AUGUST 2019

TRANSFORMING KENYA’S
AGRICULTURAL INPUTS SECTOR

Why it matters, what’s been

achieved and where next

Agri
inputs

CASE STUDY
2
The undertaking and production of this work was made possible through funding from the UK’s
Department for International Development (DfID) and Gatsby Africa.

The contents of this report are solely the responsibility of Kenya Markets Trust and do not necessarily
reflect the views of DfID or Gatsby Africa.

For more information on this report or Kenya Markets Trust, please get in touch:
Kenya Markets Trust,
14 Riverside Drive, Cavendish Block,
2nd Floor, Suite B,
P.O. Box 44817 – 00100,
Nairobi, Kenya
Tel: +254 20 2588343
+254 722 201233
Email: info@kenyamarkets.org

Copyright © 2019
This research work was undertaken to inform relevant policies, actions and stakeholders. All or certain
parts of this material may be used for relevant work, provided that the necessary references and
acknowledgements are made back to Kenya Markets Trust.

Correct citation:
Kenya Markets Trust (August 2019). Transforming Kenya’s Agricultural Inputs Sector. KMT Agri-Inputs
Case Study 01. Nairobi, Kenya.

www.kenyamarkets.org

3
Kenya Markets Trust (KMT) is a Kenyan not-for-profit organisation that
specialises in market transformation. We work to stimulate inclusive and
resilient growth that will lead to a step-change in the livelihoods of millions
of Kenyans. We take a long-term approach, staying true to our vision while
adapting to the forces that are shaping the markets we operate within such
as climate change and access to emergent technologies.

One of the key drivers of agriculture transformation is without

doubt, productivity. There is so much more that we can do to
raise productivity of the land under cultivation.
HON. MWANGI KIUNJURI, E.G.H
CABINET SECRETARY, MINISTRY OF AGRICULTURE, LIVESTOCK, FISHERIES AND IRRIGATION

Acknowledgements
The publication of this case study was made possible through the support and
collaboration with many stakeholders.

A special thank you goes to Market Share Assosicates who performed the ground work
and drafting of this report, and ThreeSixty for developing the design and layout of this
case study.

We are grateful for the support and collaboration we received from Kenya’s national
and county governments, various market actors mentioned in this report, all
interviewees, and all Kenya Markets Trust (KMT) staff.

In collaboration with

4
Table of Contents

Executive Summary 6

Section 1: Agriculture in Kenya why change is needed 13

1.1 The importance of agriculture in Kenya 14

1.2 Kenyan agricultural performance – low productivity and dominance of maize 14

1.3 The drivers of underperformance in Kenyan agriculture 16

Section 2: Tackling underperformance – KMT’s vision for transforming the agri-inputs sector 18
2.1 KMT’s vision for a reformed agricultural inputs sector 19

2.2 Strategies to achieve this vision 19

Section 3: The evolution of KMT’s Last Mile Distribution Strategy 21

3.1 Two approaches to last mile distribution 22

3.2 Lessons and challenges  27

3.3 Signs of sector transformation 29

Section 4: Seeds self-certification and scratch-off labels 32

4.1 KMT’s seeds work to date 33

4.2 Lessons and challenges 36

4.3 Signs of sector transformation 37

Section 5: The way forward 40

Endnotes42

List of Acronyms 43

Annexes44

5
EXECUTIVE
SUMMARY

6
Executive Summary

Agriculture in Kenya – why change is needed

“One of the key drivers of agriculture transformation is without doubt, productivity. There is so much
more that we can do to raise productivity of the land under cultivation.”
Hon. Mwangi Kiunjuri, E.G.H
Cabinet Secretary, Ministry of Agriculture, Livestock, Fisheries and Irrigation

Agriculture is the backbone of Kenya’s economy. It employs close to 40% of the

population and generates a third of Kenya’s GDP. Despite its importance, it has not
been performing to its potential, with limited diversification away from staple crops,
such as maize, and average yields remaining below those of comparable countries.
Kenyan farmers use relatively low levels of inputs, such as fertiliser. This lowers
productivity and therefore farmers’ returns and their ability to reinvest in their crops.

SCENARIO
What could we see?
• Low and inappropriate consumption of inputs
(fertilisers, chemicals and seeds) per hectare of
arable land, resulting in low productivity
• Less diversification of crop production (60% of
total crops produced in MT was maize
• Low incomes of farmers

SYMPTOMS/EFFECTS
What was the market suffering from?
• Lack of product-specific knowledge transfer from
manufacturers/suppliers to the downstream actors
• Uncompetitive market system characterised by
dominance of parastatal companies in distribution of
fertilisers and maize seeds
• Increased sales of counterfeit seeds and fertilisers

CONTRIBUTORY FACTORS
Why did those symptoms exist?
• Transaction oriented supply chain focused on
maximising short-term gains rather than a
long-term customer-driven business practice
• Seed sector governance and regulation not
fit-for-purpose, with public bodies lacking
capacity and private sector lacking representation

7
Executive Summary

While several factors have affected productivity, the structure of the agricultural inputs market has
been a major cause of poor performance. This stems from two main issues:

1. The short-term oriented business practices of actors

in the inputs supply chain
Historically, the public sector has also dominated the distribution of fertiliser and other inputs
in Kenya. As it has been more profitable for input suppliers to vie for government contracts or
directly serve large agribusiness operations, they tended to expend very little effort interacting with
distributors and engaging further downstream with agro-dealers and farmers. As a result, market
actors lower down the chain tend to deploy short-term, transactional business models, premised on
high-margin sales at the expense of long-term business growth and customer relationships.

Manufacturers, Distributors Agro-Dealers Farmers

Suppliers, Importers
Large companies (public and Large or mid-sized registered Retail shops, located in urban Farmers directly purchase
private) that manufacture and/ companies usually based and rural areas, procure inputs items from the nearest agro-
or import agriculture inputs in capital cities of various from different distributors and dealer.
including seeds, fertilisers, countries. They procure sell them directly to farmers.
agro-chemicals etc.. They agirculture inputs from Agro-dealers also purchase
usually have a network of suppliers and distribute to products (usually fake items)
distributors in various countries agro-dealers based on orders from unregistered traders.
through which they supply their received. In a few cases the, the
products. distributor can also be an
agro-dealer.

2. Seed sector governance and regulation

Historically, the public sector has played a key role in seed distribution, with the parastatal Kenya Seed
Co controlling at least 80% of the market for maize seed. Likewise, seed inspection and certification
has been managed by the Kenya Plant Health Inspectorate Service (KEPHIS), which has been under-
resourced to meet demand and has prioritised servicing parastatals over private sector players. These
businesses have been unable to have their seeds certified before the cultivation season, leading to
severe losses and incentivising firms to distribute uncertified seed. Furthermore, the body meant to
represent their collective interests has not been performing.

Taken together, these have had severe impacts on

smallholder farmers and created several intersecting
negative cycles.

8
Executive Summary

Tackling underperformance – KMT’s vision for

transforming the agri-inputs sector

Kenya Markets Trust (KMT) is a non-profit organisation that aims at

fostering inclusive, competitive and resilient economic growth in Kenya.
It has worked in the agricultural inputs sector since 2012. Its vision is to
transform smallholder agriculture in Kenya from subsistence to successful
agribusiness through farmers’ effective and timely use of agricultural inputs.

KMT believes that through the right support and facilitation, transformational change is possible
within the agri-inputs sector, delivering higher agricultural productivity, long-term growth, and better
value to farmers.

To achieve its vision, KMT has developed two main strategies focused on
the two key challenges outlined above.

