East Africa wakes up to the potential of commercial farming

Millions of young people in east Africa have now embraced agriculture, which is promising to bring about a major paradigm shift in the region’s food security situation and also transform agriculture from subsistence to a commercial venture. Across the major green produce markets and farms in the region, youths are replacing the older traders, as agriculture gains the status of a wealth creator and not just a food provider. Agriculture experts attribute the phenomenon to various factors, including better market systems that now ensure farm produce is bought at a reasonable price, civic education on small-scale commercial farming and the realisation that good earnings are not only from white-collar jobs. “Youth participation in agriculture will address two of Africa’s biggest challenges: its fight to achieve food security and its urgent need to find employment for its young people. These challenges can be transformed into its biggest assets,” says Dr Agnes Kalibata, former Rwandan minister of agriculture and current president of the Alliance for the Green Revolution in Africa. “Unlike their aged counterparts, the youth are more likely to perform irrigated agriculture, produce for the markets, grow staples like rice, maize and horticulture for export markets and engage in post-harvest activities,” says Professor David Nyange of the Ministry of Agriculture, Livestock and Fisheries.hideRisk experts say the entry of the youth into agriculture in the region is a transformative development because they are generally more educated and are therefore likely to embrace modern farming methods, including protection of their investments against risk through insurance products. Already, there has been an upsurge in the uptake of agriculture insurance, according to Pauline Mwangi, business development manager at Manjani Insurance Brokers. More youthful farmers undertaking agriculture as a business are more willing to take insurance to cover their risks, she says. The company has been offering livestock insurance cover, in partnership with UAP Insurance. “There is correlation between an increase in the number of youthful farmers and the demand for insurance,” she says. Her sentiments were shared by Farid Wangara, sales manager at Acre Africa, the company that now implements the restructured Kilimo Salama (safe farming) project initiated by UAP Insurance, Safaricom and Sygenta. Among the products offered by Acre Africa are weather index covers, hybrid index and multi-peril crop insurance covers – a combined insurance product to insure crop against risks beyond farmers’ control, including drought, storms, pests, and diseases – and indemnity covers for dairy cows that insures against death from accidents and selected diseases. Replanting guarantee products, meanwhile, enable farmers to buy another packet of seeds in case of germination failure and still plant within the planting window. Not just about farming Young people in agriculture say the growing interest among the youth is a result of a realisation that agriculture is not just about farming, but provides other enterprise opportunities along the value chain. Rita Kimani and Peris Bosire, for instance, two Kenyans in their 20s, founded FarmDrive, a business that uses data collected from small-scale commercial farmers to enable those farmers to access financing, therefore addressing one of the biggest challenges facing small-scale farmers in Africa. It is a challenge that even banks and microfinance institutions have failed to address because they lack data on small-scale farmers, which would enable them to make decisions on the type and quantity of loans to offer farmers. “We have pioneered an innovative way to use data that is generated in smallholder farmers’ value chains to facilitate their access to credit,” says Ms Kimani. “Many other businesses can access loans from banks based on their records but not small-scale farmers, who do not have a credit history. This is what we are changing now,” she adds. FarmDrive charges financiers a $1 fee for every farmer profile it accesses, while farmers pay a transaction fee of 3% of the total loan they receive via the company. Another young entrepeneur, Laetitia Mukungu, 20, started the Africa Rabbit Centre in western Kenya. The project has resulted in hundreds of women becoming financially stable by helping them to start rabbit-rearing businesses and then to buy back mature rabbits to sell to high-end hotels. Ms Mukungu has operated as a marketing link for the rabbit farmers – she links the women to the buyers, an innovation that has also helped address another big challenge that has faced small-scale farmers – certainty of the market. “We have improved the food security situation in the areas we operate in. Women, for instance, are able to use the money from the sale of rabbits to buy genuine seeds and use rabbit manure to improve their yields,” says Ms Mukungu. Ernest Sebuba, 27, from Uganda, a diploma graduate in telecommunications engineering, chose to go the on-farm way. He earns his income exclusively from his farm, a two-acre holding that focuses on dairy and horticulture farming. Abrhame Endrias Butta, 29, from Ethiopia, owns Green Agro Mechanization, a firm that offers rental services for modern agricultural machinery, equipment and tools, including equipment for ploughing, harrowing, row-seeding, harvesting, processing and transporting. He has 13 full-time or temporary employees. Pascal Furaha, 35, from Rwanda, is the owner of PEBEC, a chilli business he established in 2012 with an aim of employing more than 5,000 farmers grouped in cooperatives. The business generates foreign currency for the country as an export project. PEBEC is already selling chilli in global markets, notably in Spain and India. The critical shift is that most of the young agro-entrepreneurs are not involved in on-farm activities but are using the value chain of the food growing and consumption process to offer critical services that have benefits on both ends; encouraging more food production and ensuring retail food markets are adequately supplied. There is already growing evidence that youth participation in agriculture is benefiting millions of small-scale farmers. With time, these agro-enterprises are expected to grow and offer even bigger opportunities, not only to their owners and employees but also the farmers. Take the case of Shambani Graduates Enterprise, a Tanzania-based