Small Scale Farming

Farming has long been the main economic activity in most rural settings. It is the backbone that provides most households with a source of livelihood. This is one of the reasons why most African communities see land as a major asset for it provides a form of stability when it comes to providing basic essentials for survival and existence. The Economic Review of Agriculture (ERA) 2015 states that the agriculture sector is the backbone of Kenya’s economy and the source of livelihood for majority of the rural population. The sector contributes about 26 percent of the country’s GDP and employs about 75 percent of the population.

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Most rural small scale farmers still have to contend with unpredictable weather patterns, inadequate access to technical expertise, outdated farming tools and techniques that tends to reduce their productivity as well as the high cost of farm inputs. In the long run, this pushes their costs of production to levels that make their ventures unprofitable and unsustainable. They also have to contend with poor infrastructure networks that make it difficult for them to access the markets that they serve in instances of heavy rains that make roads practically impassable.

 

The Food and Agriculture Organization states that the potential contribution of the agricultural sector to poverty reduction, improved livelihoods of rural households and greater food security in Sub Saharan Africa is undisputed. Yet growth in the sector remains challenged by an uncertain policy environment and poor infrastructural development that limit market access, increase post-harvest losses and raise the cost of trade. Thus food prices in the region remain high, which impacts negatively on food security, particularly given that most small scale producers are still net buyers of food products.

 

According to Juhudi Kilimo, the average smallholder farmer in Kenya owns 1 -5 acres of land and mainly produces for subsistence or sales in informal markets to earn USD 2-4 per day. They are a micro finance institution that provides loans to rural small holder farmers and small-medium agribusinesses to enable them acquire high quality agricultural assets that enhance their productivity. The CEO, Nat Robinson has pointed out that one of the major obstacles rural small holder farmers face in their quest to become productive is that they lack the collateral assets required for financing. This is due to the fact that small businesses based in agriculture are perceived as too risky by commercial and micro finance institutions as well as being simply too far away or too expensive in invest in.

He reiterates that rural small-scale farmers cannot compete with larger producers because they lack the capital to transport and market their produce to more lucrative urban markets. This limits smallholder farmers to supplying informal markets where they are often forced to sell their produce to local brokers, or in open-air markets and kiosks. In this sense, they end up being paid at rates that are below market prices for their produce.

It is thus imperative to ensure that the agricultural sector and the small scale farmers in particular get the support that will enable them to become more productive. This will in turn positively contribute to poverty eradication by creating sustainable revenue streams through the creation of quality employment avenues.

 

litualex@gmail.com

Informal Economy Researcher

 

 

Working Poverty

During the past decade, there has been a rise in the number of people pursuing alternate means to employment as a means of raising their living standards. This can be largely be attributed to the high levels of unemployment as well as the rising number of people that are engaged in poor quality jobs. The informal sector creates poor quality jobs and is an avenue for a large percentage of the population to find an extra source of income.

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In the light of this factor, the International Labour Organisation (ILO) has released the World Employment Social Outlook 2017 report. It focuses on trends in job quality, paying particular attention to working poverty and vulnerable employment. What come out clearly is the contrast in the growth of the regional economies over the past decade vis-à-vis the employment and poverty trends. The report states that Sub-Saharan Africa continues to report the highest rate of youth working poverty globally, at almost 70 per cent in 2016, while facing rapid growth in the number of youth in the labour force.

It further states that Sub-Saharan Africa’s unemployment rate is forecast to be 7.2 per cent in 2017, unchanged from 2016. While the unemployment rate remains stable, the number of unemployed is expected to increase from 28 million in 2016 to 29 million in 2017 due to the region’s strong labour force growth. Poor quality employment, rather than unemployment, remains the main labour market challenge in the region. With this in mind, the lack of productive opportunities for youth and adults alike meant that 247 million people were in vulnerable employment in 2016, equivalent to around 68 per cent of all those with jobs.

Statistics from the report show that an additional 12.6 million youth in the region will enter the labour force over the next four years. Due to growth in the working-age population, the number of people in vulnerable forms of employment is expected to increase by 14.6 million. Further, the outlook is particularly challenging for women, who are more likely to be in vulnerable employment, largely as contributing family workers. The share of female workers categorized as contributing family workers, at 30.6 per cent, is more than twice the rate for their male counterparts, at 14.0 per cent, with women additionally over-represented in informal non-agricultural employment.