STRATEGY 1 STRATEGY 2

Fostering long-term customer- Improving seed industry governance

oriented business strategies along and regulation
the chain
This involves bringing together the public and
This aims to address both demand and supply- private sector to reduce the prevalence of
side issues in the inputs market, reorienting counterfeit seeds and increase efficiency in the
the behaviour of all actors along the chain to seed certification process. This strategy has
promote more long-term customer-oriented retail worked at improving the regulatory environment
practices. In turn, this is expected to influence in the seed industry so that the private sector
the purchasing patterns of farmers, increasing could play a greater role in streamlining the
demand for quality inputs and attracting other supply and distribution of certified seeds. This,
players into the market over time. in turn, is expected to reduce the prevalence of
counterfeit sales and provide more high-quality
seed varieties to farmers.

The major interventions under these strategies - and the impact achieved to date - is
summarised in the table on the next page:

9
Executive Summary

STRATEGY 1
Fostering long-term customer-oriented business strategies along the chain
Last Mile Distribution Impacts to date
The Issue KMT Response • 376,000 farmers have benefitted from
The short-term, transactional KMT tested different models KMT and its partners working along the
relationships along the chain aimed at changing business inputs supply chain through two different
weakened knowledge transfer relationships along the chain. models that have been adapted and
and demand. Downstream actors They learned from pilots and
(agro-dealers and farmers) adapted models, ultimately
refined over time.
particularly suffered. Those seeking changes in farmer • Significant learning has also taken place
farmers that did buy inputs were behavior and the improved
often uninformed about how best distribution of quality inputs in
about the relative costs and benefits
to use them. the ‘last mile’ of the chain. of these different models – and about
the contexts where they might be most
successfully scaled-up.
Soil testing services • In 2016, KMT expanded its partnerships to
include Toyota Tshusho, who commissioned
The Issue KMT Response
the first full-scale fertiliser blending pant
A farmer’s understanding of the KMT partnered with large in Kenya and introduced crop-specific
nutrient mix in their soil and its lime and fertiliser producers fertilisers to the market, giving farmers
impact on productivity levels is to demonstrate the benefits
a major determinant of whether of soil-testing services to
the opportunity to increase production
they will buy inputs and whether farmers. This involved exploring without depleting the soil.
they will buy the right inputs. different funding models
However, soil testing is not a to make the service both
• 186,000 farmers have increased their
widespread practice in Kenya. affordable and enticing to the income by at least 10% by using crop-
average smallholder. specific fertiliser.

STRATEGY 2
Improving seed industry governance and regulation

Seed self-certification Impacts to date

The Issue KMT Response • In December 2016, the Seeds and Variety
The seed inspection and KMT focused on building Evaluation and Release Regulations were
certification process had a shared public-private revised, paving the way for greater private
become increasingly lengthy and vision for policy change to sector involvement in seed certification.
costly for private players due to facilitate greater private
outdated legislation and a lack sector involvement in the seed • A new public-private framework for
of staff and resources within the certification process to increase controlled seed self-certification has
mandated state regulator. The efficiency. It also helped build the
private sector response to this capacity of the private sector
been created. Early adopter Monsanto
was not coordinated. seed suppliers association. has already begun to see benefits from
implementing the new process.
• The seed supplier association has been
Scratch-off labels for seed packets strengthened to become an effective
advocate for change, with substantial
The Issue KMT Response
input to the new regulations and increased
Outdated regulation and the KMT brokered a partnership collaboration with the public sector.
issues with seed certification between public and private
meant uncertified, low-quality actors, to ensure all certified • All seed packets must now be labelled,
and counterfeit seed were seed packets are labelled with particular benefits for smallholder
becoming increasingly common. with a scratchable code.
farmers.
Farmers lacked trust that higher- Farmers can SMS this code to
quality seed was genuine and a toll-free number to confirm
worth paying higher prices for. the supplier, seed variety and
certification date.

10
Executive Summary

Signs of Sector Transformation Monsanto participated in

the public-private dialogues
There are now signs of industry-wide change within the agri-inputs right from the beginning.
sector. Toyota Tshusho, a large fertiliser supplier and one of KMT’s
KMT has done a good job in
partners, commissioned the first full-scale fertiliser blending pant in
Kenya and has rapidly expanded sales of their crop-specific blends. bringing about changes in seed
Their success has also encouraged other fertiliser companies, such as regulations.
Yara East Africa and MEA Ltd, to explore similar opportunities.
EVERLYN MUSYOKA,
MONSANTO
Distributors that received KMT support have significantly improved
their financial performance and grown their customer networks. They
have also implemented better distribution practices and maintained
continuous relationships with agro-dealers and farmers. Agro-dealers
that have maintained close ties with distributors have seen significant
improvements in their sales.

All of this has led to improved linkages along the supply chain, with
stakeholders at the top increasingly seeing the value of focusing on
smallholder farmers as customers. These changes have also gradually
trickled down to farmers, who have increasingly begun to access
improved seed and fertiliser, adopt good agricultural practices, and
diversify crop production. This indicates that the inputs market is
gradually shifting towards more customer-oriented distribution
practices, allowing farmers to make more informed choices about what
products to purchase.

In seed, the work to build a shared public-private vision and to

strengthen the seed suppliers association has been crucial to achieving
regulatory reform. Ongoing dialogue has also facilitated a less
adversarial relationship between the private sector and KEPHIS and
built trust – with all actors willing to engage in a process of co-creation A farmer sifting through her
around key regulation and policies. yellow bean crop

First movers are beginning to see significant benefits from the improved
regulation. Major seed company Monsanto has established a laboratory
and been authorised for the seed self-certification process by KEPHIS.
Monsanto has already begun to see benefits in terms of cost savings,
improved efficiency and shorter timelines. Simlaw, another seed
manufacturer, is currently establishing its laboratory.

Farmers complained constantly about low productivity and continued to purchase large quantities of DAP and
CAN. They were not aware that the excessive use of these fertilisers was increasing the level of soil acidity. I, along
with a few other agro-dealers in Kisumu, reached out to Magos for soil testing services. We created awareness on
the product … demonstrated to farmers on how to read soil testing results. Through support from Homa Lime, we
encouraged use of lime and this increased the yield. Now farmers enquire about different fertilisers; they are aware
of the different names of companies and the products they provide. Farmers also use Whatsapp to send photos
and seek advice. I believe that customer management is essential for customer retention.
BEATRICE OKELLO,
AGRO-DEALER SHOP OWNER, KISUMU

11
Executive Summary

Building on learning and success – the way forward

Building on successes to date, KMT plans to engage up to seventy companies in the scale up of its
last mile distribution work over the next 3-5 years. As a result, three million smallholder farmers should
have improved access to key agricultural inputs, adopt good agricultural practices, and ultimately
increase their farm yields and income.

The improved regulatory environment and increased public-private dialogue should also drive further
investment and innovation in the Kenyan seed industry. KMT will work with other seed manufacturers
to enable more of them to follow Monsanto’s example on seed self-certification, while also working
with partners to further increase farmers’ uptake of certified seed. This work aims to see 2.7 million
smallholder farmers accessing quality crop seed by 2022.

While there is much work to be done, the future looks

promising for KMT’s vision of a vibrant agricultural
inputs sector.

12
SECTION 1

AGRICULTURE IN KENYA
WHY CHANGE IS NEEDED

13
Section 1: Agriculture in Kenya why change is needed

1.1 The importance of agriculture in Kenya

Agriculture is the backbone of the Kenyan economy. It employs more than

40% of Kenya’s total population and about 70% of its rural population.
In 2016, the sector was valued at KES 2.3 trillion (roughly 22 billion USD),
generating a third of Kenya’s GDP and 60% of its exports.

In Kenya, 1% of agricultural growth is estimated to drive 1.6% overall GDP growth1. Agricultural
transformation is therefore critical to improving food security and nutrition, creating employment, and
reducing poverty for millions of Kenyans.

1.2 Kenyan agricultural performance – low

productivity and dominance of maize
Despite the importance of agriculture for Kenya, it has not been performing
to its full potential.

Average yields for major crops remain below those of other comparable nations.
For example, in 2003, Kenya had similar average maize yields to Uganda and
Zambia. But by 2012, average maize yields in Zambia and Uganda were 1.4 to
1.5 times those in Kenya. Over the period, Kenyan maize yields increased 6%,
compared to Uganda’s 39% and Zambia’s 58%3.

