The Central Bank of Kenya (CBK) has released a comprehensive report highlighting the significance, recent performance, and future prospects of the agricultural sector, a cornerstone of Kenya’s economy. The report underscores the sector’s vital contribution to GDP, employment, and foreign exchange earnings through exports such as tea, coffee, and horticultural products.
Key highlights from the CBK Report
1. Background and sector significance
Agriculture contributes 22% to Kenya’s GDP, supports employment, and bolsters industries like manufacturing and retail. Between 2019 and 2023, the sector saw steady growth in its GDP contribution, increasing from 20.9% to 21.8%. Additionally, wage employment in agriculture rose to 344,300 in 2023, demonstrating the sector’s expanding economic footprint.
2. Recent sector performance
After two years of decline, the sector rebounded with a 6.5% growth rate in 2023. This positive trajectory continued in 2024, recording 6.1% growth in Q1 and 4.8% in Q2. This recovery is attributed to favorable weather conditions and government initiatives, such as subsidized fertilizers, which have significantly boosted sector optimism.
3. Survey methodology
The CBK’s November 2024 survey, conducted from November 11–16, gathered insights from 233 respondents, including farmers (52%), retailers (35%), and wholesalers (14%) across diverse regions. This broad participation ensured a comprehensive view of the sector’s dynamics.
4. Key findings
- Price trends: Prices for green maize, beans, cabbages, and onions declined, while maize flour, wheat flour, sugar, and spinach saw increases. Prices of sugar, cooking fat, and oil are expected to rise in December due to global market shifts.
- Agricultural outlook: A robust 87% of respondents expect stable or improved agricultural performance in the next three months, while 81% express optimism for the sector’s performance over the coming year.
- Input access: Among farmers, 85% use inorganic fertilizers, with over 50% benefiting from subsidized inputs that have positively impacted production.
- Inflation expectations: Improved food supply and stable exchange rates lead 52% of respondents to anticipate stable or decreasing inflation.
5. Recommendations
To sustain this growth and address challenges, the CBK recommends:
- Promoting irrigation infrastructure to reduce reliance on rain-fed agriculture.
- Ensuring affordable and quality inputs, alongside sustained subsidies.
- Expanding market access and stabilizing prices.
- Supporting mechanization and enhancing farming techniques through extension services.
6. Policy implications
The CBK emphasizes the need for continued government support in strengthening input subsidies, improving financing access, and addressing logistical challenges in the supply chain. The bank also stresses the importance of monitoring food prices and supply trends to maintain inflation control.
7. Challenges facing farmers
Farmers highlighted key challenges, including:
- Price fluctuations: 80% reported significant volatility in key crops like tomatoes, onions, and maize.
- Market challenges: Price distortions caused by middlemen and poor road infrastructure.
- Access to finance: High-interest rates, lack of collateral, and fear of loan defaults remain significant barriers, despite the rise of mobile-based loans and the Hustler Fund.
8. Concluding insights
The report underscores the critical role of irrigation and mechanization in reducing reliance on rain-fed agriculture. Infrastructure improvements, such as better feeder roads and maize drying facilities, are vital for reducing post-harvest losses and enhancing market access.
The CBK report reiterates that agriculture remains a pillar of Kenya’s economic stability, and sustained interventions are essential to maximize the sector’s potential and mitigate challenges.