The issue of vulnerable employment is linked to that of working poverty. The report adds that Sub-Saharan Africa continues to be characterized by elevated rates of working poverty, with 33.6 per cent of all employed people living in extreme poverty in 2016 – i.e. on less than US$1.90 per day – and an additional 30.1 per cent in moderate poverty – i.e. between US$1.90 and US$3.10 per day. This corresponds to over 230 million people in sub-Saharan Africa living in either extreme or moderate poverty.

These numbers are a strong indicator as to why the informal economy continues to consistently grow in the region. The downside to having a large informal economy is that those that are involved in the micro businesses cannot afford to access proper medical attention as well as other social welfare benefits. It would be prudent for policy and decision makers to look into and implement strategies that grow the capacity of informal businesses to enable them to become profitable entities. This will reduce the high levels of poverty by providing sustainable incomes to a vast majority of households.

Informal Garages Rule Kenya

There has been a steady rise in the number of informal motor vehicle garages and repair shops over the last few years. It is no wonder that the sector currently accounts for the highest number of persons engaged in the licenced MSMEs by economic activity and establishment size. According to the Micro, Small and Medium Enterprises 2016 Survey released by the Kenya National Bureau of Statistics, those engaged in the repair of motor vehicles and motorcycles formed the majority of persons engaged in MSMEs. This demographic group represented 36.3% of the total number of small businesses in the country.

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There are two main categories in the motor vehicle repair industry. The first one constitutes of new vehicle dealers. These offer after sales services inclusive of repairs. They are however limited to a warranty that is based on a set mileage. The second category is that of independent garages and workshops. These mainly handle a majority of the second hand imported vehicles as well as some new vehicles whose warranty with the new vehicle dealers has expired. It is in the latter category where these MSMEs are located.

It is with this in mind that the importance of ensuring professional standards in this sector are adhered to. A large number of these mechanics learn their trade through apprenticeship. This was what I found out during an interview I conducted with Barak Okoth, the Secretary of the Kisumu County MSE Association. He informed me that a majority of the artisans involved in the motor vehicle repairs industry were primary school dropouts who require to up skill their technical knowledge. Most of them can visually identify spare parts but do not know the technical terms which identify them. This poses a risk to the quality of repair work and service they offer. Any minor mismatch to this end will affect the performance of motor vehicles that undergo repairs in such garages. He also noted that the equipment that they use is outdated.

The Ministry of Industrialisation tasked the Kenya Motor Repairers Association (KEMRA) and the Kenya Bureau of Standards (KEBS) to develop a code of practice for motor vehicle garages for repairs and services. In consultation with other stakeholders in the industry, the KNWA: 2460 was drafted and formulated. It is a standardisation code of practice for this industry that dictates that motor vehicle garages adhere to the delivery of quality service during repairs of motor vehicles. One of the aims of developing this code of practice was to reduce accidents caused by faulty repairs. During the launch of the code of practice, Benard Ngoe who is the chairman of KEMRA pointed out that only 20% of informal garages follow professional standards.

In order to minimise the carnage on Kenyan roads, it is of key importance that focus be put on developing training programs that target informal motor vehicle mechanics. Key areas of implementation should include upskilling to enable the use of modern tools and equipment that are more efficient in diagnosing and servicing motor vehicles. This will ensure that informal garages will improve the quality of services that they offer. It will also give informal garage operators an avenue to upscale their operations thus improving the livelihoods of those engaged in this critical sector of our economy.

Informal Sector: Carpentry & Wood Works

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(Source: http://www.financialgazette.co.zw/power-deficit-chokes-informal-sector/)

Wood artisans have been a part of informal business for a long time. Their work forms a central component in a majority of households. These range from dining tables and chairs, sofa sets, beds, cupboards, cooking spoons, picture frames and even wood carvings that we use to give that aesthetic touch to our homes. In their quest to remain competitive and relevant, they have had to overcome a myriad of hurdles.

The first challenge is that they face stiff competition from imported products which are often perceived to be of higher quality often due to the latter’s quality of finishing. Although some local artisans use modern tools when making furniture, a majority of them are yet to adopt newer technologies. Sticking to the old models of operation that makes them have a low production capacity means that they not to be able to access clients who require mass production. This is only possible for those who are in associations and thus sub divide such orders and contracts so as to meet the demand. The problem with this is that the goods that they end up producing are not usually of the same standard.

