A farmer inspects her maize crop in Subukia. FILE PHOTO | NMG
I once asked myself, why is food expensive in Kenya? This led me on a journey, meeting countless farmers and reviewing a significant amount of published material.
One statistic hit me from the World Bank: that Kenyans spend 55 percent of their disposable income on food. I looked at what other countries were spending, South Africa was 16 percent and the UK was about 10 percent.
In 2019, we saw one of the highest sustained months-on-month inflation rates on food in the country, getting to average nearly 10 percent from March to December. So, I thought to myself, if the cost of food is rising faster than income levels, with already an extremely high amount of disposable income going to food, that could also start explaining why many sectors in the economy struggled in 2019, because consumers prioritised food over other types of expenditure.
From this analysis, the question was, what is the structural issue that continues to mete such pain on the average Kenyan consumer? I started subscribing to the hypothesis that this lay in the structure of our retail industry and that of many other African countries which are facing similar challenges.
In my career, while working for The Coca-Cola Company and having directly managed close to 40 countries across Africa, the one thing that struck me was the similarities in the structure of the retail industry.
The retail industry is characterised by fragmentation and informality. Looking at the retail fragmentation data, I saw a correlation: the higher the level of retail fragmentation, the higher the amount consumers were spending on food. Nigerians spend an average of 60 percent of their disposable income on food.
This level of informality in the retail structure is also mirrored in local food production, where 70 percent of Kenya’s food comes from the small-holder farmer.
The small-holder farmer in Kenya is of an average age of 60 years. With the average age in Kenya being 18 years, it means the younger generation has essentially abandoned agriculture. A continuation of this trend may lead to the collapse of the local food production system in the country.
One thing that I learnt in my 21 year career, distributing beverages in highly fragmented and informal markets is that when you don’t have structured access to the domestic market, then there is significant knock-on effects in terms of how investment then flows into different sectors of the economy and one of the greatly impacted sectors is agriculture.
Commercial bank funding allocation to agriculture was less than four percent, which is counter-intuitive when you look at the size of the food opportunity. Most of this funding is directed towards export-oriented agriculture, mainly because the importing countries have well-structured domestic markets through big retail chains and this provides predictability in the value chains of food exporting companies in Kenya.
Hence the reason why all major agricultural companies in the country are all export oriented.
So, where does this leave the efforts towards national food sovereignty? Where does Kenya and Africa go from here? This is the problem that Twiga set out to solve. Twiga views its purpose as providing access to low-cost, high-quality food across African cities.
The writer is CEO, Twiga Foods.
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