1. PROFITABILITY ASSESSMENT OF CATFISH (CLARIAS GARIEPINUS) FARMING IN KENYA By John K.OKECHI UNU – FTP Fellow 2004

2. WHY CATFISH FARMING?  Endemic species-ubiquitous distribution  Succeful culture/breeding (fingerling raised) (Hogendoorn, 1979):  it matures and is relatively easy to reproduce in captivity;  it can grow fast and efficiently;  it supports high population densities;  it is hardy; and  it can tolerate adverse water quality conditions.

3. Relevant data on reproductive biology and rearing techniques of catfish, tilapia and carps (After Haylor, 1989; Rana, 1989 and Woynarovich and Horvath, 1980)

4. JUSTIFICATION Fish farmers in Kenya lack information on how to asses and determine the profitability of their farms The consequences are that many fish farmers do not achieve good fish production in their ponds. Other ‘potential’ farmers avoid going into fish farming and other farmers become ‘inactive’ because the profitability of aquaculture has not been demonstrated to them.

5. GOAL/VISION To carry out an analysis of catfish farming in Kenya so as to be able to determine its profitability and sustainability in the country. The intention is to make aquaculture (catfish farming) a profitable and equally competitive industry in the country (like agriculture and horticulture) within the next ten years. For instance, horticulture exports from Kenya command 27% of the EU market (November 2004).

6. OBJECTIVES  Develop/learn skills needed to develop enterprise budgets and business plans for catfish production systems.  Collect and organize data/information necessary to prepare enterprise budget and business plan for catfish production systems.  Estimate the expected net returns, breakeven cost, and breakeven yield of catfish farming in Kenya.  Determine profitability measures (net present value (NPV), internal rate of return (IRR), financial ratios (e.g. debt service coverage) and sensitivity analysis of the catfish farming.  Develop an aquaculture business plan for Catfish farming in Kenya.

7. METHODOLOGY  This work will involve the search and collection of secondary data and information on specific aspects of catfish farming (production) in Kenya.  The information will be collected from publications (reprints and on-line reprints).  The data/information collected will be analyzed using economic models.  The economic and financial indicators and analysis will be used to better understand the performance of catfish farming in Kenya.

8. ITEMS AND VALUE (Kshs)

9. ITEMS AND VALUE (Kshs) Cont;

10. SENSITIVITY ANALYSIS AND INVESTIMENT RISK ASSESSMENT ENTERPRISE BUDGET ANALYSIS  Will be developed based on average expected prices, costs, quantities and yields. BREAK EVEN ANALYSIS  Breakeven prices and yields will offer additional insights into the overall feasibility of the operation. Breakeven price above total variable costs Breakeven price above total costs Breakeven yield above variable costs Breakeven yield above total costs

11. SENSITIVITY ANALYSIS AND INVESTIMENT RISK ASSESSMENT Cont; SENSITIVITY ANALYSIS  Yields, prices, and interest rates vary over time and subject farmers to risk.  In the production cycle certain prices, quantities and costs may be highly variable with a resultant large effect on net returns.  Sensitivity analyses will be done by varying feed prices, yields, farm size and other variables

12. INVESTIMENT RISK ASSESSMENT Cont; NET PRESENT VALUE (NPV) AND INTERNAL RATE OF RETURN (IRR)  These are indicators of investment returns and will be applied to determine the profitability and feasibility of operating catfish farming activity.  Both NPV and IRR will be determined using a profitability model in Microsoft EXCEL.

13. MAIN ASSUMPTIONS Production assumptions that will be made include:  Initial weight of catfish stocked?  Survival rates in ponds?  Stocking density? catfish/m 2  Year 365 days  Cycle length days?  Growth rate catfish g/day?  Harvest weight catfish?  Feed conversation ratio (FCR)?  Data analysed is secondary  Yields (tons of catfish harvested after one cycle from 1 ha. Pond)  The sale price will be Kshs x/kg  Feeds used have a adequate proteins for the growth of the fish  Assume 12% interest on capital  Loan for operations at the beginning of the year?  Owners’ equity?

14. EXPECTED BENEFITS The products of the study:  Use as guides for prospective and existing fish farmers in Kenya.  The information generated will provide farmers with appropriate tools to determine profitability of their farms  To help lending institutions to better asses the viability of aquaculture projects and reduce the rate of failure in loan repayment.  Guide the government and other stakeholders on how to commercialise aquaculture in the country.