Maize productivity is particularly 50

important, as it remains the
dominant crop in Kenyan 40
agriculture, comprising more
than 60% of production (with an
30
increasing share from 2003 to
2012). Commercial crops such as
20
tea and coffee account for less
than 10%2. Maize’s dominance
10
has discouraged smallholder
farmers from exploring
0
alternatives, such as other cereals Kenya Uganda Zambia South Africa
and vegetables, as they fear Figure 1: Crop yields for maize in Kenya and other
developing countries in 2003 & 2012
these may not attract buyers.

14
 Section 1: Agriculture in Kenya why change is needed

Figure 2: Composition of crop production in Kenya (volume of production in MT) | Source: FAO
2003

62% 13% 8% 7% 1% 1% 8%

64% 10% 8% 6% 1% 2% 9%
2012

Maize Vegetables Wheat Tea Coffee Rice Others

Source: Production (in MT) of Coffee, Maize, Rice, Tea, Vegetables, Wheat in 2003 and 2012; Production (in MT) of all crops in Kenya
in 2003 and 2012, Food & Agriculture Organisation (FAO) Statistics; Crop Production includes tea, coffee, cereals, pulses, vegetables
and fruits.

15
Section 1: Agriculture in Kenya why change is needed

1.3 The drivers of underperformance in Kenyan

agriculture

Yield gaps are driven by factors including:

• Limited and/or delayed access to high-quality seeds
• Poor farming practices
• Low levels of mechanisation
• Significant post-harvest losses
• Growing uncertainty related to climate change

The structure and organisation of the agricultural inputs market has also been a
major cause of underperformance6. There are two key challenges:

1. Seed sector governance 2. The short-term oriented

and regulation business practices of actors in the
Historically, the public sector has played a key inputs supply chain
role in seed distribution in Kenya.
Historically, the public sector has also played a key role in the
distribution of agricultural inputs in Kenya, with the National
In 2013, the parastatal Kenya Seed Co. and its
Cereals and Produce Board (NCPB), a state corporation,
subsidiary Simlaw Seeds controlled at least
importing fertilisers and distributing them directly to farmers
80% of the market for maize and vegetable
through its depots.
seeds respectively. At this time, new seed
varieties were only being certified by the Kenya
In 2013, the government decided to engage the private
Plant Health Inspectorate Service (KEPHIS).
sector in this system and contracted Safaricom (a
However, they were unable to meet demand
telecommunications firm) to implement an e-voucher scheme
and focused primarily on certifying the seed
that allowed farmers to purchase subsidised fertiliser directly
produced by Kenya Seed Co. This meant that
from agro-dealers. Additionally, county governments were
other players were unable to have their seeds
newly authorised to distribute fertiliser. While these changes
certified before the cultivation season, leading
allowed for increased private sector involvement, the market
to severe losses and incentivising firms to
was still heavily dominated by the government and the
distribute uncertified seed.
provision of subsidised fertilisers discouraged agricultural input
suppliers from manufacturing or importing5.
In addition, the main body meant to represent
private sector interests in the seed industry -
As it has historically been more profitable for input suppliers
the Seed Trade Association of Kenya (STAK)
to vie for government contracts or directly serve the larger
- suffered from low membership as well as
commercial segment of the agricultural market (i.e. large
limited resources and capacity to advocate
agribusiness operations), they tended to expend very little
for its members. Between 2013 and 2014,
effort interacting with distributors and engaging further
the volume of certified crop seed distributed
downstream with agro-dealers and farmers. Thus, most market
dropped by 19%4.
actors along the inputs supply chain largely deployed short-
term, transactional business models, premised on high-margin
sales at the expense of long-term business growth, with few if
any attempts to transfer knowledge to farmers.

16
Section 1: Agriculture in Kenya why change is needed

Figure 8: Tracing the causes of agricultural underperformance in Kenya

SCENARIO SYMPTOMS/EFFECTS CONTRIBUTORY FACTORS

What could we see? What was the market suffering Why did those symptoms exist?
from?
• Low and inappropriate consumption • Lack of product-specific knowledge • Transaction oriented supply chain
of inputs (fertilisers, chemicals and transfer from manufacturers/ focused on maximising short-term
seeds) per hectare of arable land, suppliers to the downstream actors gains rather than a
resulting in low productivity long-term customer-driven business
• Uncompetitive market system
practice
• Less diversification of crop production characterised by dominance of
(60% of total crops produced in MT parastatal companies in distribution • Seed sector governance and
was maize of fertilisers and maize seeds regulation not
fit-for-purpose, with public bodies
• Low incomes of farmers • Increased sales of counterfeit seeds
lacking capacity and private sector
and fertilisers
lacking representation

Combined, these two challenges have had severe

impacts on smallholder farmers and created several
intersecting negative cycles.

Agro-dealers have set prices high, maximising profit per sale but resulting
in lower sales overall – furthermore, without the knowledge of how to apply
products properly, farmers have not realised the expected return on their
investments, lowering both their ability and their incentives to reinvest in the
next season.

The high prices combined with farmers’ low incomes and lack of knowledge
about potential benefits mean farmers are already purchasing and
applying fewer inputs than needed to maximise productivity, while seeking
out cheaper but poorer quality (i.e., out-of-date, counterfeit, uncertified)
products.

This further lowers their productivity and therefore lowers the returns they
have to reinvest in inputs. The decreasing profitability of this segment of the
market further disincentivises input suppliers from engaging with actors to
build the long-term relationships needed to reverse this cycle.

17
SECTION 2

TACKLING UNDERPERFORMANCE –
KMT’S VISION FOR TRANSFORMING
THE AGRI-INPUTS SECTOR

18
Section 2: Tackling underperformance – KMT’s vision for transforming the agri-inputs sector

2.1 KMT’s vision for a reformed agricultural

inputs sector

Kenya Markets Trust (KMT) is a non-profit organisation aimed at fostering

inclusive, competitive and resilient economic growth in Kenya. It began working
in the agricultural inputs sector in 2012. Its vision is to transform smallholder
agriculture in Kenya from subsistence to successful agri-businesses through
farmers’ effective and timely use of agricultural inputs.

KMT believes that through the right support and facilitation, transformational change is possible within
the inputs and seeds market, delivering better value to farmers, higher agricultural productivity and
ensuring long-term growth in Kenya’s agricultural sector.

2.2 Strategies to achieve this vision

To achieve its vision, KMT has developed two main strategies focused on the
two key challenges outlined in the previous section.

STRATEGY 1

Fostering long-term customer-oriented business strategies along the chain

This first strategy aims at addressing both demand and supply-side issues in the inputs market, seeking to
reorient the behaviour of all actors along the chain towards more long-term, customer-oriented business
strategies. This is, in turn, expected to influence the purchasing patterns of farmers, increasing demand for
quality inputs and attracting other players into the market over time.

STRATEGY 2

Improving seed industry governance and regulation

This involves bringing together the public and private sector to reduce the prevalence of counterfeit seeds
and increase efficiency in the seed certification process. This strategy has worked at improving the regulatory
environment in the seed industry so that the private sector could play a greater role in streamlining the supply
and distribution of certified seeds. This, in turn, is expected to reduce the prevalence of counterfeit sales and
provide more high-quality seed varieties to farmers.

