FOOD SECURITY KENYA : NEW POTATO VALUE CHAIN (PPP)

GRANT KENYAThe Eastern African region has been a blind spot for our customer, the global market leader in seed potato exports. After the Kenyan and Dutch authorities signed a Memorandum of Understanding, the Kenyan market was opened for seed potatoes. Our customer acknowledged the commercial opportunity and opened its local representation in 2012. Simultaneously it started creating a consortium of Kenyan – Dutch stakeholders for the future plans and developed the vertical integration plan for the Kenyan potato chain. The total investment in this new potato value chain is estimated at €40 mio.

EUNITE played an important role in co-creating the plans, acquiring a grant and realising the consortium. In addition EUNITE has been responsible for the overall management of the public private partnership (PPP) from its start.

INTRODUCTION POTATO & FOOD SECURITY KENYA

Currently Kenya’s sole dependency on maize as main crop threatens the food security situation in Kenya. This threat has been acknowledged by the Kenyan authorities, who decided to choose potato as a substitute for its current dependency on maize. Three reasons for choosing potato are applicable, namely:

  1. It is the most sustainable crop;
  2. The wealthiest and poorest Kenyans consume potato and
  3. It already is Kenya’s second crop.

However realising Kenya’s food security strategy has been severely jeopardised due to the structure and the characteristics of its potato sector. With the investment project Food Security Kenya we will eliminate the current problems and we will realise a new sustainable potato chain in Kenya. As a result follow up investments will occur and Kenya’s food security strategy will be realised.

OBJECTIVE OF NEW KENYAN POTATO CHAIN

FOOD SECURITY KENYA POTATOThe long term outcome of our investment project is to realise Kenya’s potato policy – and thus its food security goal – in a sustainable manner. We will do so by replacing the current negative circle for all Kenyan potato small holders by a structurally profitable value chain, where top quality import material is fully available and affordable. Furthermore we realise this goal by:

  1. An increase of the efficiency in other parts of the Kenyan potato value chain;
  2. A widespread level of potato knowledge throughout the chain and
  3. Realising a potato enabling environment by the Kenyan and Dutch authorities.

Altogether these four elements will lead to a modern professional potato value chain, where all rural chain members can realise profits and all Kenyan consumers will have access to large amounts of top quality Kenyan potatoes for a fair price.

SMALL HOLDERS’ IMPACT: 400,000 NEW JOBS

SMALL HOLDERS KENYA IFDCThe strong socio economic development of Kenya’s rural areas is an important spin off effect of our investment project. Our approach will create 50% more jobs in the rural potato sector,   400,000 new jobs measured in absolute figures. An increadible boost is expected in small holders yields: a growth from the current average 6 tonnes per Ha to 27.5 tonnes per Ha. A strong improvement in the quality of the potatoes is expected also. Together this will boost the turnover at individual small holders up to 950% compared to their current practice.

Over 60% of all potato small holders are women, hence the position of this vulnerable group will be enforced strongly.  All chain partners will benefit from our approach, however Kenya’s small holders are – by far – the biggest beneficiaries of all. Our Kenyan project will become a blueprint for other Eastern African countries – facing similar problems as Kenya – to follow.

5 TIMES LESS NATURAL RESOURCES NEEDED

Kenya’s environment will witness a very positive impact also, due to the enormous boost in yield. For producing the same amount of potato, 5 times less land and water is needed, and 2 times less – and less harmful – amount of fertilizer is required.

PHASED APPROACH

We will realise our long term goal via a two-phased approach. The first – mid term – phase is the subject of our Public Private Partnership (PPP):

VERTICALLY INTEGRATED CHAIN

During 7 years we will create the first vertically integrated Kenyan potato value chain, consisting of a local potato seed multiplier, Kenyan service centres, a Kenyan agent, a Kenyan distributor, a few future large consumer potato farmers and over 12,000 small holders. In this new chain a wide spread level of potato knowledge will be present.

99.95% KENYAN CHAIN: HIGHLY SUSTAINABLE

This first Kenyan potato chain will be fully operational and fully profitable for each part in the chain. This chain will import merely 825 tonnes of input material from the Netherlands and will produce 143,000 tonnes of consumer potato in Kenya – and for the local Kenyan market only –  per year. Hence a 99.95% Kenyan – and highly sustainable – chain is applicable.

PUBLIC SECTOR: CREATING POTATO ENABLING ENVIRONMENT

FOOD SECURITY KENYAThe public sector’s support will increase the efficiency of the Kenyan potato chain and will establish a potato enabling environment during these 7 years. As a result a fair level playing field will be applicable, sufficient capacity will be present for certifying and testing seed potato, rural infrastructure will be improved and ‘potato’ awareness will be created. The fair level playing field will also have positive spin off effects for small holders. A tangible example are bag sizes that lead to high fall out percentages and to inhume conditions. Currently potatoes are distributed in bags weighing over 100 kgs and literally these are often carried on backs of small holders. We envisage to change Kenya’s legislation by adopting bags weighing between 25 & 50 kgs.

BLUEPRINT: REALISATION OF KENYA’S FOOD SECURITY POLICY

After these seven years we foresee a natural evolution of a second – longer term – phase, which is beyond the scope of our current PPP:

The tangible and sustainable success of our chain, the efficiency improvements in the value chain, the presence of potato knowledge and the creation of the enabling potato environment, will significantly lower the current (too) high risk for private investors. This combination of low(er) risk and tangible ROI from our first operational chain will persuade other private parties to follow our example and to invest in the Kenyan potato sector also. Ultimately we will thus realise our long term goal : to achieve Kenya’s potato policy – and thus its food security goal – in a sustainable way.

PUBLIC PRIVATE PARTNERSHIP

MoALFWe will realise our goals by a 7 year lasting PPP, which has been granted by the Dutch authorities. In this PPP a large amount and a large variety of partners have been collaborating since January 2015, amongst other public partners such as the Kenyan Ministry of Agriculture Livestock and Fisheries, The Dutch Ministry of Economic Affairs, Agriculture and Innovation, the Dutch Ministry of Foreign Affairs, KEPHIS, FPEAK, NGOs such as IFDC, KENDAT, FCI, SNV, and private partners such as Kenyan potato distributors, Rabobank Netherlands, Atradius, Tolsma, Miedema, Agrico Netherlands, Agrico East Africa, Bayer Cropscience, Lachlan, Koppert, Migotiyo Plantations ltd and various co-operatives consisting of over 12,000 small holders.

The total investments for all PPP partners – consisting of CAPEX, working capital, knowledge transfer and capacity building – over the years is budgeted at about €40 million, out of which the share of CAPEX investments is estimated at €18 million.

ADDED VALUE EUNITE

EUNITE has played an active rol in co-creating the PPP. In addition we requested and acquired the grant from the Dutch auhorities and we supported in realising the remaining private funding also. From its very beginning, EUNITE has been steering the PPP and has been responsible for its overall management. Next to our steering role, we have also put in various operational efforts, such as creating CSR policies, creating management contracts etc.

 

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