Markets and poverty in northern Kenya: Towards a ... - FSD Kenya

42 • MARKETS AND POVERTY IN NORTHERN KENYA: TOWARDS A FINANCIAL GRADUATION MODEL
Value chain Opportunities Challenges Pro-poor potential Overall assessment
Herbal and medicinal plants Strong demand
Thrive in arid environments
cream and shampoo (Farm Concern International, undated c: 8). Aside from
a few isolated cases of contract farming schemes in central Kenya, most trade
in these products is informal. Kenya’s only aloe processing factor, built in 2004
with donor funds in Baringo, is sitting idle, though the reasons are unknown
(Kay, undated). Jojoba is another product with potential for cultivation in
Kenya’s ASALs, though it is unclear whether the extremely arid climates in the
north are suitable (Farm Concern International, undated a).
Opportunities and challenges: there is strong demand in Nairobi
among processors for raw artemisia and semi-processed aloe (Farm Concern
International, undated b: 9). However, there are also significant constraints
on the development of these products. Significantly, the inability of suppliers
to reliably provide quality product causes many processors to import raw
materials from other countries. Asian aloe, for instance, is cheaper though
perceived to be of lower quality. Supplying these products at an affordable
price to processors is critical to market success, though it will be a challenge
for producers from northern Kenya who face higher transportation costs
and the risks of deterioration during transport. Sorting and grading of the
products could significantly address this gap. A perceived (though not actually
instituted) government ban on the export of aloe for environmental reasons
put in place by former President Daniel arap Moi has frustrated efforts to
commercialise the crop. Other constraints include poor horizontal links among
producers, which are necessary to achieve the levels of production that would
make the crop commercially viable. In terms of community-based processing,
consumer research indicates there are significant quality gaps that need to
be addressed before products can complete in urban Kenyan markets (Farm
Concern International, undated c: 24-25).
Potential areas of intervention: further information is first needed on
the medicinal plant value chains to assess the competitiveness of producers
in northern Kenya versus imported product and also the availability of raw
product to harvest. If it is possible to achieve competitiveness and there is
adequate supply, there will likely to be opportunities to develop a lead firm
model that partners with Kenyan processing demanding the raw product and
willing to invest in their suppliers to achieve the right quality and prices.
Table 17: Herbal and medicinal plants value chain
Uncompetitive vs. imports.
Low economies of scale.
Low quality of production.
Low barriers to entry in
collection and primary
processing.
Irrigated agriculture value chains
Background: there is extremely limited published information on
agricultural crops grown in northern Kenya’s few agro-pastoral zones. The
aridity of northern Kenya significantly limits any existing irrigated agriculture;
that which exists is clustered around the major lakes. Farmers produce grains
and a few cash crops, including khat.
Opportunities and constraints: given the very high prices of food in
northern Kenyan markets, local food production has a large potential market.
While producers tend to be wealthy, there are significant trading opportunities
by the very poor for locally-consumed crops such as khat (FEWS Net, 2010:
14). A primary constraint is inadequate water for expansion; limiting
opportunities for the very poor to engage in irrigated agriculture as producers
or labourers. As a result, much of the production is consumed by the farmers
themselves (Watson and van Binsbergen, 2008: 17). The limited area does not
offer opportunities for the incorporation of large numbers of HSNP-recipient
households. For existing producers, challenges include unavailability of
transport and inputs and the inability to wait to sell when prices rise following
harvest (OPM and IDS, 2011: 78). Women, who are often in control of growing
crops, are often unable to travel to markets, and are thus forced to sell their
produce locally (OPM and IDS, 2011: 78).
Charcoal value chain
Medium.
Background: charcoal is a critical source of energy for Kenyans: 82 per cent
of urban households and 34 per cent of rural households use charcoal for
cooking and it also feeds many cottage industries (Practical Action Consulting
East Africa, 2011: 7). Its demand is driven by its easy availability and low cost
relative to other options. An estimated KSH 32 billion in economic activity
is generated from the charcoal industry in Kenya, just slightly less than the
contribution of the tea industry (Mutimba et al, 2005: 16). Approximately
500,000 Kenyans are involved in supplying this demand, 200,000 of them
as producers and the remainder operating elsewhere in the value chain (e.g.
transporters, wholesalers, retailers) (Mutimba et al, ibid: 4). Many of those
involved in the charcoal value chain are situated in northern Kenya. This activity
is most significant in Turkana, where 46 per cent of households are engaged in