100299 A g r i c u lt u r e G l o b a l P r a c t i c e N o t e 17 Kenya Agricultural Risk Assessment Stephen D’Alessandro, Jorge Caballero, Simon Simpkin, and John Lichte Despite highly variable growth rates, agriculture remains a crucial backbone of Kenya’s economy. The sector directly accounts for more than one quarter of the gross domestic product (GDP), 70 percent of rural jobs, 65 percent of exports, and 60 percent of foreign exchange earnings. Consequently, agriculture is vital to Kenya’s economic growth, national food security, and poverty reduction. Yet Kenya’s reliance on smallholder, rain-fed agriculture and its high poverty rates render the country particularly vulnerable to climate risks. This Note highlights major risks facing Kenyan agriculture and identifies pathways toward stronger sector resilience. BACKGROUND trends is not only about raising farmers’ productivity. It is also about finding ways to strengthen the resilience of Since the vast majority of Kenya’s poor depend on agricultural systems. smallholder agriculture for their livelihood, increasing their productivity can contribute to improving food availability and increasing rural incomes. Putting more and better MAJOR RISKS seeds, fertilizers, and other inputs into the hands of farm- Kenya’s agricultural sector is increasingly vulnerable ers and pastoralists and finding ways to link them more to risks, especially to extreme and growing weather directly to markets are among the key thrusts of current variability. Figure 1 depicts a historical timeline of the sector development policies. More broadly, Kenya’s Vision most notable risk events to adversely impact sector 2030 aims in part to transform the country’s agriculture performance from 1980 to 2012. In addition to extreme from subsistence to a more competitive and commercially weather events, the global financial and economic crisis, oriented sector, one that can meet the country’s food volatile food and fuel prices, and a tense and at times needs, expand exports, and become a key engine for uncertain political environment have repeatedly disrupted forward growth. agricultural supply chains and markets, jeopardizing growth and the sector’s ability to ensure food security and Notwithstanding Kenya’s strong commitment to agricul- reduce poverty. ture, sectoral growth remains well below the 6 percent target and meaningful gains in productivity and in rolling Production Risks back rural poverty have been slow in coming. The Eco- nomic Survey 2014 shows that the agricultural sector grew Erratic rainfall, punctuated by severe droughts, is the big- by a mere 2.9 percent in 2013, down from 4.2 percent a gest risk facing Kenya’s agricultural sector, with profound year earlier. Moreover, Kenya continues to rely heavily on impacts on both crop and livestock production. Severe, imports to feed its growing population amid a widening widespread droughts occurred with increasing frequency structural imbalance in key food staples. Reversing these over the past decade, accompanied by rising levels of AGRICULTURE GLOBAL PRACTICE NOTE — OCTOBER 2015 Figure 1: Historical timeline of major agricultural production shocks in Kenya, 1980–2012 Agriculture, value added (annual percent growth) Percent Source: World Development Indicators, Authors’ notes. Year year-on-year rainfall variability. The country experienced an most noteworthy of which is Maize Lethal Necrosis extreme rainfall event during two out of every three years, Disease (MLND). MLND was first detected in 2011, and on average, between 1980 and 2012. The combination seed varieties resistant to the disease have yet to emerge of high dependence on rain-fed agriculture and the high from research institutions. Incidence in the field ranges poverty rates among smallholder farmers and pastoralists from 40–100 percent of the crop, and crop losses of over who have limited coping capacity makes Kenya particu- 80 percent have been reported. Among Kenya’s industrial larly vulnerable to the effects of droughts. crops, coffee is particularly susceptible to Coffee Berry Disease and Coffee Leaf Rust, which can cause losses of Relative to most other crops, maize is highly susceptible to moisture stress. Kenya’s reliance on rainfed maize produc- Figure 2: Domestic maize output versus tion in meeting its food needs and growing consolidation utilization demand, 2003–2015 of production toward maize (and dry beans) has rendered the country increasingly vulnerable to supply disruptions and food shortages. Amid declining yields, production gains have come largely through land expansion into Thousand metric tons marginal areas that receive lower and more variable rainfall. This trend coupled with Kenya’s increasingly erratic rainfall has amplified year-on-year yield variability, with substantial food security implications. Beyond weather risks, pests and diseases pose a significant threat to Kenya’s farmers. The most common crop threats are armyworms, thrips, aphids, mealybugs, nematodes, and parasitic weeds, which are all a permanent fixture of Kenya’s agricultural landscape. Maize is particularly Domestic production Domestic utilization susceptible to a range of fungal and viral diseases, the Source: FAOSTAT 2015. 