Agri -Trade and Rural Livelihoods Linkages: Implications for Food Security (Kenya)

Agri-Trade and Rural Livelihoods Linkages: Implications for Food Security (Kenya) Victor Ogalo CUTS ARC Nairobi 8 March 2010

Structure of Presentation • Context and Study Objectives • Exploring Agritrade-Rural Livelihoods-Food Security Linkages • How Regional and International Agritrade Impact Rural Livelihoods and Food Security • Policy, Institutional Frameworks and Interplay of Stakeholders • Conclusions and Recommendations

Context • World’s malnourished increased from over 800 million in 2008 to 923 million in 2009 (FAO, 2009) • Kenya ranks 29 among the countries with worlds poorest food security • Effects partly due to recent droughts and rising food prices as well as rising poverty • Rising food poverty: expenditure is about 60 percent of poor household’s incomes • 70 percent of the Kenyan population are market-dependent and net buyers of food

Context dependence on rain fed agriculture has seen output from maize fall from a surplus of 9 million bags in 2006 to a deficit of 35 million bags at present. Kenya thus relies on imports and Trade is important for stabilizing the national food supplies and food prices. However trade is affected by tariffs, NTBs and subsidies.

Context • After Government Withdrew agricultural support measures following liberalization: • food security started worsening by early 90s • By 2003, the country relied more on imports to fill food deficits; • About 25% of value of agric exports and 14% of the total exports were now being diverted to import food. • Food imports have not necessarily helped the poor since at household level (mainly in the rural and among the poor in towns and urban centers) food insecurity has increased; • incomes of the poor have plummeted, and they can’t sufficiently buy the imported food from the market

Context Some Stylized Facts about Kenya Agritrade, Poverty and Food Security • Trade deficit has been widening • Value of exports increased by 14% in last 2yrs but that of imports grew faster and at a higher rate (16%) • Poverty still remains high and overlaps largely with rural areas • Where 67% of pop lives, affecting largely small-scale farmers

Context Poverty Rates Selected Years (1992-2007) • With such statistics in poverty, there is also a markedly increase in food insecurity in the past few years • Food Security definitions • secure access by all people at all times to enough food for a healthy, active life’ World Bank (1996). This implies • Availability of enoughfood for an active healthy life; • access to this food; and • the guaranteeof access to it at any time [Christiaensen 1995] • Availability is thro local food prod or imports; access is thro ability to purchase enough quantity of quality food (income and food price) and this to be so on a sustainable basis

Study Objectives • Identify linkages between trade, rural livelihoods and food security more specifically within the Kenyan context. • Determine magnitude and composition of regional trade in Agriculture (both formal and informal) and inherent effects on rural livelihoods and food security. • Carry out a review of national policies related to agriculture – food security, trade, and regional integration

Methodology • Literature review to establish the Linkages between Trade, Livelihoods and food security. • Secondary data used for trend analysis • Primary data – FGDs with farmer organizations. • Key Informants • Review of Policies, Legal and Regulatory Frameworks

Agritrade-Rural Livelihoods-Food Security Linkages Dependence on Agriculture for Livelihoods • In the rural the poor are linked to agriculture as • farmers, laborers, transporters, marketers and processors of produce and as suppliers of non-agricultural services to households whose income is principally agriculture-derived • food purchase is their main consumption expenditure • In the rural towns and large cities • They engage in the processing and distribution of agricultural products from the hinterland. • They buy most of their food needs in addition to supplies from rural relatives, and • So to the extent that trade affects agriculture then it affects rural livelihood as well

Agritrade-Rural Livelihoods-Food Security Linkages Agricultural trade and Rural Livelihoods (II) • Thus if incomes from agric trade are rewarding then we expect: • Rural households’ incomes to increase hence increased demand for food and other consumer goods, • creation of non-farm jobs and employment diversification, especially in small towns close to agricultural production areas • surplus rural labor is absorbed, raises demand for agricultural produce and again boosts agricultural productivity and rural incomes • Thus, impact on rural livelihood comes through • falling real food prices, • creation of employment, • higher real wages, and • rising incomes fro small farm households

