Towards the end of March, Agri-value chain actors converged in Nairobi for the Global G.A.P. Tour Stop conference to discuss and formulate a permanent solution that ensures agricultural exports meet standards for global market access certification.
Certification and standards are essential to any country’s industrial operations, economic development, and compliance with global standards. As such, Kenya has established its industry certification and standards within the agricultural sector to ensure it meets the necessary requirements and keeps up with the rest of the world in ensuring that only quality agricultural produce reaches the consumer.
The forum couldn’t be more apt, especially for our economy, given that agriculture is the mainstay of Kenya’s economy. Studies by the Central Bank of Kenya show agriculture accounts for 47 per cent of Kenya’s Gross Domestic Product (GDP) directly and indirectly through its linkages with other sectors. The sector employs also 40 per cent of the total population, and more than 70 per cent of the rural population relies on agriculture for their daily livelihoods.
However, the sector continues to face several challenges, such as climate change and macroeconomic challenges, resulting in stagnant yields leading to food insecurity. Lack of market access increases post-harvest losses, and unstructured value chains equally add to the burden on value chain actors within the agricultural sector. As a result, it is estimated that nearly a third of Kenya’s agricultural production worth billions of shillings goes to waste due to fragmented supply chains, non-climate smart agricultural practices, and poor infrastructure.
Last year, I had the privilege of attending the Fruit Attraction Fair in Madrid, Spain, which brought together leading exporting countries, global logistic companies, input and machinery providers, and larger exporters to upcoming players from developing countries. From my interactions with Kenyan fresh produce exporters, I noted that the challenge was meeting the standards and certification requirements for produce entering the European market. Similarly, most exporters intimated the need for more technical knowledge on how to package their produce for the global market.
Lessons learnt from the conference and my visit to Spain show that there is a need for the private sector to support Kenya’s Agri-SMEs holistically to meet certification requirements locally and remain globally competitive as buyers are guaranteed that the goods and services meet certain levels of safety, quality, and performance, which are vital when operating in a global market. Moreover, certification and standards ensure that Kenyan businesses can compete in a global market. By following these standards, firms will be able to produce quality goods and services that can be sold around the world. This helps to further Kenya’s objectives of economic development, as much-needed foreign investments and jobs are created. Reliable market access also boosts productivity, improves livelihoods, and strengthens food security. It can also contribute to reducing poverty and hunger for producing families and their communities if appropriate measures are taken to reduce market risks and unequal market power.
Financial institutions therefore must widen their lens and find a way to support the agricultural sector better. Lenders should embrace the concept of shared value to develop commercially scalable solutions to address market problems while deriving shareholder value.
Absa Bank Kenya, for instance, has adopted a value chain approach that actively provides solutions for input providers, primary producers, aggregators, and agro-industry players. The bank does this through a four-pronged approach of access to markets, access to information, access to mentorship and coaching, and access to sustainable finance.
The information asymmetry between buyers and sellers has also been noted to be a hindrance to trade and could easily be termed as a non-tariff barrier to trade. I believe that commercial banks can help improve access to information to SMEs by providing networking platforms and events that connect traders with other actors in the global marketplace. This can go a long way in easing access to markets and introducing international certification and standards for them to compete globally. Absa has taken the lead on this by signing a collaborative partnership with key industry association that will see the bank support select market interventions including access to information, access to markets and access to coaching and mentorship.
In conclusion, banks need to go beyond lending to help Agriprenuers overcome their barriers to growth, increase their resilience, and ultimately contribute to the economy’s growth. Helping them meet global certification and standards is crucial to their success.
By Daniel Munyambu – Country Agribusiness Specialist at Absa Bank Kenya