2 | AGRICULTURE GLOBAL PRACTICE NOTE — OCTOBER 2015 Photo credit: Curt Carnemark / World Bank 50–80 percent if left untreated. Chronically low farm-gate when even common day-to-day levels of infection or prices offer poor incentives to farmers to invest in control internal or external parasites can be fatal. measures for these diseases, aggravating their impact. Market Risks For Kenyan livestock, diseases pose a significant threat, At the market level, the analysis highlights price volatility though due to a paucity of data, related impacts are as the most significant risk. Producer prices for key crops difficult to measure. East Coast Fever (ECF) is perhaps the are subject to moderate-to-high levels of interannual most noteworthy threat. Tick-borne, ECF can kill large price variability. Rice, coffee, sorghum, and to a lesser numbers of calves in pastoralist herds. The presence of extent, cowpea exhibit the highest levels of year-on-year ECF in neighboring countries severely handicaps effective producer price volatility. In the case of rice and coffee, control. Rift Valley Fever in Kenya is similarly hard to control domestic price fluctuations are influenced by imports but is more predictable due to its positive correlation and/or changes in international market prices, exposing with heavy rainfall and flooding. During outbreaks, Kenyan producers to significant swings in farm-gate prices animal losses are often high, as treatment by vaccination from one year to the next. frequently leads to abortion in pregnant animals. Foot and Mouth Disease (FMD) is endemic in Kenya and can cause While public support programs manage to keep producer high mortality rates, especially among improved breeds. prices for maize relatively stable, wholesale prices are Vaccination is effective but existing coverage is limited among the most volatile, a critical issue for the govern- (roughly 10 percent). Widespread outbreaks were recorded ment given maize’s importance to household consump- every third year on average during the review period. One tion and food security. Sharp increases during 2008–2009 severe FMD flare up in the early 1980s resulted in losses and then again in 2011 and 2012 coincided with domestic valued at an estimated KShs 230 million. Other notable and external shocks. For example, maize prices jumped by diseases include small ruminant pest, contagious bovine 145 percent during the first six months of 2011 following pleuropneumonia, and catarrhal fever. The risk associated a sharp increase (39 percent) in the commodity food price with animal disease is especially acute during drought index and a near doubling of U.S. maize prices in 2010. In AGRICULTURE GLOBAL PRACTICE NOTE — OCTOBER 2015 | 3 Figure 3: Estimated losses to aggregate crop production from risk events, 1980–2012 (US$ millions) Millions US$ Year Source: FAOSTAT 2013. general, domestic maize prices tend to be more volatile (Common Market for Eastern and Southern Africa) rules than international maize prices, as domestic prices are pose considerable risk to mills, cane producers, and other highly sensitive to uncertainty and constant speculation stakeholders. Unpredictability also impedes investments in projected and real annual output. The Government of and needed industry reforms, including the planned Kenya’s active role in cereal markets, while designed to privatization of remaining government-owned mills. increase productivity, stabilize prices, and ensure food Sizeable unrecorded imports of refined sugar from outside availability, can also discourage private sector investment the region pose additional risks to the industry. Prices can in input supply, storage, and other services due to the fall precipitously when the market becomes saturated and added uncertainty over the timing and scale of public mills are unable to compete, as happened in 2002 when interventions. the industry assumed massive debts. A more recent surge in sanctioned and unsanctioned imports in 2013 resulted Enabling Environment Risks in sizeable government payouts to a number of mills to The political uncertainty and associated insecurity that stave off bankruptcy. disrupted agricultural production and markets in recent Kenya’s growing dependence on cereal imports is also years have declined markedly since the new Constitution noteworthy. Imports today make up a much higher was enacted in 2010. Moving forward, the restructuring, proportion (37 percent) than they did a decade ago. consolidation, and reorganization of the agricultural This exposes the country to external pressures that can sector’s legal and regulatory frameworks and ministerial adversely impact domestic food prices, availability, and functions and the devolution of policy planning, decision access. Moreover, amid recurrent maize shortages, uncer- making, and administration to the county level will tainty exists about whether rising Kenyan maize imports continue to have major consequences for the sector. Such will be able to fill the gap in light of Kenya’s 50 percent ad seismic change imparts uncertainty and significant and valorem tariff for non-COMESA sourced maize, its import myriad institutional risks in the short-to medium-term. ban on genetically modified (GM) maize, and inadequate These include potential for increased inefficiencies, supplies of non-GM exportable maize in the COMESA disruptions, and breakdown of critical public services such region. This is especially true in light of episodic export as extension, data collection, and MIS systems and higher bans for maize in Tanzania, Malawi, and Zambia during volatility of producer, wholesale, and retail prices. production shortfalls. Supply markets have also thinned Kenya’s sugar industry, in particular, faces significant out due to the growing attractiveness of the South Sudan regulatory risks. Policy unpredictability related to import market and of markets in the Democratic Republic of regulations and ongoing exceptions to the COMESA Congo for Ugandan and Tanzanian maize exports. 