As hopes of Kenya achieving a middle-income status by 2030 dwindle, questions are starting to emerge on whether the country has its growth priorities right.
In the Vision 2030 master plan, policymakers pegged the country’s ability to achieve middle-income status on its ability to grow consistently by at least 10 per cent in GDP from 2010.
Speaking during the release of the National Economic Survey 2012, that showed the economy’s growth to have slumped to 4.4 per cent, Assistant minister Peter Kenneth was candid. He said that at 5 per cent, the country was not growing, only maintaining the status quo.
“At the rate we are growing the economy, we risk not achieving Vision 2030 objectives,” said Mr Kenneth.
Experts interviewed by Smart Company said that for the ambitious 10 per cent growth to be achieved, the country needs to focus more on agriculture than it is currently doing.
A trend analysis on the correlation between agricultural sector growth and overall economic growth supports this claim. Last year, growth in the sector slumped to 1.5 per cent against 6.4 per cent recorded in 2010, overall growth followed the trend to grow at 4.4 per cent against 5.6 per cent recorded in 2010.
In 2008, the sector contracted by 4.1 per cent in the heat of the post-election violence, pulling the whole economy’s performance down to 1.5 per cent. In 2009, the sector’s contraction fell to 2.6 per cent, leading to a better growth rate of 2.7 per cent of the national economy.
The sector boomed in 2010, growing by 6.4 per cent on the backdrop of good rainfall and conducive weather conditions.
Consequently, the general economy posted an impressive growth of 5.8 per cent.
“What this means is that for the country to get to a 10 per cent annual GDP growth, as proposed in the Vision 2030 blueprint, more will need to be done in the agriculture sector,” said Dr Joy Kiiru, a senior lecturer at the University of Nairobi’s School of Economics. The government only gave 3 per cent of the total budget to agriculture, which is way below the target.
The African Union’s Maputo declaration of 2003 concluded that agriculture and rural development be awarded at least 10 per cent of the national budget.
“Agriculture is the one sector whose output is directly proportional to the input. We need to put in more money if we want to see the sector grow and boost the economy,” said Dr John Omiti, the principal policy analyst and head of the productive sector division at the Kenya Institute for Public Policy Research and Analysis (KIPRA).
In contrast, allocation to infrastructural development gobbled almost a fifth of the budget, with roads taking over Sh100.9 billion.
Despite the huge investment, the building and construction sector recorded a slowed growth, expanding by 4.3 per cent in 2011, down from 4.5 per cent the previous year.
The slowdown came despite the government increasing its budgetary allocation for road construction and repair by 34 per cent to Sh82.3 billion.
The poor growth in agriculture also pulled down other sections of the economy whose raw materials are largely farm produce.
In the third quarter of 2011, manufacturing declined to 1.1 per cent growth, compared with 5.7 per cent growth in the same period in 2010.
“The slow performance was attributable to contraction in the food processing sub-sector,” notes in the 2011 third quarter survey highlighted.
The food sub-sector recorded a negative 4.6 per cent growth while the rest of manufacturing activities put together registered a growth of 4.0 per cent — evidence that much of the growth in manufacturing comes from agricultural processing.
A further analysis showed that the poor performance in the food industry was mainly due to a significant drop in sugar production. In the period under review, sugar production grew by negative 38.6 per cent to 74.2 thousand tonnes, from 120.8 thousand tonnes in 2010.
“This level of sugar production was the lowest in a decade,” data analysts at the Kenya National Bureau of Statistics (KNBS) noted in the third quarter survey.
The same thread runs through the full year growth. In the newly released report, manufacturing grew by 3.3 per cent in 2011, compared with 4.4 per cent in 2010.
“Growth in the sector was undermined by unfavourable weather conditions that led to reduced availability of raw materials to agro-based industries, increase in price of primary inputs and fuel costs, in addition to a weak currency, which increased the cost of imported intermediate inputs,” says the report.
Agriculture is the backbone of many African economies, contributing about 27 per cent of Kenya’s gross domestic product.
According to PriceWaterhouse Coopers, the sector accounts for 80 per cent of national employment, mainly in the rural areas, and contributes more than 60 per cent of the country’s total export earnings.
“The sector also contributes about 45 per cent of the government revenue, while providing most of the country’s food requirements and has further indirect but significant contribution to GDP through linkages with manufacturing, distribution, and other service-related sectors,” reads a statement from PWC.
Under Vision 2030, the country’s development blueprint covering the period 2008 to 2030, with the objective to transform Kenya into a middle-income country and a high quality life for the citizens, agriculture is cited as a means of poverty eradication.
“With the wide coverage of the population, enhancing agri-business is the most effective way to approach poverty eradication,” says Dr Kiiru.
According to her, evident investments in infrastructure are good because they will enhance market reach by farmers, but the same or more attention should be put into developing agriculture directly.
The government should increase its input to this sector by supplying enough seeds and fertiliser, creating water harvesting mechanisms to expand irrigation, and investing in the post-harvest stage to ensure that no food goes to waste.
Technological developments in other sectors of the economy should spread to agriculture in value addition, marketing, storage, and other services related to the industry.
“The irony is that any time a Kenyan is going hungry, another one is wasting food because of lack of collaborated efforts by the government and infrastructure to share the food,” she said.
In the current budget, the government allocated Sh10.2 billion to boost irrigation projects as a means of enhancing food security.
In his budget speech, then Finance minister Uhuru Kenyatta noted that agricultural development remained a top priority towards addressing rural poverty, unemployment, and food insecurity.
“These allocations represent the highest ever to expand and initiate various irrigation projects spread countrywide,” he said.
Kenya’s Vision 2030 chief executive Mugo Kibati defended the government’a actions, saying that agriculture was receiving top priority, especially the irrigation of arid and semi-arid areas. However, he admitted that the funding was not sufficient.
“There is also a need to improve infrastructure across the whole country to enable easier access to markets,” said Mr Kibati.
However, he thinks that a bigger problem lies in the cohesiveness of the various ministries concerned with agriculture.
“Consolidation and harmonisation of these projects and the various policies governing agriculture will go a long way in boosting the performance of this sector, whose input to the national economy is really significant,” said Mr Kibati. He added that this would come with the new government next year.