Agritrade-Rural Livelihoods-Food Security Linkages Agricultural trade and Rural Livelihoods (III) • Trade affects rural livelihoods through importation and exportation and policies thereof • Domestic • Production, with main determinant being price farmers receive and boost government revenue which can also be ploughed back through support • Policies (like subsidies) that dampen world prices create uncompetitiveness of products produced by countries who cannot afford subsidies • Reduce incentive to invest in agricultural infrastructure, agricultural research and development,

Agritrade-Rural Livelihoods-Food Security Linkages Agricultural trade and Rural Livelihoods (III) • International • Countries can produce and export based on their factor endowments • Use income from exports to import national food requirements • Ability to import food depend on incomes generated from imports and world price of food • Thus Export competitiveness and price matter

Exploring linkages between Trade, Rural Livelihoods and Food Security contd’ - Positive Linkages Linkages between agricultural trade and rural livelihoods therefore occur in three phases according to Evans 1990: • 1. rural households earn higher incomes from production of agricultural goods fornon-local markets, and increase their demand for consumer goods • 2. this leads to the creation of non-farm jobs and employment diversification, especially in small towns close to agricultural production areas • 3. which in turn absorbs surplus rural labor, raises demand for agricultural produceand again boosts agricultural productivity and rural incomes (Evans, 1990).

Exploring linkages between Trade, Rural Livelihoods and Food Security –Negative Linkages • Trade Liberalization such as SAPs – many sectors became uncompetitive. • International trade policies such as • Subsidies -dampened world prices, leading to collapse of many agricultural sectors in developing countries • NTBs – such as standards have also acted as barriers for developing country exporters. • Consequently, production declined and this led to a drop in employment for farmers and dependency on imported food leading to major changes in food prices and worsening the food security and livelihoods situation.

Rural Livelihoods, Poverty and Food Security: The Kenyan Situation • Poverty rates in Kenya are 46.1 percent. Rural poverty is higher than the national average and stands at 49.1%. • Rural poverty mostly associated with agriculture and land • Highest in ASALs in Eastern and North-eastern – due to poor climatic conditions • High potential areas e.g Central are over exploited due to population pressure • Poverty is highly correlated with food security i.e high poverty areas are the most food insecure – Asals and Coast • Food security worsened since 1990s and by 2003 imports were 14 percent of total value of imports and 25 percent of agricultural imports.

Food Security Situation contd’ • Statistics show that only 47 percent of the entire Kenyan population is food secure. • Hence Kenya’s dependency on food Aid has continued to rise over the years and is observed to have high peaks in 1993, 2001 and in 2007 • Currently WFP is feeding a total of 3.6 million people in 25 districts and 535,000 children are given school meals through the school feeding program • Food imports especially cereals have also increased – deficits last year was 95,000MT met through imports • Most imports come from the region Uganda and Tanzania 108,155 MT and 56,900 respectively

Rural livelihoods and Implications on food Security in Kenya • More than 70 percent of Kenya’s Population live in rural areas • Agriculture and pastoralism the mainstay of the Kenyan Rural economy • An average of 68% rural household income is derived from off-farm incomes, and around 32% comes from own production (crops and livestock products), with maize and wheat being the leading sources of crop income. • Incomes from Agriculture alone are not sufficient to meet food needs especially in ASALs hence purchase of food is very common.