4 | AGRICULTURE GLOBAL PRACTICE NOTE — OCTOBER 2015 Figure 4: Value and frequency of losses per crop in Kenya, 1980–2012 (US$ millions) Losses (millions US$) Frequency Source: FAOSTAT 2013, Authors’ calculations. ADVERSE IMPACTS to recover and rebuild their assets. This has weakened traditional coping mechanisms, handicapping household Estimated crop losses in Kenya amounted to more than resilience against future shocks. US$5 billion from 1980–2012, or roughly US$155 million on an average annual basis. Average loss figures conceal The increasing frequency of shocks has negative impacts the severity of impact in individual years; losses amounted on food security, especially for vulnerable groups, to more than $250 million in 2012 and exceeded $300 precipitating spikes in emergency aid. In addition to million in 2009 (figure 3). Key crops experienced significant an estimated one-half million Somalian and Sudanese production losses in one out of every three years as a refugees in Kenya’s Dadaab and Kakuma camps, an result of adverse risk events between 1980–2012 (figure estimated 1.5 million Kenyans are chronically food 4). Combined, these crop-loss events resulted in drops insecure and in need of assistance, according to the World in agricultural GDP of 2 to 4.2 percent. Maize losses were Food Programme. In drought years, that number can grow highest by production value, accounting for nearly 20 exponentially, as it did in 2011 when 4 million Kenyans in percent of total indicative losses. Coffee, tea, banana, dry the northern rangelands needed food aid. In 2012, total beans, and sugarcane also experienced notable losses humanitarian assistance to Kenya had climbed to US$287 over the period. million (based on the 3-year average, 2010–12), more than triple what it was receiving earlier in the decade (US$90 Extensive livestock systems and pastoralists in Kenya’s million, 2003–05). As evidenced elsewhere, frequent crises northern rangelands are particularly vulnerable to the coupled with an overreliance on food aid can lead to a effects of drought. Estimated losses to livestock popula- breakdown of household resilience. While emergency tions from droughts that have occurred within the most food aid can help address immediate food needs, it does recent decade alone amount to more than US$1.08 billion. little to help rebuild household resilience and may induce Ancillary losses related to production assets and future higher rates of dependency and chronic malnutrition. As income and the costs of ex-post response measures are such, it can increase the cost of managing future crises. likely several times that figure. The increased incidence of droughts across Kenya’s arid and semi-arid lands in recent years means that affected communities have less time AGRICULTURE GLOBAL PRACTICE NOTE — OCTOBER 2015 | 5 Managing Agricultural Risks While handicapping growth, unmanaged risks are also a significant factor contributing to chronic poverty in Kenya. Shocks to agricultural production and markets adversely impact household wellbeing in a variety of ways: by limiting food availability, weakening food access, and negatively affecting future livelihoods through income disruption and depletion of productive assets. Chronically vulnerable groups with high exposure to risks experience a disproportionately large impact from adverse events and typically lack coping mechanisms Photo credit: Curt Carnemark / World Bank available to other groups. Understanding these and other risk dynamics is key to developing appropriate risk management responses that can help reduce production volatility, safeguard livelihoods, and put the sector and the broader economy on a firmer footing for growth. Effective strategies can also make a meaningful contribution to poverty reduction efforts. which will require knowledge generation and sharing, and Management of agricultural risk is not new to Kenya. The integration of investments at multiple levels. These will Government of Kenya has a long track record of investing need to be supported by policy and institutional reforms. in risk mitigation, transfer, and coping mechanisms. Equally critical will be ensuring that producers have good Moving forward, Kenya’s Vision 2030 recognizes the need access to needed productive inputs, including market and to strengthen existing risk management systems and weather information, credit, and well-functioning markets. the Government has launched a range of new initiatives Based on an assessment of existing risk management to confront the most severe threats facing the country. practices and programs in Kenya, the following