During my visits to various small scale businesses around the country, the wood artisans I interviewed made me understand that they have had to face the reality that when they make high quality products, such as beds and wall units, these often go for long periods of time without being purchased. In this sense, such products tend to tie down capital. The option that has worked for them has been to produce cheaper products which have a higher turnover. This has been the case in peri urban parts of Nairobi and towns such as Nanyuki, Kisumu and Mombasa. Part of the problem is the level of income of the clients they serve is usually low.

Also, most small businesses face numerous challenges when trying to access support from financial institutions. Wood artisans are not an exception. Due to the size and scope of their operations, majority of those that I have interacted with see no need of book keeping for example for they believe that their mental memory is sufficient to record all their dealings and transactions. This fallacy becomes an issue when they approach financial institutions for loans. The latter requires them to produce financial historical records of their business dealings for a risk analysis that can enable them to gauge their credit worthiness. This is the point where most micro and small businesses are disqualified from the loan application process.

It is with these dynamics in mind that Bosch have partnered with Equity Bank to avail the Bosch Power Box (BPB) to Jua Kali artisans. The BPB enables artisans to hire the tools on a day to day basis and eventually purchase them through a micro financing deal that the two institutions have agreed upon. This will go a long way in enabling artisans to improve the quality of their products as well as scale up the efficiency of their operations. The artisans are given technical training on how to handle and use modern equipment and put on a plan where they can comfortably pay for the tools. This is an endeavor that needs to be replicated as it ensures that micro and small businesses in the sector up-skill and upscale their operations.

 

litualex@gmail.com

 

Informal Economy Researcher

Approaches to training in the Informal Sector

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The informal sector has grown in leaps and bounds over the last decade. This growth has mainly been propelled by the shrinking availability of formal employment opportunities, with most of these businesses in the sector being micro enterprises. The quality of employment in the sector is poor as most usually work without access to medical insurance and no terminal benefits. In a bid to formalise these informal businesses to a level where they can provide quality employment, a few factors have to be considered.

The sort of training that usually takes place is traditional apprenticeship. This is whereby various skill sets are acquired via on the job training. In the Jua Kali sector for example, improved technical skills are of prime importance for enhancing their productivity as well as the quality of the goods and services they produce. These however, have to be regularly updated so that they will be at per with modern technological practices in a liberalised and globalised market.

Institutions that offer technical training still base their curricula on the needs for wage-employment, while requirements for self-employment such as basic management skills are not emphasised on as key pillars to these programs. While interviewing a majority of businesses in the informal sector, this is an aspect that has come out strongly. Basic financial literacy skills such as book keeping are side lined which leaves these businesses at a disadvantage as they do not have a platform from which they can engage with financial institutions that they approach for assistance.

The design of the current curriculum in the institutions that offer courses that are suitable for those that are engaged in the informal sector is tailored for individuals who would like to gain entry into its various sub sectors while ignoring the importance of upskilling. Those that earn a living from informal businesses often do not have the luxury of leaving their work places unattended as this is often the only way that they can afford to put food on their tables. The sort of curriculum that would work for them is one that is flexible enough to allow them to attend classes after working hours as well as properly structured short courses.

The Kenya Industrial Transformation Program (KITP) states that manufacturing is expected to increase its contribution to the national GDP by at least 10% per year. One of the focus areas that are spelled out include the strengthening of the capacity and local content of domestically manufactured goods. Some of the ways in which it plans to achieve this goal is through the development of Small and Medium Enterprise Parks as well as Industrial and Technology Parks, upgrading of products from small and medium enterprises and most importantly, the development of skills for the Technical Human Resource for the Manufacturing Sector.

It is with this in mind that the curriculum that is developed for the skills required to achieve this ambition be based on the science, technology, engineering and mathematics (STEM) approach. This will ensure that the labour force will be adequately equipped to handle the challenge of developing products that are competitive in regional and international markets and relevant to the growing needs of the country.

litualex@gmail.com

Informal Economy Researcher

 

Elections 2017

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Kenya will be holding its elections this year. As we approach the period, the political atmosphere in the country usually gets highly charged with the various candidates holding meetings and rallies. The business environment has often taken a beating during this period due to the uncertainty that looms. Despite this challenge, there are businesses in the informal sector that can take advantage of this scenario and use it to grow their operations.