19
Section 2: Tackling underperformance – KMT’s vision for transforming the agri-inputs sector

STRATEGY 1
Fostering long-term customer-oriented business strategies along the chain
Last Mile Distribution Impacts to date
The Issue KMT Response • 376,000 farmers have benefitted from
The short-term, transactional KMT tested different models KMT and its partners working along the
relationships along the chain aimed at changing business inputs supply chain through two different
weakened knowledge transfer relationships along the chain. models that have been adapted and
and demand. Downstream actors They learned from pilots and
(agro-dealers and farmers) adapted models, ultimately
refined over time.
particularly suffered. Those seeking changes in farmer • Significant learning has also taken place
farmers that did buy inputs were behavior and the improved
often uninformed about how best distribution of quality inputs in
about the relative costs and benefits
to use them. the ‘last mile’ of the chain. of these different models – and about
the contexts where they might be most
successfully scaled-up.
Soil testing services • In 2016, KMT expanded its partnerships to
include Toyota Tshusho, who commissioned
The Issue KMT Response
the first full-scale fertiliser blending pant
A farmer’s understanding of the KMT partnered with large in Kenya and introduced crop-specific
nutrient mix in their soil and its lime and fertiliser producers fertilisers to the market, giving farmers
impact on productivity levels is to demonstrate the benefits
a major determinant of whether of soil-testing services to
the opportunity to increase production
they will buy inputs and whether farmers. This involved exploring without depleting the soil.
they will buy the right inputs. different funding models
However, soil testing is not a to make the service both
• 186,000 farmers have increased their
widespread practice in Kenya. affordable and enticing to the income by at least 10% by using crop-
average smallholder. specific fertiliser.

STRATEGY 2
Improving seed industry governance and regulation

Seed self-certification Impacts to date

The Issue KMT Response • In December 2016, the Seeds and Variety
The seed inspection and KMT focused on building Evaluation and Release Regulations were
certification process had a shared public-private revised, paving the way for greater private
become increasingly lengthy and vision for policy change to sector involvement in seed certification.
costly for private players due to facilitate greater private
outdated legislation and a lack sector involvement in the seed • A new public-private framework for
of staff and resources within the certification process to increase controlled seed self-certification has
mandated state regulator. The efficiency. It also helped build the
private sector response to this capacity of the private sector
been created. Early adopter Monsanto
was not coordinated. seed suppliers association. has already begun to see benefits from
implementing the new process.
• The seed supplier association has been
Scratch-off labels for seed packets strengthened to become an effective
advocate for change, with substantial
The Issue KMT Response
input to the new regulations and increased
Outdated regulation and the KMT brokered a partnership collaboration with the public sector.
issues with seed certification between public and private
meant uncertified, low-quality actors, to ensure all certified • All seed packets must now be labelled,
and counterfeit seed were seed packets are labelled with particular benefits for smallholder
becoming increasingly common. with a scratchable code.
farmers.
Farmers lacked trust that higher- Farmers can SMS this code to
quality seed was genuine and a toll-free number to confirm
worth paying higher prices for. the supplier, seed variety and
certification date.

20
SECTION 3

THE EVOLUTION OF KMT’S LAST MILE

DISTRIBUTION STRATEGY

21
Section 3: The Evolution of KMT’s Last Mile Distribution Strategy

3.1 Two approaches to last mile distribution

1. Pilot Program & Conceptualisation of ‘Preferred Stockist

Model’ | 2012-2014
KMT’s first step was to design and implement a Based on this scoping study and a separate survey of
pilot programme aimed at changing retail practices distributors in Kenya, KMT identified nine to work with
amongst distributors and agro-dealers. A scoping using a range of criteria - such as revenue, number of
study was carried out in 2012 to understand the role connections with agro-dealers, number of branches and
of key stakeholders in the market and identify those customers, spread of connections with agro-dealers
capable of influencing supply side decisions. Although in rural and urban areas, as well as number of years
the study found that manufacturers and importers had in business - before shortlisting those that scored
both significant resources and capacity, KMT made highest. For its pilot phase, KMT partnered with just one
a conscious decision not to engage with them based distributor, Magos Enterprises in Kisumu County.
on the view that these companies were only directly
connected to large-scale distributors located in specific
counties rather than agro-dealers and farmers. Any
business improvements at this level would have little
downstream impact. In contrast, the team identified a
few distributors that had strong connections with agro-
dealers in their counties and nearby regions, providing
more strategic initial partnerships.

KMT subsequently contracted Dot Matrix – a • The creation of outdoor kiosks in select towns and
marketing and strategy consulting firm– to re- villages of Kisumu County during the pre-harvest
develop Magos’ retail strategy and to work with season to attract local agro-dealers and farmers;
a select few agro-dealers in Kisumu County. This
• Collaboration with agro-dealers and stockists
support included:
to create a database of farmers and the use of
• The design of its logo and shop banner; SMS to share information on new products and
discounts;
• The creation of Magos-branded merchandise such
as stationary to distribute amongst agro-dealers; • Training of agro-dealers to prevent sales of expired
and fake products to farmers; and
• The introduction of early-bird discounts on sales
of fertilisers and chemicals offered to agro- • The implementation of a customer-management
dealers; system through which farmers could reach out to
Magos to resolve issues pertaining to the use of
• Rewards for frequent customers with small certain fertilisers.
discounts and free sales on samples of new;

22
Section 3: The Evolution of KMT’s Last Mile Distribution Strategy

As a result of these initiatives, Magos quickly increased Through these groups, farmers placed joint orders with
the value and volume of its sales, expanded its agro- TIVA Agrovet, who in turn was extended a credit line
dealer network from less than 20 to 100, and increased from Magos to service these groups. Early successes
the number of farmers that it reached to 10,000 (as of have resulted in the formation of 75 such groups and
February 2019 7). Furthermore, while most agro-dealers TIVA’s owner won the National Farmers Award for Agro-
tend to operate only during peak agricultural seasons, Dealers in 2018 in recognition of its achievements.
Magos’ partners have begun selling year-round to keep
up with demand. This has had an impact up the chain This pilot programme led to the development
as well, as agro-dealers started procuring nearly 70% of a ‘preferred stockist model’, in which KMT’s
of their products from Magos, which meant Magos has implementation partners would first work with a
had to purchase items frequently and in large quantities distributor to build a strong network of agro-dealers,
from suppliers. before strategically selecting the most well-networked
agro-dealers to train in modern retail practices.
Building on this pilot, Dot Matrix, with support from
Magos, trained 35 of its agro-dealers in ‘modern’ retail
practices similar to those outlined above, leading to
several (with the financial resources and business
acumen) to take these practises on in a serious way.
For instance, on the back of training, TIVA Agrovet
organised demonstration workshops for farmers on use
of fertilisers and lime as well, and formed buyer clubs of
15-20 farmers that produced the same crops and had
similar interests in learning good agriculture practices.

Figure 6: Changes in shop layout following training on modern retail practices

Before KMT’s Support After KMT’s Support

23
Section 3: The Evolution of KMT’s Last Mile Distribution Strategy

Scale-up of the preferred stockist model and establishment of

strategic partnerships with manufacturers and suppliers | 2014
onwards
Following the pilot, KMT worked with the other eight distributors, but also with farmers directly. This led to the
short-listed distributors, again partnering with Dot establishment of strategic partnerships between KMT
Matrix and Afri Business Solutions. These distributors and suppliers such as Homa Lime and Athi River Mining,
began to rapidly increase sales and started to gain the who in turn collaborated with distributors and agro-
attention of manufacturers, importers, and suppliers. dealers to organise field days and farm demonstrations
Several suppliers started deploying staff members to on soil acidity, its impact on productivity and the use of
these counties to manage the distribution of fertilisers lime and mavuno fertiliser 8 to reduce it.
and other inputs as well as engage with distributors
directly to market their products. The two companies identified agro-dealers through
KMT’s network capable of convincing farmers to provide
While the model was proving successful in increasing their plots for training. These proved to be an effective
distributors’ overall volume of sales, as well as building extension method, given that farmers could physically
tighter linkages across the inputs markets, it was see the benefits. Between 2014-2015, a total of 185
not leading to new purchasing patterns amongst demo days were conducted, reaching more than 20,000
farmers. For instance, while sales of the conventional farmers.9
DAP fertiliser used for maize were increasing, several
other newly introduced crop-specific and soil-specific KMT has referred to this as its ‘Last Mile Distribution’
fertilisers were not. model because it involved connecting all actors in the
supply chain and creating a channel for the flow of
KMT decided to respond to the challenge of information from suppliers to the end consumers. In
diversifying sales – and thus agricultural production 2016-2017, KMT expanded its partnerships to include
– by incentivising suppliers and manufacturers to Toyota Tshusho, who introduced crop-specific fertilisers
share information on their products, not only with to the market.