recom- In 2011, it established the Drought Risk Management mendations are tailored to address Kenya’s unique Authority to better coordinate preparedness and speed risk landscape, fill existing gaps, and scale up effective up response measures. It also launched the Disaster Risk strategies. The interventions encompass a broad range of Reduction Program, the National Climate Change Action interrelated, mutually supportive investments that align Plan, and the National Hunger Safety Net Program. These with the Livelihoods Enhancement goals within Vision and other initiatives by the GoK and its development 2030 and aim to strengthen the resilience of vulnerable partners are already helping to safeguard livelihoods, farming and pastoralist communities to shocks. promote adaptation, and strengthen resilience against impacts from natural disasters and a changing climate. Yet 1. Improved Water and Soil Management Kenya’s agricultural supply chains remain highly vulner- Addressing climate-change-induced water stress and able to myriad risks that disrupt the country’s economic promoting better water-use efficiency, particularly in growth, cripple poverty reduction efforts, and undermine marginal rainfall zones, will be required to strengthen food security. A more targeted and systematic approach to resilience in Kenya’s agricultural sector. Similarly, curbing agricultural risk management is needed in Kenya. soil erosion, increasing soil fertility, and improving access to high-quality, drought- and disease-tolerant seed variet- Strengthening Resilience ies are crucial to enhancing the productivity of smallholder Strengthening ex ante resilience requires moving beyond systems. In most parts of the country, access to irrigation individual practices to integrate through a whole-farm remains limited, and farmers are at the mercy of rainfall. and whole-landscape systems approach. Many gains will Perception of high production risks drives their ex-ante come though better and more equitable management decisions and discourages them from investing in fertiliz- of natural resources such as soil, water, and landscapes, ers, improved seeds, and better crop husbandry practices. 6 | AGRICULTURE GLOBAL PRACTICE NOTE — OCTOBER 2015 Irrigation infrastructure build-out is costly and not suitable 2. Strengthening Rangeland Management and for many areas where long-term access to groundwater is Livestock Services uncertain. However, water harvesting and improved soil Given the importance of the livestock sub-sector, management offer a sustainable and cost-effective way to safeguarding the long-term viability of arid and semiarid favor investments in yield-enhancing practices. rangeland ecosystems is a key component of building resilience in Kenya’s agricultural sector. This will require In order to strengthen risk management at the farm level, reversing the degradation of water, soil, and vegetative increase the effectiveness of productivity-enhancing cover, and ensuring access to sufficient grazing land. programs, and improve the effectiveness of public support Successful strategies to mitigate rangeland degradation systems, the following is recommended: must also address resource conflict between and within • Incentivize farmer/community–driven investments communities, improve pastoralists’ access to markets, and in improved rainwater harvesting and storage mea- reduce the vulnerability of marginal livestock owners to sures such as terracing, water harvesting pans, roof shocks. In order to achieve sustainable, community-driven and rock catchment systems, multi-pond systems, pastureland management, the following is recommended: furrows, small basins, sub-surface dams, and micro- • Promote sustainable land management practices irrigation systems. such as contour erosion and fire barriers, cisterns • Promote broader awareness and adoption (via for storing rainfall and runoff, controlled/rotational Farmer Field Schools and other participatory grazing, grazing banks, homestead enclosures, and extension approaches) of improved soil and water residue/forage conservation. Counties and com- conservation practices such as zero tillage, mulch- munities should be encouraged to implement joint ing, integrating livestock, composting and use of rangeland management strategies. organic fertilizers, crop diversification and rotation, • Strengthen traditional customary institutions to terracing and grass strips, and agroforestry. implement grazing and water management plans • Create stronger linkages with continental-level that leverage customary forms of collective action initiatives such as the Comprehensive Africa Agricul- and economic instruments to reward sound pasture ture Development Programme’s African Alliance for management strategies recognized by county and Climate Smart Agriculture to better leverage exper- national authorities to ensure protection of pastoral- tise and scale up best practices technologies. ists’ rights and enforcement by the judicial system. • Strengthen management of subsidized seed and • Implement supportive policies and livelihood fertilizer distribution schemes to better incentivize development programs (targeted credit schemes, farmers to adopt “best practice” soil and water con- technical/business skills training, small business