Productive Employment in Segmented Markets of fresh produce

The Productive Employment in Segmented Markets of fresh produce in Kenya (PRESM) project investigates alternative approaches for modernizing the avocado sector in Kenya. It evaluates the impact of these approaches on the productive employment of small-scale avocado growers.

The project focuses on the benefits, costs, and constraints associated with producing for modern, export-focused markets, instead of for traditional, locally-oriented markets. Findings from the project provide insights into how the Kenyan avocado sector value chains can be modernized.

PRESM is part of the research agenda of the Knowledge Platform on Inclusive Development Policies.

In 2014, the Netherlands Ministry of Foreign Affairs, through the Netherlands Organisation for Scientific Research (NWO)–WOTRO Science for Global Development programmes, awarded a special research grant to a consortium of international research organisations: PEP, Vrije Universiteit (VU) Amsterdam, Amsterdam Institute for Global Health and Development (AIGHD), University of Nairobi, Grupo de Análisis para el Desarrollo (GRADE), and the Fresh Produce Exporter Association Kenya (FPEAK).

PEP provided overall leadership and management while VU provided technical leadership for conceptual and analytical aspects of the project. The Wageningen Economic Research Institute also collaborated.

Context Project Key Findings Policy Messages Publications

Context

Over the last decade, consumers in Europe have learned to appreciate the quality of Kenya’s fresh agricultural produce. Kenya’s horticulture sector engages over half a million farmers and the country’s agricultural exports have reached US$1 billion annually.

This success has been due to the emergence of modern, innovative and programmed production by farmers that are exporting directly to high-value markets and trading companies that meet Global Good Agricultural Practice (GlobalGAP) standards.

At the same time, many smaller growers serve the domestic market and/or sell to collectors and middlemen that cannot, or do not, want to adhere to global standards. This means that the process of structural transformation is creating a modern (programmed) agricultural sector and a traditional (non-programmed) agricultural sector.

In modern value chains, farmers are directly linked to exporters through contractual relationships. They produce according to (certified) global good agricultural practices and their products can be traced back to the producer. In traditional value chains, farmers use non-certified production methods, sell their outputs to ‘brokers’ or middlemen, and their products cannot be traced in the production chain.

Growing avocados that can be exported to GlobalGAP standards requires high-level skills, as such, growth in the modern and traditional segments of this sector has differed substantially.

The Project

In June 2014, PEP was awarded a special research grant by the Netherlands Organisation for Scientific Research (NWO) - WOTRO Science for Global Development, through a competitive call for research proposals on "Productive Employment" under the "Research for Inclusive Development in Sub-Saharan African" (RIDSSA) program.

This project focuses on the avocado sector, which now accounts for nearly two-thirds of Kenya’s fresh fruit exports.

The aim of this project is to study alternative approaches to modernizing the avocado sector in Kenya and the effects of these approaches on small-scale avocado growers in terms of productive employment.

Main research questions

What characterizes employment in the segmented labor market of fresh produce in Kenya?
How does the nature of productive employment vary in the programmed and non-programmed worlds in the avocado sector?
What interlinkages are there between the programmed and non-programmed worlds in the avocado sector?
How do policies and practices affect the generation of productive employment, especially for smallholder farmers, women and youth in Kenya?
What can be learned from Peru’s recent export success in the avocado market regarding enhanced opportunities for inclusive growth and productive employment?

Method

To answer these questions, the project compares modern and innovatively programmed value chains with more traditional, non-programmed modes of farming.

The project uses a mixed-methods approach:

A systematic review and expert interviews, to assess the effect of selected intervention on productive employment
New and important primary data collection via two surveys (an avocado growers’ survey and a farm workers’ survey), to reach the main local stakeholders

The researchers surveyed 790 households and farmers’ groups in Kandara, a sub-county of Murang’a County in Central Kenya. They surveyed farmers who already had a contract with an exporter during the 2015 season, farmers who had signed a contract with an exporter for the 2016 season, and farmers who had not signed a contract.

A qualitative survey was carried out in March 2017 to investigate whether and how avocado contract farming is or can become a successful model of structural transformation in the avocado sector in Kenya. An end line survey targeting the 790 was carried out in late July 2017.

Additionally, recognizing that there is growing international competition on the world market for avocados, Peru – one of the new competitors – was also studied for comparative purposes.

Key Findings

Several factors influence smallholder farmer participation in the modern avocado value chain, including:
- Awareness of and access to reliable information about the farmer groups linked to exporters, possibly through avocado groups.
- The number of trees and agricultural assets a farmer owns.
- Trust between key players in the modern avocado value chain
Increased investment in technology can increase productivity. Farmers’ willingness and ability to invest can be encouraged through market assurance from export companies.
Farmers who grow avocados for the modern sector employ significantly more hired labor per unit of production, compared with farmers selling to the traditional chains. However, avocado production is not labor intensive.
Successful contract farming schemes tend to provide farmers with higher and more stable incomes, however, side-selling remains common among contract farmers.
- Side-selling is strongly linked to the price incentives offered but it results in farmers receiving lower prices.
Women and youth are marginalized in the modern avocado value chain. Women participate mostly in the lower end of this value chain, while youth are involved in harvesting.

Policy Messages

Provide access to farm technology and market information to increase awareness and reduce uncertainty about the expected outcomes of participation.
Support knowledge-building in agronomy related to avocado production. This can be done through active and interactive farmer-extension services focusing on new technologies, production techniques and market information.
Improve household welfare and agricultural assets to enable farmers to hire labour and also to participate in the modern value chain.
Mobilize avocado farmers into contract farming to boost crop productivity and help generate employment.
- Local authorities should encourage and provide support to new and existing agricultural groups that serve as important social capital medium.
Maintain strong price incentives and increase confidence to find ways of enhancing farmers’ confidence in the sustainability of the scheme and prevent side-selling.