24
Section 3: The Evolution of KMT’s Last Mile Distribution Strategy

Introduction of Soil Testing Services | 2016-17

During this period, KMT also began co-funding and therefore continued to purchase and use large
exhibitions in partnership with distributors in seven quantities of lime when it was not necessary, further
counties. These were annual events that brought depleting soil quality. Other farmers were even using lime
together all stakeholders in the inputs supply chain, in place of fertiliser.
with suppliers, manufacturers and importers setting
up kiosks. Throughout 2016-17, nearly 13,000 farmers To address some of these issues, soil testing services
attended such exhibitions. 10 were introduced as a crucial complement to KMT’s
initiatives. KMT partnered with Soil Cares and Agri
While these efforts led to improvements in inputs supply, Quest to build awareness on the nutrient composition
again there was limited impact on farmer behaviour. of soil and how soil-testing services could help farmers
Some initiatives were even proving to be counter- make appropriate decisions on the use of agricultural
effective. For instance, some farmers began to believe inputs.
that acidity was the major issue inhibiting productivity

Figure 7: Timeline of intervention

Scale-up of “preferred Stockist Model” & establishment of stategic partnerships with

manufacturers and suppliers.

Implementation of Implementation of
Franchisee Distribution Model. Franchisee Distribution Model.

2012 2013 2014 2015 2016 2017 2018 2019

Pilot programme & conceptualisation Introduction of soil Practical training to

of preferred stockist model. testing services. agro-dealers.

Practical training to agro-dealers | 2018 onwards

A major weakness of KMT’s approach was the provision workshops also did not provide recommendations to
of instruction-based learning to agro-dealers. While agro-dealers based on their size and location (e.g. urban
support offered to distributors was practical, the versus rural). From 2018 onwards, KMT, along with Dot
capacity building workshops conducted for more than Matrix and Afri Business Solutions, restructured these to
400 agro-dealers required an additional component include demonstrations and site visits as well as more
on technical and financial management skills. The bespoke capacity building exercises.

25
Section 3: The Evolution of KMT’s Last Mile Distribution Strategy

2. The franchisee distribution model | 2013-2016

In 2013, KMT partnered with Positive International Additionally, the franchisor assists the agro-dealer to
to pilot a franchisee model as an alternative to the revamp their shop layout and manage product logistics
preferred stockist model. This was meant to reach out after which a revenue sharing model between the two is
to micro agro-dealers in rural areas that cater to large agreed.
numbers of farmers. KMT supported this model as
rural agro-dealers often face input supply constraints Under this model, Positive International identified,
and lack sufficient stock to serve farmers during the recruited, and trained franchisees. They also
peak season. Due to financial challenges, they are managed supply chain activities including standards
unable to procure in large quantities from distributors. development and monitoring. They were further tasked
The situation is made worse by rural infrastructure with consolidating remotely located agro-dealers,
challenges. becoming their distributor through bulk-purchase from
suppliers and offered better rates that trickled down
The model involved franchisors (i.e. distributors) granting as price benefits to rural farmers. Rural agro-dealers,
licenses to agro-dealers to conduct business under the once franchised, ran their shops under the Positive
franchisor’s brand. The franchisor would then provide International brand. The new branding concept also
training to the agro-dealer on: helped the agro-dealer franchisees raise their visibility
• How franchises work; and position themselves as farmer solution centres.
Under this partnership, KMT funded the establishment of
• Business management, including inventory, financial 30 such franchisees.
and customer care management;
• Product knowledge; The initial success of Positive International led KMT
to fund another such franchisor company in 2016 –
• Demo plot preparation;
Farmers Pride –in Machakos county.
• Product promotion and marketing.

Figure 8: Impact numbers

7
Partnerships formed between
suppliers and manufacturers
9
9 Exhibitions

Distributors engaged in last

mile distribution

552 241 376,000

Field days Farmers benefitted
Agro-dealers participated in through these
capacity-building workshops programmes
through preferred stockist model

1,451
56 Farm
demonstrations
Rural agro-dealers
concerted into franchisees

26
Section 3: The Evolution of KMT’s Last Mile Distribution Strategy

3.2 Lessons and challenges

As the complexity and scale of KMT’s work in the inputs sector evolved, a few
interventions did not result in expected outcomes. KMT learned from these experiences
and the inputs team has been able to reflect on key lessons learned along the way.
For example,

1. Moving up the supply chain and 2. The franchisee model has been more
engaging all actors in the distribution effective in transforming retail practices
channel has been instrumental in of agro-dealers than the preferred
promoting the use of appropriate inputs stockist model but relies heavily on donor
by farmers. funding.
KMT’s efforts to build the capacity of distributors While outreach numbers were high under the preferred
and agro-dealers has resulted in increased inputs stockist model, training workshops less frequently
sales. However, there has been mixed results in terms resulted in agro-dealers adopting new retail practices
of whether farmers are purchasing the right inputs due to a lack of funds. As a result, KMT also co-funded
and using them appropriately. KMT realised that not joint activities such as farm demonstrations, field days
all distributors and agro-dealers understood good and exhibitions for a select group of distributors and
agricultural practices and were often not able to provide agro-dealers. Through these efforts, most distributors
accurate guidance to farmers on fertiliser and pesticide have been able to increase their sales, expand their
use. Hence, it was necessary for KMT to engage with customer and supplier networks as well as generate
actors at the top of the supply chain (manufacturers profits. A few distributors - such as New Down Town,
and importers) to transfer this information downstream. Farmers Centre, Moiben and Magos - have been able to
KMT has now partnered with Toyota Tshusho, Athi River continue these activities after KMT’s support ended.
Mining, Homa Lime and Syngenta East Africa to deploy
field workers and train farmers and agro-dealers through Stakeholder feedback suggests that the franchisee
farm demonstrations, exhibitions, field days and an model has been highly successful. Farm Shop, another
SMS-based system for resolving grievances and queries. KMT partner, has franchised 32 agro-dealers to date and
has received funding from the Mastercard Foundation
to franchise more, particularly in rural areas. Surveyed
agro-dealers report an increase in sales of up to 30%.11
Additionally, Farmers Pride has franchised four agro-
dealers in Makueni County and has 125 agro-dealer
partners, of which 12 stockists are gold members (i.e.
they are ready to be converted into franchisees).

27
Section 3: The Evolution of KMT’s Last Mile Distribution Strategy

At the time of writing this case study, Farmers Pride had the model more effective in implementing better retail
secured funding from a venture capital fund and the practices.
UK’s Department for International Development (DfID),
to develop these new franchisees. However, replicating the franchisee model is a challenge
due to its cost. Both Positive International and Farmers
The franchisee model creates a strong business Pride are dependent on continuous funding from other
partnership between the distributor and agro-dealer, sources to remodel new agro-dealers’ shops into
with the distributor assuming much of the risk and costs franchises.
associated with establishing the franchise, making

Figure 9: Comparison of Preferred Stockist and Franchisee Models

Preferred Stockist Model Franchisee Model

Features • Distributor establishes strong business relationship with the • Franchisor establishes a partnership with an agro-dealer,
agro-dealer; provides training and converts the shop into a franchisee;
• Agro-dealer receives instruction-based training on ‘modern’ • Franchisor continuously monitors the performance of the
retail practices; franchisee and ensures successful adoption of improved
• Distributor partners with agro-dealer in conducting rural retail practices.
farmer outreach activities.

Financial Model • Distributor sells products to agro-dealer on cash/credit. • Franchisor finances the revamping of the agro-dealer shop;
• Franchisor practices a revenue-sharing model with the
franchisee to recover its investment;
• Donor provides initial funding.

