Located 90 km from Kenya’s capital, Nakuru county in the Rift Valley is a great agricultural center, endowed with amazing touristic destinations with lakes and craters.
Agriculture is a major contributor to the Kenyan economy, with up to 22% stake in the Gross Domestic Product (GDP). The horticultural industry is one of Kenya’s economy fastest growing industries and another great contributor to the GDP, with 3% input to the GDP (approximately USD 1 billion annually to the economy). Of this, the floriculture subsector contributes 1.6%.
Kenya’s climate is very favorable for flower farming. Differences in altitude allow dynamic climatic conditions from the hot coastal plain up to the cool highlands. With a temperate climate prevails above 1500m with daytime temperatures ranging from 22 °C to 30 °C and night time temperatures from 6 °C – 12 °C. There are two distinct rainy seasons. The long rains from March to June and short rains during September and October. The rainy days are restricted to 60 – 80 days, giving a chance to excellent radiation most of the year, which is ideal for the year-round growing of quality flowers.
Nakuru County is Kenya’s floriculture center, contributing highly to the employment and economic development of its people. According to the Lake Naivasha Growers Group (LNGG), there are 73 flower farms in the county, with Naivasha town accounting for 48 of these.
Flower farming in Kenya dates back to 1928, which started with the introduction of pyrethrum, a flower used in the production of natural insecticide. For an extended period of time, Kenya was the biggest producer of pyrethrum in the world, producing up to 90% of the world’s pyrethrum up until 1998, a position that has since been taken over by Tasmania, Australia. Pyrethrum production used to be at over 18000 metric tonnes (MT) per annum, a number that has drastically reduced to about 200 MT per annum.
According to Mr. Nyang’au, a former pyrethrum farmer in Nakuru County, the major contributors to this decline have included:
- Poor farmer remuneration
- Mismanagement of funds at the board and farmer societies
- Introduction of synthetic insecticides to the market. Synthetics might be cheap but are not only environmentally unfriendly but this introduction also competed with the farmers’ natural options.
- Pyrethrum farming is very labor intensive and this means that small-scale farmers who depended on school breaks for cheap labor from their children and students were not able to cope during school terms.
- The introduction of other cash crops, whose timing coincided with the declining times of pyrethrum production also pushed these numbers further down.
While pyrethrum farming has seen a decline in Kenya, countries like Rwanda are making an entry into the market with pyrethrum farming which has started to see sustainable income for the farmers. This is a clear indication that there is still great potential in investing in pyrethrum flower farms, especially for the small farmers as the demand for the produce by manufacturers of natural insecticides is still set to be on the increase.
The Nakuru County governor, Mr. Kinuthia Mbugua constituted a task force in 2013 to investigate the decline of the pyrethrum farming in the country, with a mandate to suggest action plans that would be taken to revive the subsector throughout the country, to attract new interests among farmers to get into pyrethrum farming.
In the agricultural sector, floriculture in Kenya is the second largest foreign exchange earner after tea. The floriculture sub sector has seen a great increase both in exports, local sales and profits. Contributing up to 1.6% to the country’s GDP, with unvalidated statistics showing that in 2012, the floriculture industry exported 123,511 tons of flowers valued at KES 42.9 billion. The flower industry is one of Nakuru County’s biggest employers both directly and indirectly with over 500,000 people (including over 90,000 flower farm employees) depending on the floriculture industry.
The vast area of Naivasha constituency is covered in green houses that are used for flower farming. Kenya is the leading exporter of rose cut flowers to the European Union (EU) with a market share of about 38%. Approximately 65% of exported flowers are sold through the Dutch Auctions to the European market that includes Holland, United Kingdom, Germany, France, and Switzerland; and although these exports did not start until as late as the 1970, the flower industry has enjoyed great attention around the world especially for the good quality of flowers grown, leading to a maintained average growth of 20% per annum.
