Agriculture and Livelihood Diversification in Kenyan Rural Households Simon C. Kimenju and David Tschirley Tegemeo Institute Conference: Agriculture Productivity, Competitiveness and Rural Poverty in Kenya-Laying the Foundation for V th-18th September 2008

Outline  What do we mean by diversification?  Diversification/specialization and agricultural development  Key findings Trends in hh portfolios and levels of diversification  Regionally, by type of hh  Policy and programmatic implications

Diversification and Specialization  Diversification refers to how broadly a rural hh distributes its economic efforts A diversified hh distributes its efforts across many activities  E.g., food crops, several cash crops, livestock, and off-farm A specialized household distributes its efforts across few activities  E.g., focuses on a few cash crops and buys most of its food Diversification and specialization are the inverse of each other

Diversification & Ag Development  Many countries in Africa wish to promote greater “diversification” among farmers  Kenya’s government also promotes this in SRA: “increasing the growth of the sector by encouraging farmers to diversify farming into non-traditional high value crops”  Yet Vision 2030 sees a problem in too much diversification: “The proliferation of enterprises … on a typical small-scale farm … reflects lack of specialization due to risk and lack of organized marketing” Vision 2030 recognizes that specialization is needed in long-run to drive income growth and reduce poverty

Diversification & Ag Development (2)  Bottom line In early stages of ag development, hhs can benefit from greater diversification  E.g., adding cash crops to the food crop portfolio  E.g., adding off-farm to the farm portfolio But as the economy develops, as cities grow, and as barriers to local, regional, and international are reduced, those farmers who can will increasingly specialize Over time, those that do not specialize will either be pushed out of agriculture or will remain poor

Diversification & Ag Development (3)  Whether diversification is positive or negative for a hh depends on the stage of development of the agricultural sector and the household’s position in it E.g., more isolated households may need to diversify But households near large markets probably want to specialize to serve that market  Understanding a country’s stage of ag development is important for designing proper policies, programs, and technology packages

Objectives  Examine trends in portfolios to see which enterprises are becoming important to rural hhs  Determine levels of diversification for different zones and types of households Using a Diversification Index  Highlight policy and programmatic implications

Household income sources Crop Livestock Business Salaries Share of household income from various sources

Household income sources Crop Livestock Business Salaries Share of household income from various sources 60/40 balance each year: No real change between ag and non-ag

Household income sources Crop Livestock Business Salaries Share of household income from various sources Business has grown substantially

Off-farm business (real income)

Rapidly and widely increasing earnings

Off-farm business (real income) Widely increased participation

Mean number of crops Agro-regional zones Coastal Lowlands Eastern Lowlands Western Lowlands Western Transitional High Potential Maize Zone Western Highlands Central Highlands Marginal Rain Shadow Overall

Mean number of crops Agro-regional zones Coastal Lowlands Eastern Lowlands Western Lowlands Western Transitional High Potential Maize Zone Western Highlands Central Highlands Marginal Rain Shadow Overall Reduced number of crops in all zones – more specialization?

Share of area to tea, coffee and sugarcane Zone Tea High Potential Maize Zone Western Highlands Central Highlands Total0.05 Coffee Eastern Lowlands High Potential Maize Zone Western Highlands Central Highlands Total Sugarcane Western Lowlands Western Transitional Total

Share of area to tea, coffee and sugarcane Zone Tea High Potential Maize Zone Western Highlands Central Highlands Total0.05 Coffee Eastern Lowlands High Potential Maize Zone Western Highlands Central Highlands Total Sugarcane Western Lowlands Western Transitional Total Steady throughout Falling Steady

Share of area to fodder Zone Coastal Lowlands0000 Eastern Lowlands Western Lowlands Western Transitional High Potential Maize Zone Western Highlands Central Highlands Marginal Rain Shadow Overall

Share of area to fodder Zone Coastal Lowlands0000 Eastern Lowlands Western Lowlands Western Transitional High Potential Maize Zone Western Highlands Central Highlands Marginal Rain Shadow Overall Rapid growth in all zones apart from Coastal Lowlands

Proportion of Improved Cattle Zone Coastal Lowlands Eastern Lowlands Western Lowlands Western Transitional High Potential Maize Zone Western Highlands Central Highlands Marginal Rain Shadow Total

Proportion of Improved Cattle Zone Coastal Lowlands Eastern Lowlands Western Lowlands Western Transitional High Potential Maize Zone Western Highlands Central Highlands Marginal Rain Shadow Total Proportion highest in Central Highlands, HPMZ, and MRS

Proportion of Improved Cattle Zone Coastal Lowlands Eastern Lowlands Western Lowlands Western Transitional High Potential Maize Zone Western Highlands Central Highlands Marginal Rain Shadow Total But improving in almost all zones

Proportion of Improved Cattle Zone Coastal Lowlands Eastern Lowlands Western Lowlands Western Transitional High Potential Maize Zone Western Highlands Central Highlands Marginal Rain Shadow Total (Not shown) Also higher for higher income households (70-79% vs %) but improving for all income groups

Diversification Indices  Crop diversification Number of crop categories and share of each in gross value  Agricultural diversification Number of crop + livestock categories and share of each in gross value  Livelihood diversification Number of crop + livestock + off-farm categories and share of each in gross value We will focus just on crop and livelihood

Diversification Indices (2) Crop diversification -Increases, then falls -Begins of crop specialization Livelihood diversification - Increases throughout

Specializing zones (in crops)

Diversifying zones (in crops)

Richer HHs are more specialized - Each year, higher income = less diversification (more specialization) -Richer hhs specialized more dramatically than others between 2004 and 2007

Additional findings  Better local infrastructure allows households that were far from roads and services to benefit through diversification …  While proximity to a major market (large city) is an important driver of crop specialization Opportunity to sell large quantities of fresh produce or other crops

Policy & programmatic implications  Kenya may be at a turning point in crop ag From increasing diversification to increasing specialization  Previously, most hhs benefited from diversification  But in future more will benefit by specializing, in response to policy liberalization and urbanization  So policies and programs need to change in response to this turning point

Policy & programmatic implications (2)  Policies for “an innovative, commercially oriented and modern agricultural sector” More high yielding tech packages even if more risky  Extension messages more finely tuned to each farmer Access to the right inputs at the right time  Be sure that government programs do not undermine private sector input development More collaboration with private sector

Policy & programmatic implications (3)  More supply chain efficiencies Market information Physical market places Cold chains Must be conceived and implemented in a highly collaborative fashion with private sector  Better risk management Forward contracts Commodity exchanges Early warning for pest and disease infestations Crop insurance

Policy & programmatic implications (4)  While specialization is beginning in ag, diversification continues into non-ag Micro-credit, training for SME Primary and secondary education  Other research shows that individuals need secondary education, not just primary, to take advantage of off- farm opportunities