Target Both urban and rural Rural

Agro-Dealers
Impact on Not all agro-dealers are capable of independently adopting Agro-dealers benefit significantly as they receive end-to-end
Agro-Dealers new retail methods support in training and implementation

Potential to Sustain Easy to scale as the workshops conducted require minimal Challenging to scale as franchisors are using donor funding to
the Model investment rehabilitate agro-dealer stores

3. Training has to be tailored to rural Likewise, the initial workshops conducted by KMT
advocated for modern retail practices with prominent
agro-dealers’ business environment
display units that customers could browse through.
Through both the preferred stockist and franchisee Such practices are not applicable to rural agro-dealers,
models, distributors were able to expand their networks however, who fear that their products may be stolen.
with agro-dealers located in urban areas. However, They prefer to interact with customers through a sealed
uptake by rural agro-dealers has been lower and window rather than an entrance that allows a customer
KMT has had to make some changes to the training to walk into the shop and explore the available products.
and workshop model to tailor it to the needs of rural
businesses. For example, trainings are now held closer to
the agro-dealers’ shops and are often in the evenings to
enable business owners to travel without having to close
their shop for the entire day.

28
Section 3: The Evolution of KMT’s Last Mile Distribution Strategy

3.3 Signs of sector transformation

After several successes, and notable failures, the team is adjusting by engaging directly
with suppliers/manufacturers to drive transformational change in the industry. Some
signs of change throughout the industry include:

Change in suppliers’ behaviour

KMT’s partnership with Toyota Tshusho has not only We now have much stronger ties with agro-
allowed them to rapidly expand sales of crop-specific dealers and farmers. In our most recent expo in
blends but has also encouraged other fertiliser 2019, agro-dealers played an important role in
companies to adopt innovative marketing strategies to gathering farmers. On average, each brought
increase sales. 80 farmers to attend the expo. Through these
efforts of contacting customers through SMS and
Prior to KMT’s engagement, Kenya’s fertiliser market was solving their problems, we now have a network of
dominated by DAP, Urea and CAN blends - accounting 25,000 farmers.
for 70% market share. Continuous application of these
STAFF MEMBER
products over the course of many seasons increased
MOIBEN
soil acidity, depleted nutrients, and decreased crop
productivity. In 2016, Toyota commissioned a fertiliser
blending plant in Kenya to produce and sell fertilisers With KMT’s support, media campaigns, demonstrations
for maize, wheat, potatoes, legumes and rice. These new, and farmer field days were conducted. This resulted
crop-specific fertilisers offered opportunities to Kenyan in over 10,000 MT of fertiliser sales during a single
farmers to increase production without depleting the season. 12 Farmers also reported making more ‘informed
soil. decisions’ on using appropriate fertilisers - rice
farmers in Mwea accessing Toyota’s rice blend reduced
Initially, Toyota engaged only with distributors to sell its fertiliser costs by 8% while increasing revenue by 12%
fertilisers at a price slightly higher than the traditional and potato farmers in Nyandarua doubled their yield
DAP and CAN fertilisers, which were subsidised by the (increase from 8.6MT per Ha to 17.1MT per Ha). 13 As a
Government of Kenya. This strategy did not work as the result, Toyota has proposed an extension plan with KMT
company realised it needed to demonstrate the added to scale to other counties.
value of a higher-priced product.
Other fertiliser manufacturers have started replicating
this approach. For instance, YARA East Africa is now
conducting season-long media campaigns on both radio
The net income of our wholesale shop has and television, promoting their crop-specific YARA MILA
increased from KES 500 Million in 2014 to KES Cereal. MEA Ltd is also refurbishing its fertiliser blending
706 Million in 2018. Through KMT’s marketing and plant under their subsidiary Fertplant East Africa Ltd in
customer management methods, we now have Nakuru to produce crop-specific fertiliser blends.
a network of over 1,000 retailers; we offer short
term credits to 400-500 of them. We also made
sufficient savings to host three large regional
farmer training workshops in 2018.

OWNER
NEW DOWN TOWN, KIRINYAGA

29
Section 3: The Evolution of KMT’s Last Mile Distribution Strategy

Change in distributors’ behaviour Change in agro-dealers’ behaviour

Distributors that received KMT support have Agro-dealers that have maintained close ties with
significantly improved financial performance and grown distributors through the preferred stockist model
customer networks. They have also implemented better have seen significant improvements in their sales.
distribution practices and maintained continuous For example, an agro-vet centre in Meru County has
engagements with agro-dealers and farmers. increased its stock-keeping units from 200 to 1,000.
It now offers continuous training to farmers and
Furthermore, success from expos has encouraged input encourages them to explore fertiliser brands other than
suppliers and manufacturers to support distributors by DAP and CAN.
co-sponsoring such events. Suppliers see value in this
and key multinationals such as Syngenta and Bayer East Similarly, another agro-dealer in Kisumu has established
Africa are emerging as potential sponsors for future the Kisumu Agro-Dealers’ Forum to bring together
expos. stockists and discuss issues pertaining to distribution,
supplying the right inputs to farmers, and introducing
new products through support from field staff deployed
by suppliers.

Farmers complained constantly about low productivity and continued to purchase large quantities of DAP and
CAN. They were not aware that the excessive use of these fertilisers was increasing the level of soil acidity. I, along
with a few other agro-dealers in Kisumu, reached out to Magos for soil testing services. We created awareness
on the product … demonstrated to farmers on how to read soil testing results. Through support from Homa Lime,
we encouraged use of lime and this increased the yield marginally. Now farmers enquire about different fertilisers;
they are aware of the different names of companies and the products they provide. Farmers also use Whatsapp to
send photos and seek advice. I believe that customer management is essential for customer retention.
BEATRICE OKELLO,
AGRO-DEALER SHOP OWNER, KISUMU

30
Section 3: The Evolution of KMT’s Last Mile Distribution Strategy

Change in Farmers’ Behaviour

Farmers who attended demonstrations, field days appropriate fertilisers. Earlier, he practiced crop rotation
or expos organised by KMT-supported distributors and produced small volumes of horticulture items using
or suppliers have begun to adopt good agricultural local seeds; now, he has three greenhouses, periodically
practices and diversify crop production, as shown in checks pH levels, and uses imported seeds. His income
the figure below, based on KMT reporting data. For (profits from sales of 50 kilograms of tomatoes) has
example, a farmer interviewed by the KMT team in Meru increased by 35%. He has encouraged other farmers to
County initially could only produce 7 MT of tomatoes reduce production of maize and increase production of
in a single eight by 30 square metre greenhouse. Now horticulture crops as they offer higher returns.
he produces 15 MT of tomatoes based on the use of

Figure 10: Summary of Results achieved by KMT through Last Mile Distribution, Soil Testing &
Promotion of Agriculture Inputs Interventions

Impact of increased use of crop specific fertiliser

266,092
266,092 3.53.5
bags
bagsbags
per
per acre
bags per
per acre
acreacre
farmersfarmers
accessing
accessing increaseincrease
in maizeinproduction
maize production
farmersfarmers
accessing
accessing increaseincrease
in maizeinproduction
maize production
crop-specific
crop-specific
fertilisers
fertilisers per farmer
per using
farmer crop-specific
using crop-specific
crop-specific
crop-specific
fertilisers
fertilisers per farmer
per using
farmer crop-specific
using crop-specific
fertilisers
fertilisers
fertilisers
fertilisers

OF WHICH
OF WHICH RESULTING
RESULTING
IN IN
OF WHICH
OF WHICH RESULTING
RESULTING
IN IN

186,477
186,477 £62.5
£62.5
per
per acre
per
per acre
acreacre
farmersfarmers
increased
increased
income income as addtional
as addtional
income income
earned earned
farmersfarmers
increased
increased
income income as addtional
as addtional
income income
earned earned
by at least
by at
10%
least 10% by thosebyfarmers
those farmers
by at least
by at
10%
least 10% by thosebyfarmers
those farmers