Naivasha constituency is the most convenient location for flower farming due to its proximity to Lake Naivasha, given the high water demands in flower production; both in irrigation and maintenance of the farm machinery.
Naivasha being 1880 m above sea level gives the area an ideal climatic condition for floriculture. The main flowers grown include: roses (53.6%), Easter lilies (26.5%), Arabicum (4.1%) carnations (3.1%), and Hypericum (1.98%). Other flowers cultivated include, Gypsophilla, Lilies Eryngiums, Arabicum, Hypericum, Statice, and a range of summer flowers.
In the recent past, the flower farms have come under a lot of pressure on issues of overdrawing water from Lake Naivasha (although this is not conclusively proven as the lake keeps rising and falling), water pollution, poor employee working conditions and remuneration. Some of the problems have seen Karuturi, one of the largest cut rose producers in the county, at 6 billion stems of cut rose for export a day, come under receivership and face management hardships.
According to Mr. Eddy Verbeek, General Manager at Florensis Kenya, there are various challenges that are faced by the Kenyan flower industry.
This varies from downturn in the European economies, the flower industries’ main market, resulting in the reduction of sales prices or static at best. Escalation of the production costs in Kenya in the same period including fertilizers, chemicals, fuel, power and labor in the order of 8-10% per annum. This results in minimum profit margins that can’t sustain re-investment and expansion.
Although Vision 2030 anticipates that the agricultural sector delivers a double digits growth per annum, the sector is paying for well over 45 different taxes, permits and levies to various government bodies. In the new devolved system, most of what is ailing the industry is that, “with the devolved government, it looks like the counties are coming up with new licenses, levies and permits for the same things we already pay to national government.” Instead of just adding new ones the counties should focus on harmonization and rationalization of the licenses, permits and levies.
The sector is embracing the newly devolved county government. It has the potential to work closely on a county level to make floriculture flourish. The issues that farms in Nakuru have are different than the farms at Mt. Kenya or Coastal regions. Working with a county government instead of national government could be an advantage.
With the new devolved system of government, the Nakuru County government has a task to ensure that the flower industry maintains its profitability without bearing too much burden on imposed taxes even as they push to increase their revenue collection. The result of this would be a balanced ecosystem where the flower farms are able to maintain their profits and their employees since if otherwise operation costs are heightened, this would be transferred to the customer which in effect might lead to reduced sales and whose ripple effect might be loss of jobs and livelihood to the citizens that depend on the industry.
The role of the Tourism sector in Kenya’s economy can never be overstated: Contributes 14 per cent of Kenya’s GDP, employs 12 per cent of the work force and it is Kenya’s largest foreign exchange earner after Tea and Coffee.
It is therefore fundamental that the government plays its part to aid in growth of the sector and fully exploit its potential by undertaking infrastructure development; encouraging private sector investment in tourism-related facilities like accommodation and restaurants; and minimizing security threats.
There is no denying that the recent wave of terror attacks in the country have been an obtrusive stain in the government’s security efforts (existing or not), but just how bad an effect have they had on Kenya’s third biggest foreign exchange earner?
Comparing tourist arrivals and terror attack numbers over the last 3 years with the years divided in quarters makes for interesting viewing. The tourist arrivals number should ideally be growing steadily but that has not been the case. The terror-attack wave from the fourth quarter of 2011 does not help at all as the numbers really start to plummet.
The security situation needs to improve drastically to save the sector from short-term and long-term damage because, as it is, Kenya’s tourism sector continues to ail: one travel advisory after the other.
Is Funding for Higher Education, keeping up with the enrollment trends?
The Higher Educations Loans Board was established in 1995 with a critical mandate to disburse loans, bursaries and scholarship to Kenyan students pursing higher education in recognized institutions. The board gives loans to students at affordable rates, which are repayable once they secure an income.