servation technologies that build climate resilience grants, and public sector investments in infrastruc- and improve productivity. ture projects) for income and livelihood diversifica- • Strengthen seed research, developing credible tion (feed/fodder production/storage, animal health and commercially-driven certified seed production services, milk/meat processing). and distribution systems, and upgrade monitoring • Strengthen the availability of financial resources and enforcement of seed-quality standards to curb (e.g., County Adaptation Fund) that can support counterfeiting and adulteration. needed improvements to rangeland and market • Create linkages between research centers and infrastructure. county governments to ensure that nationally • Train pastoralists to access formal banking services funded research is aligned with farmers’ needs and and introduce/expand financial instruments offered county development priorities. by lending institutions that are sharia-compliant and • Support research to address gaps in the empirical that allow movable assets, like livestock, to be used evidence related to the costs/benefits of climate for collateral. smart adaptation and mitigation technologies. AGRICULTURE GLOBAL PRACTICE NOTE — OCTOBER 2015 | 7 • Create a Livestock Enterprise Fund to provide access communications in conjunction with national and to finance for value chain entrepreneurs such as live- international universities. stock traders, animal vets, and feed/fodder suppliers. • Develop big data crop-weather analytics to help • Conduct training of community leaders and county reduce risks and uncertainties, and assist farmers government staff to deal proactively with livestock in making decisions on what, when, and where to emergency situations using the Livestock Emergency plant. Guidelines and Standards toolkit. • Leverage multiple delivery channels (traditional 3. Climate Services for Better Decision Making extension, radio, SMS) to disseminate weather and Improving the productivity and climate resilience of market advisories to rural farmers and pastoralists. smallholder farmers and pastoralists requires timely, These delivery channels should be integrated with cost-effective, and relevant information on improved the agro-weather and market information support agricultural practices, markets, prices, inputs, weather, and systems and allow for bi-directional information ex- news of impending disasters. Yet, access to and quality of change to maximize collection of data from farmers. these climate and market information services are critically low or non-existent in many parts of Kenya. The assessment Conclusions highlighted the need for developing integrated, modern The risk assessment process highlighted opportunities for agro-weather forecasting and marketing information strengthening the climate resilience of Kenya’s agricultural systems to equip farmers with the right information to sector. The country is currently undergoing a revolution- make better decisions and manage climate variability. ary transformation within its political, fiscal, legal, and These tools will also enhance extension services delivery by administrative makeup. Launched in 2012, the devolution providing advice on agronomic best practices, agro-input process has decentralized power and resources across use, storage technologies, and marketing of production. key sectors of the economy to local levels of government. Building partly on the experiences from Agro-weather For agriculture, this means that 47 county governments Tools for Climate Smart Agriculture pilots funded by the are now in the driver’s seat. While this presents near-term World Bank Netherlands Partnership Program in Embu and challenges, it also presents a unique opportunity for more elsewhere, proposed interventions include: localized and more targeted planning and decision making on agricultural sector growth and development priorities. • Upgrade existing weather infrastructure and install It also empowers more localized, more effective responses new automated weather stations to improve agro- to the growing threat of climate variability and extreme weather observation monitoring. weather. It is hoped that this study’s findings will help to • Strengthen institutional capacity for downscaling inform optimal policy and investment choices toward climate models, numerical weather prediction mod- stronger climate resilience of agricultural systems and eling, processing and satellite weather data analysis, livelihoods in Kenya. visualization of the data, and improved weather This Note is based on the World Bank publication: Stephen D’Alessandro, Jorge Caballero, Simon Simpkin, and John Lichte. 2015. Kenya Agricultural Risk Assessment. Agriculture global practice technical assistance paper. Washington, D.C. : World Bank Group. This work was funded by the World Bank, the United States Agency for International Development and a Multi-Donor Trust Fund on Agricultural Risk Management financed by the Ministry of Foreign Affairs of the Government of the Netherlands and the State Secretariat for Economic Affairs (SECO) of the Government of Switzerland, and was conducted by the World Bank’s Agricultural Risk Management Team. Internet: www.worldbank.org/agriculture, Twitter: wb_agriculture