Impact of increased use of lime and soil testing services

10 10
bags
bags
bags per
per acre
bags per
per acre
acreacre
increaseincrease
in maizeinproduction
maize production
increaseincrease
in maizeinproduction
maize production
per farmer
per using
farmerlime
using lime
per farmer
per using
farmerlime
using lime

RESULTING
RESULTING
IN IN

84,914
84,914
RESULTING
RESULTING
IN IN

farmers
farmers
farmers accessing
farmers accessing
accessing lime
lime and
accessing lime
lime and
and and
£160
£160
per
per acre
per
per acre
acreacre
as addtional
as addtional
income income
earned earned
soil-testing
soil-testing
services
services as addtional
as addtional
income income
earned earned
soil-testing
soil-testing
services
services by thosebyfarmers
those farmers
by thosebyfarmers
those farmers

31
SECTION 4

SEEDS SELF-CERTIFICATION AND

SCRATCH-OFF LABELS

32
Section 4: Seeds Self-Certification and Scratch-Off Labels

4.1 KMT’s seeds work to date

Identification of regulatory barriers and possible

interventions | 2013
KMT’s work to reform Kenya’s crop seeds industry formally began in
July 2013. The overall vision was to create an enabling environment
for the private sector that would attract greater investment, reduce
the dominance of state companies, and provide farmers access to
quality seed varieties.

At the outset, KMT’s implementing partner Agri-Experience (AE) convened several

meetings, bringing together government representatives from KEPHIS, KALRO and the
Ministry of Agriculture as well as members of STAK and the agricultural association of the
Kenya Private Sector Alliance (KEPSA). The purpose of these meetings was to discuss the
status of the crop seeds industry in Kenya, identify constraints affecting private sector
involvement, assess the capacity of state agencies to perform their roles, as well as create
a laundry list of potential initiatives to be undertaken. Two key issues were repeatedly
highlighted throughout:

1. Kenyan seeds and plant variety regulations had not been updated since 1991. As per
these regulations, KEPHIS was authorised to inspect and certify all seeds in Kenya, both
those produced locally as well as imported. Due to a lack of staff and resources within
KEPHIS, the seed inspection and certification process had become increasingly lengthy
and costly for private players.
2. As a result, the distribution of low quality and counterfeit seeds was becoming
increasingly common. The regulations also only allowed seed packets of more than 10
kilograms to carry certified labels and details of the supplier. Hence, uncertified seeds
were sold in smaller volume packets that were typically purchased by smallholders.

To address the above concerns, strong representation from the

private sector was needed. The existing industry association – STAK
– had few members (less than 10)14 and lacked strong leadership to
represent companies in public-private dialogue. As a result, one of
the initiatives undertaken by AE was to build the capacity of STAK,
increase its membership, and hire an executive director who could
represent the association at various meetings.

33
Section 4: Seeds Self-Certification and Scratch-Off Labels

Initial Developments on Seed Labelling | 2014 -15

AE began working directly with STAK to formally review the Seeds and
Plant Varieties (Seeds) Regulations of Kenya (1991) and propose revisions.
Several meetings were held to gather feedback from suppliers, who pushed
for liberalisation. A document comprising feedback, along with the existing
regulations and data pertaining to Kenya’s crop seed industry, was released
online in September 2014 by AE in collaboration with KEPHIS and KALRO.

The purpose of making these documents publicly available was to raise awareness amongst small
and medium seed companies on out-dated regulations and encourage them to participate in on-
going public-private dialogues. For the remainder of 2014 and most of 2015, key stakeholders from the
private and public sectors continued to debate on amendments to the regulations through meetings
organised by AE. The two parties struggled to reach common conclusions, however, mainly due to a
lack of strong representation from STAK.

Although some developments were made in seed labelling, these were ultimately unsuccessful. Due
to a lack of input from STAK, KEPHIS carried out the procurement process to hire a third party to
create new labels. Financial evaluation of bids was based on the lowest cost of production. However,
the chosen vendor suggested a cost of KES 15 per label, which was strongly opposed by most seed
companies as it would increase the cost of packaging, which would then be passed on to farmers. As
such, the chosen third-party company was not engaged.

Learning Trips and Approval of Revised Regulations |

2016
With support from STAK’s new Executive Director, AE arranged several
learning trips to understand how crop seed regulation operated in other
African countries.

Two trips were made:

1. The first to visit the South Africa National Seed Organisation (SANSOR) – a comparator for STAK
– authorised by the government to certify seeds. However, trip participants concluded that this
approach could not be implemented in Kenya, given that STAK did not have the capacity to take up
such a role.
2. Consequently, a second trip was made to Zambia. There, the government retained greater control
over the certification process, while the private sector was authorised to carry out inspections. All
representatives agreed that the Zambian model was more appropriate, and AE initiated support to
KEPHIS and STAK to implement the same.

On December 30, 2016, the Seeds and Variety Evaluation and Release Regulations was revised, paving
the way for the private sector to play a greater role in the industry. These regulations also included
the requirement that labels must be affixed to all seed packets, including those weighing under 10
kilograms.

34
 Section 4: Seeds Self-Certification and Scratch-Off Labels

Implementation of scratch-off labels for seed packets and

seed self-certification process | 2017 – 18
To replicate the Zambian seed certification model, AE and STAK designed a
framework for public-private collaboration on inspection and certification. The
new framework allowed for private sector companies to inspect seeds on field
and in labs, although KEPHIS would continue to certify them. According to the
framework, companies must have staff members (inspectors and analysts) that
are trained and licensed, as well as a fully equipped laboratory to carry out the
process. This comprised a readiness audit of seed companies to be authorised
to do inspections.

Additionally, a trainers’ handbook was also prepared in collaboration with the Seed Control and
Certification Institute of Zambia. KEPHIS staff would provide training to inspectors and analysts from
private companies and, upon completion of the coursework, the latter would be licensed to carry out
inspections on behalf of those private companies.

Around 38 inspectors and 10 analysts have been trained since mid-2017, of which 20 inspectors and
five analysts were licensed. One seed company (Monsanto) has established its laboratory and has been
authorised by KEPHIS to start the lab-inspection process. One other company, Simlaw Seeds is currently
in the process of establishing its own lab.

It is envisaged that once companies carry out field and lab inspections in-house, there will be significant
reductions in cost and time. Currently, companies usually have around 10 days between seed production
and start of the harvest season and KEPHIS takes between 4-6 weeks to inspect seeds and certify
them. The new system would mean companies could have their inspectors ready immediately after seed
production.

KEPHIS simultaneously carried out a new procurement process to select a firm to create new seed labels.
This time, STAK’s executive director was present to open and evaluate bids to ensure transparency in the
process. mPedigree was identified as the preferred company and new labels would cost KES 2.

Figure 9: Timeline of seed interventions

Possible interventions Developments on seed labelling

2012 2013 2014 2015 2016 2017 2018 2019

Implementation of scratch-off labels

South-South learning trips & for seed packets and seed
approval of revised regulations self-certification process (ongoing)

35
Section 4: Seeds Self-Certification and Scratch-Off Labels

4.2 Lessons and challenges

Over the course of KMT’s engagement in the crop seed industry, several key
lessons have emerged.

1. Farmers are now aware of certified seeds, but STAK and KMT need to
provide additional information and support to ensure uptake

While farmers in urban areas are aware of the new scratch label system,
they often purchase multiple seed packets of one variety and scratch
only one label. Based on this, they assume that the remaining seed
packets of the same variety are also certified. STAK and KMT will need
to make continuous efforts to provide more information to farmers on
certified seeds and track data through mPedigree on the number of
scratch labels sold versus number of labels scratched. These efforts are
ongoing and such data will help determine the effectiveness of scratch
labelling in reducing the prevalence of counterfeit seeds.