In the last few years the number of students enrolled in Kenyan universities – public and private – has increased from 177,618 in 2010/11 to 324,560 in 2013/14 and significant increase of 82%. The student numbers have grown faster in public universities at 98% in the same period compared to 27% in private universities as shown in the chart below.
Source: Kenya Economic Survey 2014 –KNBS
The next step is to analyze the resources that are allocated to fund education in Kenya as well as help students’ access the loans provided by HELB.
The funding for public universities in Kenya comes in two main streams; first, universities get money that is collected as fees from students who learn in these institutions. Secondly, they also get transfers from the Ministry of Education to top up the revenues generated as fees in the institutions. One thing to note is that over the past few years the total budgetary allocations per capita (total university expenditure per student) has been declining showing a case of increasing number of students in public universities that is not commensurate with the money funding their education as shown in the chart below.
Source: Kenya Economic Survey,2014 and the Budget Expenditure Estimates
The next area of analysis is to see if the funds available to HELB will ensure the increased number of students still have access to loans and scholarships. Data between 2010/11 to 2012/13 shows an increase in per capita allocations to HELB as shown in the next table. However, there is a drop in 2013/14 which could be explained by the 53% increase in the number of students but only a 7.8% increase in the expenditure to universities for that year.
Kenya still has a very low transition rates between secondary schools into tertiary institutions. It is expected that the Government together with private sector players will continues to push for higher intakes over the foreseeable future. However, this could be a challenge to the institutions if the resources available to keep the students in school is deficient.
Kenya is a country that has a high age dependency ratio as an aging population is dependent on their working children and relatives to support them. This is in addition to other dependents who are of working age but are not engaged in any income generating activities and are dependent on the same providers. This has led to a debate on Kenyans planning for life after retirement which means saving for retirement benefits when still in active employment. However, majority of employed Kenyans are actually in the informal sector and do not have regular incomes which makes periodic savings a challenge. According to the Economic survey 2014, 88% of people employed in Kenya are in the informal sector. In addition the proportion of informal jobs created every year is over 80% and increasing in size compared to formal sector jobs.
In the light of these developments the government has been pushing to get more people in the informal sector to take up health covers and start saving for their retirement. The recommendation to register more people under the National Health Insurance Fund (NHIF) and the National Social Security Fund (NSSF) has also been complemented by some private companies who have developed some products to tap into this huge market.
So how has the enrolment into NHIF and NSSf played put so far?
According to the National Health Insurance Fund the number of people in the formal sector registered under NHIF rose from 1.8 million in 2008/09 to 2.7 million in 2012/13,a 49% increase in the 5 years as shown in the chart below.
In the same period the number of NHIF members from the informal sector increased from just over 376,000 to 1.1 million. A 196% increase over 5 years. This is quite an impressive increase over the period. However the share of members from the informal sector in relation to the total NHIF membership was still under 30% in 2012/13 despite making up 88% of the workforce. This is an indication of the scale of need for health insurance in Kenya.
The chart below shows the share of people registered with NSSF that are employed. Over the last five years that number has been varying between 29%-32% and it does not seem to be rising. While we don’t have data on the numbers brought in by the Pension ya Mbao scheme. Available data shows a stagnation in pension plans uptake.
What does this mean? Only a third of the employed (Formal and Informal Sectors) have some sort of pension benefits to look forward to and this could be an indication that the dependency rates in Kenya could remain high if we incorporate the large proportion of the unemployed and the old.
So the 2014 FIFA World Cup is here.
Maradona’s “hand of God” goal, Roberto Baggio’s penalty miss against Brazil, Bergkamp’s wonder goal against Argentina, Zidane’s sending-off against Italy; Every football fan has their own most memorable World Cup moment.
For African teams though, the World Cup has been a forgettable outing. Apart from 1990 when Cameroon, led by the hip-shaking Roger Milla, took the world by storm and probably in 1982 when Algeria looked destined for greatness but were undone by a disturbing case of match-fixing between West Germany and Austria, the rest have been disappointments.
