Regional Markets

Regional Markets for Local Development
political instability, or price shocks on the global market (e.g., low maize prices or high
energy prices)—the food security of the rural poor can be severely threatened.
The Rift Valley region, one of the most fertile areas in Kenya, is home to a fourth of
the country’s population and a major production centre for the maize and dairy subsectors.
It accounts for about 80% of the country’s total maize harvest and is also home
to more than half of all dairy cattle (FAO 2011). The development of market-oriented
agricultural production in Kenya can be roughly divided in three phases: immediately
after independence (1967–1978), the structural adjustment period (1979–2002), and
the agricultural reforms since 2003.
Before independence, the agricultural sector was dominated by large-scale settler
estates, which produced for export markets. After independence, the newly established
administration sought to include more indigenous Kenyans in commercial agriculture
(including market-oriented dairy). This period saw the rise of organised smallholders,
as large estates were broken up and divided among local farmers. The government
intervened directly: cooperatives were established, services and inputs for farmers were
subsidised, and large purchasing and marketing parastatal enterprises came to life.
The next phase saw a different approach; the government took a step back and followed
a hands-off strategy in favour of private sector actors. The so-called Structural
Adjustment Policies (SAPs) promoted the privatisation of state-owned enterprises as
well as the reduction and easing of government regulation. These measures were aimed
at promoting competition and the participation of private sector actors; however, they
had some long-term negative effects (FAO 2011). Governmental budgetary allocation
for agricultural support dropped from 10% to 3%, and many cooperatives collapsed.
The internal market became much more volatile and producer prices towards the end
of the period fell to all time lows (dropping as much as 50%). Corruption was rife
among multiple levels of the administration, as key inputs (such as fertiliser) became
hotly desired commodities on the thriving informal black market. Private millers
and middlemen took advantage of the decreasing purchasing power of the parastatal
National Cereals and Produce Board (NCPB) and Kenyan Co-operative Creameries
(KCC). The SAP policies were not very popular with smallholders, and often have
been blamed for the weakening of the cooperatives and the drop in producer prices
(Rono 2002). These are the challenges hampering the development of the smallholder
maize and milk sectors.
Since 2003, there has been a period of renewed reforms in agricultural policy, spurred
by the revival of some market-stabilisation mechanism (e.g., the rebirth of the new-
KCC). There are some visible results, like the tripling of milk production in the formal
sectors between 2002 and 2007, but the system still suffers from many weaknesses
(FAO 2011). NGOMA arose in the midst of this revival in 2002. It has focused on
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