Opportunities await those that are involved in the printing and catering businesses. During the campaign period, candidates like to be visible. Posters, flyers, pamphlets, t- shirts and caps are some of the items that they use to push their messages across to a wider audience. Those businesses that are involved in these ventures stand to make attractive profits given the political interest in the various levels of county representation. Also, there will be a number of rallies and meetings that will require the services of caterers who provide tents and chairs as well as food and beverages.

Candidates that are vying for various seats need to have a strategy that addresses the informal economy agenda as these constitute a majority of the voting population. Those that are engaged in the informal economy mainly run micro and small businesses that are considered as a means of trying to escape from the vicious cycle of poverty. It would be a positive move to have this as a strategy in their campaign manifestos for it would appeal to a broader range of the electorate.

The youth are a demographic group that are usually targeted by politicians to gain popularity and help in the running of campaigns. In some cases they are misused to cause chaos and even enlisted to join militia groups. Given the high levels of unemployment among this group, they should demand a better deal from political candidates by way of the latter providing viable solutions that will see them positively engaged in a manner that benefits them.

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The down side to elections in the country is the disruption of businesses as we get closer to the election date for it is during this period that most business operations temporarily stall or even shut down. The charged political atmosphere usually comes with tribal connotations that see the displacement of people who are not indigenous to a particular region. The National Cohesion and Integration Commission should come down hard on aspirants that use this sort of political speak as a means of gaining popularity as it is a hindrance to the growth and sustenance of businesses.

The time is way overdue for the electorate to lean towards candidates that advocate for issue-based policies as this is the only way that will ensure the leadership that is voted in works to improve the social and economic environment in the country. Choosing tribal affiliations and outfits is an outdated principle that only serves to divide our nation further. As we vote in the next cycle of leadership, let us choose wisely.

litualex@gmail.com

Informal Economy Researcher

Improvements to aim for in 2017

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Informal businesses have often been perceived in a negative light. They are seen to be high risk ventures, a nuisance to formal enterprises and government as well as being of little assistance to the growth and development agenda of most nations. This is due to the fact that most of them have haphazard modes of operation and a majority are not registered and hence do not pay taxes. This sector has however registered rapid growth over recent years. In Kenya for example about 82% of those employed are engaged in informal businesses. The high levels of poverty has exacerbated this growth as a majority of people seek to make a living where jobs are hard to come by.

There are a wide range of issues that, if addressed, will see most of these businesses develop to a level where they will be even more positive contributors to the economy. A place to start would be offering financial literacy programs for those that operate these businesses. Due to the fact that a majority of them do not keep records of their day to day operations, it becomes difficult for financial institutions to offer any assistance because there is no clear basis from which performance can be tracked. The importance of basic skills like book keeping needs to be emphasized when developing capacity building programs for the sector.

Access to health facilities for informal workers is another area that can improved. In my experience while visiting various informal businesses around the country, most business operators have had to leave their work unattended as they try to seek medical attention whenever they fall sick. Most work under deplorable conditions without the required protective gear. The Kenyan government through the National Hospital Insurance Fund (NHIF) has launched a program that seeks to increase the number of informal workers who can access quality healthcare. The program aims to recruit 12 million Kenyans under a cover that sees them pay a monthly contribution of between Kshs 150 to Kshs 500 depending on their income status. This is a step in the right direction that needs to be replicated.

While interacting with businesses in the sector, a major hurdle that has consistently come up is the difficulty they face when trying to market their goods and services. Most do not have the skills required to widen their scope of customers. This is an area that should be considered by those developing capacity building programs for the sector. Another barrier has been the allocation of spaces they are given to operate their businesses. Most of these are in areas that potential customers cannot easily access and are often unattended to by those that collect revenue from them in terms of garbage collection. This considerably compromises the ability of the informal sector to attract clients and customers to their business.

Although information on those engaged in the informal economy is hard to come by, my experience indicates that the sector is ready for engagement; it is critical we tap into this goodwill. However, note that the Kenya National Bureau of Statistics (KNBS) released the Micro Small and Medium Enterprise survey in 2016. In as much as this is a move to be applauded, most of the players in the informal sector that I interviewed over the past few months feel that the report was inconclusive as it excluded a huge percentage of micro businesses. A proper census will need to be carried out to provide a clearer picture of where the sector stands. This will go a long way in better informing policy makers and those that would like to engage with the sector.

In conclusion, these interventions can be best leveraged through bodies such as the Micro and Small Enterprises Authority (MSEA), who have established a credible network around the country as well as various organizations and associations that work with the informal sector at the county level.

litualex@gmail.com

Informal Economy Researher