2003: Partner NEWS Vol. 6 no. 1

Don’t trade Aid

International trade benefits the big fat farmer. The small-scale farmer, who cannot even put his foot down in Kenya, has no chance at squeezing it in the door of big time trade. Thomas Mortensen, Development Worker in Ololmasani, rejects the development paradigm - Trade, not Aid from a small-scale farmer’s perspective.

By Vitalice Meja

Although Africa has continued to receive aid from the West for many years, its effects have been widely criticised. Many critics have specifically questioned the prevailing models, methods and strategies for development. The disappointing impact of aid and consequent donor fatigue, combined with an upsurge in liberalism forged by among others, the IMF and the World Bank paved the way for a new development paradigm - Trade, not Aid. This implies that increased trade internationally and nationally would bring about development. But is that so?

The fiercely competitive nature of international trade forces exporting countries to fight for market shares while domestic industries try to fight off foreign competition. It is noteworthy that some of the most ardent proponents of liberalization namely the US, Japan and the European Union have very strong agricultural interest groups, which have succeeded in maintaining extensive tariff and non-tariff trade barriers including quotas and tough sanitary measures.

In this respect, some developing countries including Kenya have negotiated for specific preferential trade rights in WTO and EU on grounds of their status as belonging to the group of "least developed countries". If they succeed, they will be exempted from the payment of stiff import duties on selected agricultural products.

One of the biggest successes in Kenya’s economy over the past decade has been a boom in the export of cut flowers and vegetables to Europe. However, this success is under threat due to the projection that by 2008, Kenya will be relatively rich and so will not qualify to fall under the "least developed countries" category. Consequently, it will have to pay substantial import duties.

In addition to the aforementioned trade barriers, the exporting industrialized countries are subsidizing their agricultural industry. Recently, US President George Bush signed a new Farm Bill that gives American farmers $190 billion in subsidies over the next 10 years. To make matters worse several countries in Sub-Saharan Africa have conceded to import liberalization as part of their World Bank or IMF programmes. This means that African farmers also face competition from subsidized imports.

The political nature of international trade renders it highly complex and enables large-scale farmers, middlemen, and Multinational corporations to take advantage of the small scale farmers who often lack the production, organizational and financial capacity to pursue local, national, and international markets. Although this situation may contribute to Kenya’s overall economic performance, it also supports critics' claims that agriculture may have limited trickle down effect in relation to issues such as poverty eradication.

Thus the question - are small-scale farmers really benefiting from local and national trade and by extension, is it time we substituted aid with trade?

Historically the Kenyan agricultural system was tied directly to the state. Government departments and parastatals financed the farmers through loans, gave them farm inputs on credit and even purchased the farm produce from farmers. These functions were undertaken by agencies like the Kenya Meat Commission, Kenya Co-operative Creameries, National Cereals Produce Board and the Agricultural Finance Corporation.

Today, that system is as dead as a dudu!

The erratic operation or collapse of most of these bodies in the recent past has forced farmers to diversify their activities and dive into horticulture. But even here, they face a myriad of severe challenges, which they have to overcome in order to succeed.

With the exception of regions like Central Kenya, Kisii, and a few others most farmers in Kenya have on average 2-3 acres of land. This apparent scarcity of land calls for its optimum utilization. For various reasons, this is however not the case. As horticultural crops are relatively new to many farmers in the country, their production poses a constant challenge to the farmers.

The management and production of horticultural crops requires more time and technical expertise than ordinary crops like maize and beans, but a large percentage of farmers do not have access to any technical assistance. For long the government provided the crucial extension services provided aimed at improving productivity, but in the recent past it seems to lack the capacity and willingness to do so. These services are now both scarce and expensive to farmers.

Many farmers also lack the human resources/labour required for optimising their production mainly because husbands increasingly look for other employment and sources of income in nearby settlements/towns. In most cases farmhands are hired to assist, but experience has shown that most lack the required seriousness, commitment and skills.

Quality inputs in terms of seeds, pesticides, and fertilizers is another requirement in horticultural production. High prices, long distances, and fake products in the market however have prevented farmers’ from accessing these. The liberalisation of the production/importation of agricultural inputs effectively ended the monopolisation of the same by the Kenya Seed Company and the Kenya Farmers Association. This also increased the number of competitors, diversified quality and threw prices open to the law of demand and supply. As a result, some unscrupulous agencies have been selling fake inputs.

Water is another crucial input in horticulture. In Kenya, a majority of farmers depend on rain-fed farming due to limited access to irrigation. In an effort to maximise production, the government established the National Irrigation Board, whose mission is to enhance the use of irrigation. The Board has been on stand by though - constantly dogged by claims of misallocation of resources and political interference.

Although agriculture has been referred to as a mainly labour-intensive activity, most of the small-scale horticultural farmers in rural Kenya badly require hard cash. In the early 90s, state owned financial institutions like The National Bank of Kenya, Kenya Commercial Bank and the Agricultural Finance Corporation were very instrumental in providing loans to farmers. Today the institutions regard the small-scale horticultural sector as a high-risk venture because the farmers often lack the conventional collaterals demanded for lending. Many financial institutions have therefore preferred to deal with a few large-scale clients. This, coupled with the high transaction costs has led to the systematic exclusion of small-scale farmers from credit access or savings facilities at reasonable terms.

For those farmers who succeed in overcoming the challenges in production and finance, the battle has almost only begun. Now they find themselves grappling with the problem of marketing their produce. On top of local markets in Kenya being unreliable and unattractive due to limited demand and fluctuating prices, transportation of the produce is a major headache. Access to main roads is troublesome due to the poor condition of the feeder roads. Most farmers are forced to carry the produce to the main roads, or use donkeys and other time-consuming and uneconomical means, thus compromising the quality of perishable products. The deplorable state of the main roads and numerous police roadblocks that act as extortion points now make transport costs to the actual market highly expensive. The market radius that the farmers can afford to operate within is limited and with that his profit. The politicisation of development has largely led to the construction and maintenance of roads in some politically correct regions with little regard for agricultural productivity.

Small-scale farmers also lack information on markets, on location, buyers, the best selling time, and buying patterns. The dynamic nature of markets, characterised by fluctuations in supply, demand and prices, creates this need. However, the majority of farmers do not have access to such information due to remoteness, inadequate communication facilities including telephones, newspapers, and Internet services. This leads to a distribution pattern where some markets are oversupplied others undersupplied. Farmers therefore lose out to the more organised and informed wholesalers who get a superior bargaining power.

Presently, the challenges facing the Kenyan rural farmers make it almost impossible for them to enter into the business of exporting their products. The potential effect of trade on development is therefore limited and aid continues to be key in complementing the private sector and the Kenyan state in creating a conducive environment for small timers. But in an era where Overseas Development Assistance is dwindling, the need for profiteering private sector players to be socially accountable and support initiatives that would improve the quality of life for the other categories in the populace is outspoken. Gone is the era where the private sector operated in seclusion.