa that urban dwellers are prioritised over rural dwellers, he goes on to say that we need to reverse this trend if we are to achieve growth.
There are many other issues including land reform, scientific research and others that can improve the agricultural sector. However, the main aim of this article is to stress its importance as the bedrock for economic growth in Kenya, it is a lesson that is to be learnt throughout the world. Peter Hartman the director general of the International Institute of Tropical Agriculture in Nigeria neatly says that the "continent's intellectuals thought that agriculture was just a phase that they could skip on their way to industrialisation" referring to the poor state of agriculture in the continent. The continent's intellectuals as it turned out were and are not so smart after all. The "intellectuals" in Kenya responsible for the vision 2030 are also in my view extremely misinformed.
In conclusion, the only way that we can achieve sustainable growth and prosperity both as a continent and as a Nation is to greatly invest in Agriculture as it is where the majority of people work. This in my view will lead to a substantial economic chain reaction akin to an economic atomic bomb, a benevolent one at that. If we continue to invest in the ICT sector and disregard agriculture, we will be in a situation analogous to that one of a teenager who after being told to clean his room, decides to sweep everything under the bed. When the mother comes in to inspect the place it will look nice and clean, however upon closer inspection, the room will still be the rotten mess that it was. Let us take the East Asian Tiger model rather than the Indian Elephant model. Please leave your comments and opinions on this matter.
I don't know about focusing on agriculture. If this is supposed to bring about more stable growth, why is it that the agricultural sectors continue to be protected industries across the globe? Is it because competition is too high in this area or is it a revelation of the difficulties inherent in growing an economy based on agriculture? I personally think the latter and for that reason support the notion of developing other sectors which may in turn contribute to the salvation of agriculture as opposed to merely focusing on agriculture by itself.
You are suggesting that we focus on other sectors with the view that they will save agriculture? How do you propose that that will work. Isn't it a solid agricultural base that feeds other sectors or vice versa. Also, how will these large portions of the populations earn the necessary incomes to grow the other sectors? How will rural populations grow the ICT sectors while most of them are subsistence farmers. Agriculture is a sector that does need support from the government due to the fact that in the long run one can only make zero economic profits, but it is a necessary evil for any economy to thrive. Thats my humble opinion.
Samora, awesome article.
I was going to write a piece on the dreams made of fibre optic. Or not as the case maybe. So you've saved me.
You see, for IT to be a viable contributor to our economy, it needs a critical mass in terms of turnover from businesses involved. And in turn, this means a critical mass of these businesses viably able to set up and make a handsome return from the IT sector. This demands a highly IT-educated but low cost laborforce; electricity and other infrastructure such as security legal framework et al. We have highly educated It literate but cheap labor force and the others are wanting. Moreover, IT is not a redistributive sector it won't necessarily grow other sectors.
Thus we arrive at your very welcome discourse on agriculture. Critically, you've made the connection with China's race for food self-sufficiency and how this turned into a virtuous circle of growth. Malawi has taken that template and is self-sufficient in under 5 years. We need to go back to basics; be realists and not fantasists...
That is what I have always said, it is good that we share these thoughts and show a sense of pragmatism. Too bad we think that government intellectuals can do a better job than the "erratic market" when it comes to distributing resources...
Your right Samora, no country can ever develop or advance without having an efficient, well developed and sustainable agricultural sector. Thereafter the transition to maufacturing and serives will be seamless. Agiculture can support numerous industries as it is the basis of a well established supply chain from the farms to the plate and in between exists the food processors, retailers, marketers, labelers, transporters,food scientists,etc. that can be supported with a viable agricultural sector and this is on top of providing food security. An issue i have with Kenya is the monopoly that The National Cereals Produce Board (Govt parastatal) has when it comes from purchasing grains from commercial farmers and how this has distorted the marketplace for grain produce (unga, posho, etc.)
Don't get me going on the national cereals board, removing it could be the main panacea for grain farmers to thrive. Furthermore Kisila expanding the agricultural sector will lead to increased formal employment in the sector, these will lead to better tax revenues and even the capital markets will thrive due to agri business and increased disposable incomes. The effects will have an immense multiplier effect.
Kenyan 'intellectuals' always want to run before they can walk which does not benefit the mwananchi. Agriculture and manpower are Kenya's greatest resource but are very much undervalued, if we could concentrate on sustainably developing our agricultural sector we can work on other issues such as lack of infrastructure. Kenyan leaders are too interested in achieving unattainable dreams at the moment, rather than concentrating on issues such as Agriculture, they are too busy thinking of faster internet speeds with more than half of Kenyan households having no computers let alone electricity.
Well said Nyash, now you see how Agriculture is the cornerstone of any economy?. It's not only trying to achieve unattainable dreams, it's also short termism which is dangerous. But remember for many of them it is about apparent rather than real progress, but let me not digress into politics... this is a purely economic/financial blog.
I completely understand about not being a political blog, there is so much income that can be generated from large scale agriculture in Kenya not counting the amount of food that can be made to cater for the countrys population, If the economy can help farmers learn new farming techniques and give them grants to do these we can move forward. In my studies, the UK gives its farmers thousands of pounds to maximise their harvests and upgrade their farms.
I've read it argued that IT sector jobs are going to turn blue collar because of rises in trained labour globally. Kenyans don't get that the reason jobs pay well is not because of what they are but rather because of how unique the skills needed for doing them are. In a globalised world, particularly in the IT sector, you're competing against someone on another continent. Granted the IT expert in Kenya is unique, by global standards, they're probably less than ordinary. That means that if there's no demand for IT sector jobs in Kenya, there's really no way it can be a thriving sector. And the IT sector is unique because the skills needed are greatly dependent on the demand for those skills in all other sectors, so other sectors actually drive IT sector growth and not the other way round. The one thing Kenyans know how to do well is create elitist sectors that don't benefit the larger economy, so what if banks and some govt institutions use IT? if other sectors that should be relatively productive can't invest in IT tools, there's really no point in cheating children and parents that the most marketable degrees are IT related as is the case now. I didn't mean to bring IT down, but it is a clear example of collective irrational behaviour.
Thanks for that insight, I hadn't thought of it that way. That IT jobs will become blue collar is a reality, I remember a friend of mine who had enrolled for an IT course in her first year, and her wise father gave her the same advice. She enrolled into something else and will atleast avoid the uncertainties of having IT qualifications. Thanks again for that nuance KK...
im sooo loving this blog and i fully agree that agricultural development is a powerful driver in reducing poverty and the success stories of other countries prove that sustainable public investments can make a big difference.
it is evident that china, for example, did not eradicate hunger but showed the importance of combined approaches to achieve success, including good science, collaboration, visionary leadership, community action, and progressive policies.
The Kenyan government should increase the yields and production of staple food crops, expand markets, develop better policies, conserve natural resources and improve nutrition. A healthy nation is important for economic developpment.