In the 2014 edition, Algeria, Cameroon, Cote d’Ivoire, Ghana and Nigeria will be flying the African flag. With all five African participants having played at least once as of today, the African record reads: Played 5, Won 1, Drew 1 and Lost 3.
Cote d’Ivoire were the only winners beating Japan with Nigeria drawing against Iran and Ghana, Cameroon and Algeria loosing to USA, Mexico and Belgium respectively. Not the best of starts and if these early results are anything to go by, Africa is treading the far too familiar path of failure at the global showpiece.
Kenyans, institutions and private sector players will all be watching keenly tomorrow as Cabinet Secretary for the National Treasury Henry Rotich reads the budget statement for the fiscal year 2014/2015, especially with it coming in the wake of recent Anglo Leasing payments and other national debates including the wage bill and how to contain recurrent expenditure.
Here is a Word Cloud of last year’s budget statement, the first under President Uhuru, to get us all in the mood. I have to say, though, that it does not analyze the statement; it just emphasizes the frequency of words used and not necessarily their importance.
It recently occurred to me that I seldom hear children playing around my neighborhood – at least not as much as they do back at my parents’ place. Considering my parents’ environment is more rural than where I live, I tried to see if rural areas have more children than urban areas.
Urban areas have a lower average child population of 36.5% compared to rural areas which have 46.1%. It could be because of a number of reasons ranging from individuals leaving their families behind while relocating to urban areas to seek employment; to rural-based parents having more children than their urban-based counterparts; the list is endless.
Looking at size of households in rural and urban areas in Kenya, Rural households are generally larger – with 66% of rural households having 4-7 members – compared to urban households which have 46% of households with 4-7 members.
To delve further into the counties, Mandera, West Pokot, Wajir, Tana River and Samburu Counties have a child population of more than 50%. Incidentally, these are among the poorest counties in Kenya.
Looking at the other extreme, Nairobi, Kiambu and Mombasa have the lowest child population in Kenya at just over 30% and are among the least poor in Kenya.
The English say the soul is healed by being with children, fair enough but what if it makes us poorer and therefore unable to provide for them as well as we would want to?
To quote the Government statement on settlement of Anglo Leasing debts, The Government’s decision to settle the judgment debts is premised on – Protecting Kenya’s economy on account of rising interest rates occasioned by domestic borrowing due to constrained access to international borrowing; Protecting Kenya’s reputation as a country that meets its contractual obligations and adheres to the rule of law; Protecting Kenya’s assets abroad; and maintaining and improving Kenya’s credit rating currently at B+.
If the statement is anything to go by, it was necessary to make the payments to Anglo-Leasing so as to maintain and improve Kenya’s credit rating in light of the proposed issuance of Eurobond to finance the Fiscal Year 2013/2014 budget.
To explain it , a Eurobond is a bond denominated in a currency other than the issuer’s home country. They are mainly issued by governments, corporations, and international organizations.
Kenya is set to follow Rwanda, Nigeria and Ghana – African countries who issued bonds in 2013 – in doing so and, according to the Central Bank of Kenya, the proceeds from the $1.5 bn Eurobond issue will significantly raise the level of foreign reserves with the exchange rate of the shilling expected to come under pressure to appreciate in the coming months. The Kenyan shilling has been on a downward spiral against other currency, recently falling to just under KES 88 – a 28 month low. Using this USD-KES exchange rate, the amount to be borrowed will be around KES 132 billion.
So it all amounts to doing away with KES 1.4 bn to get KES 132 bn. Worth it?
An increase in government debt raises the Debt-GDP ratio. Looking at @Ramah_Nyang’s Twitter time line from 27th May, 2014, this will raise Kenya’s Debt-GDP ratio to the 53%-55% range.
Comparing Kenya with a few selected countries worldwide makes for some interesting viewing.
But the expected GDP re-basing for later this year should raise the GDP figure and thus lower the Kenyan ratio by some percentage points.