Magnitude, Composition and Direction of Trade • Exports • dominated by the agricultural sector- horticulture 22%; tea 17.9%, others eg petroleum and manufactured exports about 45 percent of exports. • Main destinations EU – 22 %; and Africa – 60 Percent • Exports to the COMESA and EAC region consist of manufactured products such as Fermented tea (35%), Cement (4.5%), Cigarettes (4.2%) amongst others • Exports to Africa increased 26% in the past 10 years • Exports to Africa facilitated by EAC and COMESA customs union - Main barriers to Exports include NTBs, poor infrastructure and delays at various border points

Magnitude, Composition and Direction of Trade • Imports – • Kenya’s imports mainly consist of petroleum products (14 percent of total imports); crude petroleum (9 percent); industrial machinery (11 percent); and motor vehicles (6.4 percent). • Main source of Kenya’s imports include Middle and Far East, UAE and EU countries including South Africa. • Kenya also imports food specifically maize from EAC and COMESA countries to meet shortages

Informal Trade and Food Security • an important aspect of cross-border trade among small traders along Kenya –Uganda and Kenya-Tanzania borders • Provides a source of income for traders and also provides food – improved access to food. • Occurs due to restrictive policies and NTBs – Magnitude is hard to measure • Involves small but significant amounts of food products moved over short distances using as bicycles, and boats • Goods entering Kenya included, maize, beans, bananas, fresh fruits and vegetables-tomatoes, onions avocados, pineapples and Textiles • Goods leaving Kenya included counterfeit batteries, cigarettes, detergents, beverages, sugar, mattresses and other household goods

Informal Trade and Food Security contd’ • Reasons for illicit trade: • delays at the border which in some cases along Busia-Malaba border was up to 7 hours • High Administrative costs -numerous requirements such as trade licenses – business and road license, phyto-sanitary certificates • Corruption and bribery at police checkpoints • Magnitude is hard to measure • Positive aspects# • Improve access to food# • drives down prices of goods# - a plus for consumers but not producers • Provides incomes and improves livelihoods for traders#

Implications of Trade on Food Security • Continued high prices of food due to: a) sustained high level of effective demand in the country, especially in main urban centers, b) accelerated appreciation of the Kenyan currency in recent years c) the impacts of increased internal production costs, given the general cost of inputs and other production outlays, and d) the overall rise in inflation, - rising to 31.5 percent in May and 29.4 percent in June 2008, e) Overwhelming dependence on maize as the key staple for the majority of the population. f) drought and poor weather conditions; g) rising food prices which is a global phenomenon as well as h) The post-election violence which occurred in 2008 January

Implications of Trade on Food Security contd’ • Increased imports – cheap food imports acting as a dis-incentive for producers although this has improved access to food • On one hand –loss of incomes for producers and labourers but on the other hand creation of employment and incomes for traders • Dependency on food aid has also acted as a dis-incentive for production although it has provided much needed food for millions of people in extreme food insecurity

Policies, Institutional frameworks and the interplay of Stakeholders • Trade liberalization under SAPs and various trade agreements such as EAC and COMESA have led to openness and reduction of tariffs • Even after the trade regime was liberalized cheap food imports have suppressed domestic food prices and therefore food production • Food security policy has laid much emphasis on Maize sector ignoring other sectors which could raise incomes of rural folk# • Food Security policy not coherent with trade policy

Policies, Institutional frameworks and the interplay of Stakeholders • Food Security# • Kenya Food Security Meeting & - Advisory role • Kenya Food Steering Group – Policy and administrative • NCPB – strategic grain reserve • Ministries and Government departments –MoT, MOA • Institutions for food security not coherent with those of Trade • Stakeholders: Farmers and Small scale traders; Millers and Transporters; ODAs and NGOs;

Conclusions and Policy Recommendations • Need for an equitable global environment for trade; removal of subsidies. • Taking care of regional NTBs to enhance regional trade • Most of what needs to be done is mainly at National level • Need for a clear and comprehensive trade policy that takes into account food security issues • Addressing infrastructural bottlenecks and redistributive mechanisms from surplus to deficit areas. • Need for a comprehensive institutional framework to enable private sector participation in the process as well as consolidation of information for future referencing.

Agri -Trade and Rural Livelihoods Linkages: Implications for Food Security (Kenya)