company started by three graduates from the Sokoine University of Agriculture in 2003. Back then, the company had the capacity to process only 30 litres of milk per day; fast forward to 2014 and the company is processing 4,000 litres per day and diversifying to add value to the goat milk. Crop and livestock microinsurance The commercialisation of small-scale agriculture is happening at a fast rate in east Africa, driven by better organised marketing systems, a growing middle class and massive investments in farming technology like greenhouses. This growth has triggered demand for crop and livestock insurance as agro-entrepreneurs seek to cover their risks against losses like bad weather, diseases and theft. As a result, small and medium-scale enterprises, whose core business has not been in insurance, are finding a niche in diversification. Optiven for example, a real estate company, has now branched out into providing microinsurance products for poultry farmers. Others include savings and credit cooperative societies, microfinance institutions and formal investment groups. Optiven has signed a partnership with Century DT Microfinance to provide the cover for poultry farmers, according to its chief executive, George Wachiuri. “Our first focus is in western Kenya, then [we will] roll out to the rest of the country,” he says. “Out of millions of Kenyans, less than 5% secure [their] investments. This is because of lack of adequate information on the importance of insurance policies and this is what we are contributing to changing,” he says. Experts say more farmers would buy insurance, if the insurance companies could do more to educate them on how it works. “The biggest challenge facing the growth of microinsurance, including that targeted at farmers, is a lack of understanding of how it works. Farmers also want to see the benefits before they buy,” says Isaac Ng’aru, an insurance consultant with Ng’aru and Associates. He adds there is a need to involve farmers in the design of the products to ensure that insurance products target crops and livestock that farmers consider valuable enough to warrant cover. APA Insurance earlier announced that it is scaling up its livestock insurance cover targeted at pastoralists, with the aim of making the practice commercially viable. The Mifugo Maisha livestock insurance cover, which previously covered pastoralists in Isiolo and Marsabit counties, has now been expanded to the counties of Baringo, Turkana and Garissa. The index-based livestock insurance cover sees pasture monitored through satellite survey twice a month and data used to predict the number of animal fatalities. The scheme is backed by the International Livestock Research Institute and World Vision Kenya. The Islamic sharia-compliant Takaful Insurance company has also expanded its livestock insurance cover to cover the whole of east Africa. Governments, too, are taking the initiative. The government of Ethiopia has announced plans to launch weather index-based crop insurance. To be implemented later this year, this new insurance product will enable smallholder farmers to insure their loans and investments to purchase and use agricultural inputs. The insurance service is expected to reach more than 200,000 farmers at the initial period. A similar product is also planned by the Kenya government in partnership with the private sector. It will cover small-scale farmers against weather-related crop failure and loss of livestock. Irrigation gains wider usage The transformation of agriculture into enterprise means farmers will want to be in the farming cycle all year round to maximise their profits. This is what is driving demand for irrigated land, and massive investments are being undertaken by the private and public sectors on the same scale across east Africa. Irrigation is also being preferred in the face of climate change. It helps to mitigate against changing weather conditions, which have distorted the traditional crop-growing cycle. “With irrigation, at least you are guaranteed there will be water. In rain-fed agriculture, the weather changes mean the rains are not guaranteed. As an entrepreneur, you choose the irrigation model and this is why we have invested in it,” says James Waigwa, who grows tomatoes under greenhouses. Kenya, for instance, just received a loan of $39.5m and a grant of $22.8m from the African Development Bank to implement small-scale irrigation projects in 11 counties. Such investments are being undertaken across east Africa. In parts of Kenya, communities living near rivers are tapping water through gravity into their farms to grow export crops like French beans and babycorns among others. Kenya is also on the verge of completing a 10,000-acre irrigated model farm, known as the Galana-Kulalu Food Security Project. It is estimated that, when completed, the project will end Kenya’s maize deficiency and provide model farming that can be replicated across the country. The project is being developed in collaboration with an Israeli company, Green Arava. It will be launched in July by Prime Minister of Israel, Benjamin Netanyahu. The Galana project is expected to cut Kenya’s reliance on rain-fed agriculture, which is blamed for the perennial food shortage, by employing technology to cut the cost of food production. The plan by the government is to develop 500,000 acres of the vast Galana-Kulalu ranch, which covers an area of 1.78 million acres but with an irrigation potential estimated to be 1.2 million acres. Experts say growing Kenya’s staple crop under irrigated conditions will not only reduce the cost of production but will also improve yields. “Irrigated maize comes with high output, high income and high profit in comparable fields. Irrigation will cut the cost of production by about 40% and enable more cycles for growing the crop,” says Dennis Otieno, a researcher with Tegemeo Institute, part of Egerton University. The agriculture ministry is betting on irrigated farms to tame perennial food shortages and stop the importation of maize, which will eventually cut down the cost of commodities. Only 20% of the land in Kenya is currently under irrigation. Kenya has a deficit of 20 million bags annually and NIB general manager Daniel Barasa believes 200,000 acres of land under maize would be enough to bridge the deficit and slash imports from Uganda and Tanzania. “By cultivating 250,000 acres of the Galana-Kulalu complex, we would meet 41% of the country’s annual maize consumption of 48 