Agribusiness for Africa’s Prosperity. Country Case Studies
the Nairobi Stock Exchange, and subsidiaries of multinational companies (FAO 2008). Agroprocessing has remained a major source of output for the manufacturing sector. The sector also witnessed increased investment in the textiles industry under the Export Processing Zones (EPZ) (Were 2006). There are also major multinationals are operating in the sector that cater for both domestic and export markets, either independently or through joint ventures. These include Nestlé, Unilever, Cadbury, Coca Cola, Del Monte, and Wrigley. The sector has recorded steady growth over the years and this is attributed largely to the increased demand for Kenyan goods from the regional markets of East Africa and the COMESA (Common Market for Eastern and Southern Africa) region. Some studies have estimated that export trade between Kenya and other East African states has fluctuated between 20-50 per cent of total exports (Onjala 2010; Were 2006). The African Growth and Opportunities Act (AGOA) of the United States has become another source of markets for Kenya’s agro-industrial products. Positive trends in the growth of the economy from 2002 onwards have also proven favourable and the country’s trade policy objectives have since shifted towards a more open regime, which has strengthened and increased access to overseas markets for processed products. Noting that a major reason for the weak competitiveness of Kenya’s agricultural exports is the limited capacity for value addition, the country’s Vision 2030 targets increased market access through value addition by processing, packaging and branding the bulk of agricultural produce (Republic of Kenya 2007). The country’s vision for 2030 is also to make Kenya globally competitive and to improve the quality of life. The nature of participation in international trade is therefore important. The share of manufacturing exports has not only remained low, but has also been declining (Onjala 2010). In terms of global competitiveness, Kenya is ranked 98th in the Global Competitiveness Index by the Global Competitiveness Report, with innovative capacity (ranked 48th), the quality of education (ranked 34th), and a sophisticated financial system (ranked 37th) being the main supporting factors (World Economic Forum, 2010). The country’s competitiveness is also demonstrated through revealed comparative advantage (RCA) calculations. Existing studies have shown that Kenya has a strong revealed comparative advantage in only a few commodities being traded internationally. These are hides and skins products and sisal fibre products (Onjala 2010). However, there are also other Kenyan export products with some competitive position, although the RCA values may be much weaker, and efforts are therefore needed to increase export competitiveness.
Structure and Dynamics of Agro-industries Agriculture is the dominant activity in the country, with 70 per cent of the country living in rural areas and 75 per cent of the rural population deriving their livelihood from agriculture. Kenya has embraced the goal of industrialization in order to achieve structural transformation for the economy. The Economic Recovery Strategy (ERS) (Republic of Kenya 2004) and the Vision 2030 (Republic of Kenya 2007) recognize the mutually reinforcing relationship between agriculture and industry, and that a vibrant and productive agricultural sector provides a crucial foundation for industrialization. Agribusiness has the potential for strengthening industrial linkages and contributing to technological innovation and regional development. It is estimated that 20 per cent of those employed in the formal sector and 15 per cent of those in the informal sector are engaged in agro-industrial activities. Approximately 40 per cent of the employees in the rural and periurban areas are employed in agro-industry (JICA and MoTI 2008). The present study considers products that may be tradable or non-tradable either at the regional or international levels, from the following subsectors making up the agro-industry sector: food and beverages including livestock and fish products; leather and leather products; textiles and garments;
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