million bags, hence providing enough maize to bridge the deficit,” says Mr Barasa. Drought-resistant crops The development of drought-resistant, disease-resistant, drought-tolerant and water-efficient crops, especially the staple food maize, has been one of the key advancements of the agriculture sector in east Africa. The idea is to develop crop varieties that will provide better yields at a time when the effects of climate change are starting to be felt. The improved maize varieties are becoming popular with agri-entrepreneurs because they are more likely to mature even in adverse weather conditions and disease outbreak periods, ensuring investment return. Last year, scientists in the region released ten varieties of conventionally bred, drought-tolerant maize varieties in response to shifting weather patterns in the region. Four drought-tolerant maize varieties were released in Uganda, three in Kenya and three in Tanzania. The Kenya government has said it will spend $2.6m on programmes encouraging farmers to plant indigenous drought-tolerant crops in counties adversely affected by climate change. Farmers will be encouraged to plant pumpkins, sorghum, butternut, cassava, millet, green grams, sorghum, amaranthus and watermelon, among other crops. The government will give the farmers certified seeds of the drought-tolerant crops. Regional counties have also lowered barriers in allowing genetically modified (GM) crops to be grown, also motivated by the need to reduce avoidable losses from pest attacks on maize, for instance. In January, Kenya approved open-air field trials of GM maize, making it the first east African country and the third in the continent to plant the genetically modified crop. If the field trials are successful, the so-called Bt maize will be approved for cultivation and go on sale on the market in the next two years. The National Biosafety Authority (NBA) granted conditional approval to the Kenya Agricultural and Livestock Research Organisation, developer of the Bt maize, and the African Agricultural Technology Foundation for the environmental release only as a first step towards the commercialisation of Bt maize. “The authority has granted an approval only for the field trials across the country and collection of data on the maize variety to confirm if it matches that of the confined field trials before the crop can be approved for cultivation by farmers,” says Willy Tonui, NBA chief executive. Uganda announced last year it is developing a coffee bean that is resistant to drought to help mitigate the impact of climate change. “We have to have a coffee variety that is adaptable to climate change,” says Henry Ngabirano, managing director of the Uganda Coffee Development Authority. Warehousing receipt system underused Only Uganda has made significant steps in the use of a warehousing receipt system, which helps farmers access better grain storage facilities, achieve better prices and get financing based on the volume of their harvest. Although the system is seen as a game-changer in the region in terms of grain marketing – limiting post-harvest losses resulting from poor storage and access to financing – low awareness has reduced its benefit to farmers. The Grain Council of Uganda has just announced a country-wide campaign of constructing grain silos, to deliver the system to the grassroots. The country has established the Uganda Warehouse Receipt System Authority (UWRSA), the lead agency for the development of standardised and certified storage facilities of commodities, and the promotion of structured financing for commodities. This is in contrast to Kenya, where there is no law on the system and the existing one only benefits elite farmers. Uganda plans to link all the silos to the National Commodity Exchange, an online market for grain to tap into the markets of South Sudan, Rwanda and Kenya, which are the major markets for Uganda. Deborah Kyarasiime, executive director of the UWRSA, says the country has begun to experience a rapid transition from subsistence agriculture towards commercialisation, especially among small-scale farmers specialising in grains. “We are targeting the surplus stocks that would have gone to waste. The warehouse receipt system provides title of ownership – a document of value recognised and tradeable anywhere, anytime, backed by law – enabling a farmer or a trader to access credit without holding onto physical goods and, hence, expanding his or her business.” She says the system minimises storage costs because of the economies of scale, especially where the insurance industry is involved, compared to the risk of storage by the producers or small-scale traders. “The system offers maximum security of the commodities because the stocks are usually insured against fire and allied perils, burglary, professional mishaps, staff infidelity and public liability. In addition, quality is assured against vermin, insects, fungae and moulds. And most importantly, the warehouse receipt system provides a wider market access for the commodities through the electronic warehouse receipt system, which brings local and regional markets together, minimising marketing costs.” In Kenya, Equity Bank, Chase Bank and the Eastern Africa Grain Council (EAGC) are the main drivers of the system, which is yet to be rolled out for mass usage by grassroots farmers. Gerald Masila, executive director of the EAGC, says that in Kenya, the lack of a law to regulate the warehousing receipt system is the main challenge. “It is a game-changer but it must be done in the right way,” he says. He adds that among the challenges are: an insufficient number of certified warehouses complying with preservation norms; farmers’ limited business skills; and lack of incentives for millers to purchase warehouse receipt system commodities. “These challenges will need to be addressed as a whole for the warehouse receipts system to help optimise agriculture in Kenya,” says Mr Masila. Rwanda, meanwhile, hosts the East Africa Exchange (EAX), which specialises in maize, beans, soya and rice and has announced plans to also sell coffee and tea. EAX is styled like the South African Futures Exchange and Ethiopia Commodity Exchange. Its range of services include secured storage, grain cleaning, drying and grading, warehouse receipts, warehouse receipts financing, trading and capacity-building, among others.

East Africa wakes up to the potential of commercial farming

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