2. STAK and KMT need to facilitate roll out of the seed self-certification
process

More support is needed to encourage uptake of the seed self-

certification process by small and medium seed manufacturers.
Feedback gathered by KMT has revealed that not all private companies
are aware of (or are interested in) adopting the seed self-certification
process. Since the publication of guidelines by KEPHIS in mid-2017, only
two companies have expressed interest, of which only Monsanto has
received authorisation for carrying out inspections. Several other firms
have deployed staff to be trained as inspectors and analysts. A few
reasons for limited uptake may include that small and medium-sized
companies lack the resources to invest in developing their own labs.
Likewise, KMT staff have been informed that companies are sometimes
fearful of losing trained and licensed staff to other companies due to a
limited skills base and high turnover in the sector. KMT has since initiated
round-table discussions with STAK members and KEPHIS to discuss and
substantiate these claims.

36
Section 4: Seeds Self-Certification and Scratch-Off Labels

4.3 Signs of sector transformation

Supporting effective collaboration between the public and private sector to resolve
binding constraints in Kenya’s crop seeds sector has been a major achievement of KMT.
Some highlights include:

There have been significant reductions in costs and time for companies that have
been able to adopt seed self-certification processes

The estimated time and costs savings for companies who employ the seed self-
certification process as opposed to relying on KEPHIS for this service are significant.
Early adopter Monsanto has already begun to see benefits from implementing the new
process. The impact of this new process on the system will continue to grow as more
firms adopt it.

Monsanto participated in the public-private dialogues right from the beginning. KMT has done a good job in
bringing about changes in seeds regulations. We have seen an improvement in STAK, yet a lot needs to be
done to engage medium and small-scale seed companies.

Following the seed self-certification process, we established our laboratory last year. Initially we sent 60
batches of maize seeds per week to KEPHIS for inspection and certification. For this, we waited for 1-3 months
and sometimes could not certify seeds before the season started. With the establishment of the lab, we have
the opportunity to fully own the process; the intervention has created significant cost savings, and improved
efficiency and timelines in terms of delivering certified seeds. We are dependent on KEPHIS only to inspect and
certify vegetable seeds. Much of the reduction in our workload of maize certification should have benefited
KEPHIS and other companies waiting to get their seeds certified.
EVERLYNE MUSYOKA,
MONSANTO

37
Section 4: Seeds Self-Certification and Scratch-Off Labels

STAK has become an effective advocate of the seed industry and

is collaborating with government for successful and transparent
implementation of seed regulation

Hiring an Executive Director capable of representing the private sector in

public-private meetings was crucial to implementing regulatory reforms.
From there, STAK has been able to work alongside AE, KMT and KEPHIS to
organise and attend learning trips in South Africa and Zambia. These trips
allowed the government and private sector to interact and identify solutions
that would serve the best interests of the industry.

STAK’s representation in the re-tendering process for a third-party label provider meant that the
process was transparent and the outcome fair. STAK also effectively negotiated on the price of labels
on behalf of medium and small-scale seed players, saving about KES 100 Million to the industry15.
Likewise, STAK represented members in the revision of the Seeds and Varieties Regulations which
were gazetted in December 2016. About 70% of the feedback provided by private sector players was
incorporated in the final document. The revisions made to the regulations led to an enabling business
environment for the seed industry in Kenya that is expected to drive further private sector investments
in upcoming years.

Private-public dialogue has facilitated a more collaborative relationship

between the private sector and seed sector regulators

Interventions such as the seed self-certification process show that, for

the first time in years, the government and private sector are effectively
collaborating on the development of policies and regulations that can drive
further investment and innovation in the Kenyan seed market. For instance,
KEPHIS recently convened two consultative seed industry meetings through
KMT’s support, which demonstrates a growing willingness and recognition of
the private sector’s role in policy formulation. Seed companies are actively
giving feedback to KEPHIS on the enhanced seed registration system,
unlike in the past where most companies had little interest in engaging with
regulators directly even when issues arose.

38
Section 4: Seeds Self-Certification and Scratch-Off Labels

39
SECTION 5

THE WAY FORWARD

40
Section 5: The Way Forward

Building on successes to date, over the next 3-5 years

KMT plans to engage up to 70 companies in the scale up
of its last mile distribution work. As a result, it is expected
that three million smallholder farmers will have improved
access to key agricultural inputs, adopt good agricultural
practices and ultimately increase farm yields and income.

KMT plans to increase agricultural lime availability from the current 10,000 MT
to 26,000 MT by 2022 and 33,800 MT by 2027. This will be achieved by engaging
with the Kenya Association of Manufacturers (KAM), KEPSA, and the Ministry of
Agriculture to convene thematic industry learning workshops and identify ways
to promote the replication of commercial models for agricultural lime.

Additionally, KMT envisions that a total of 2,720,000 smallholder farmers will

access quality crop seeds by 2022 and 3,060,000 smallholder farmers by 2027.

To achieve all of this, KMT will need to work very closely with industry players
such as STAK, AAK, KEPHIS, KALRO and County Governments.

41
ENDNOTES

1. Kenya Agricultural Sector Transformation and Growth Strategy 2019-2029

2. FAO Statistics (2003 and 2012), ‘Production of maize, other cereals, tea, coffee, and other crops in Kenya (in MT)’

3. FAO Statistics (2003 and 2012), ‘Yield (in 100 grams per hectare) for Kenya, Zambia and Uganda’

4. (2018) Agri Experience Ltd.,‘Crop Seed Sector Project July 2013 – July 2018, Implemented by Agri Experience Ltd
through Funding from Kenya Markets Trust’

5. (2015) ‘Agriculture Inputs Sector Strategy; Implemented by Kenya Markets Trust and Funded by UKAID, Gatsby and
Kingdom of the Netherlands’, 27 May

6. The definition of the agriculture inputs & seeds market, for the purposes of this case study, includes use of seeds,
fertilisers and chemicals while excluding equipment, machinery, animal feed, vaccinations and any other inputs
used for livestock.

7. Data collected from stakeholder consultations.

8. Mavuno fertiliser contains 11 essential plant nutrients such as nitrogen, phosphorous and potassium, among
others key nutrients. The mineral elements are combined in various formulations and blends that create ‘tailor-
made’ fertilisers that have been proven to give superior crop yields by over 40 per cent. Other than yields, the
fertilisers improve soil fertility, rectify acidity and improve soil pH for higher crop production. Micro-nutrients
present in Mavuno improve color, taste, texture and nutrient value of produce.

9. Agri-Inputs Bi Annual Report for April to September 2017, prepared by Kenya Markets Trust.

10. Agri-Inputs Bi Annual Report for April to September 2017, prepared by Kenya Markets Trust.

11. Data from stakeholder consultations.

12. Consultations with Toyota Tshusho Fertiliser Africa Ltd.

13. Agri-Inputs Bi Annual Report for April to September 2017, prepared by Kenya Markets Trust.

14. Data from stakeholder consultations

15. (2018) Agri Experience Ltd.,‘Crop Seed Sector Project July 2013 – July 2018, Implemented by Agri Experience Ltd
through Funding from Kenya Markets Trust’

42
LIST OF ACRONYMS

AAK Agrochemicals Association of Kenya

AE Agri-Experience

CAGR Compounded Annual Growth Rate

EA East Africa

FAK Fertiliser Association of Kenya

FAW Fall Armyworm

GDP Gross Domestic Product

KALRO Kenya Agricultural & Livestock Research Organisation

KAM Kenya Association of Manufacturers

KEPHIS Kenya Plant Health Inspectorate Service

KEPSA Kenya Private Sector Alliance

KMT Kenya Markets Trust

MLND Maize Lethal Necrotic Disease

MoU Memorandum of Understanding

MT Metric Tonnes

NCPB National Cereals and Produce Board

SANSOR South Africa National Seed Organisation

STAK Seed Trade Association of Kenya

VAT Value-added tax

43
ANNEXES

A.1. Methodology
The case study was developed by applying a structured methodology comprising document review and stakeholder
consultations. The phases involved in carrying out research and documenting the case study are presented in the
following table.

Phase Activities
Phase 1: • Initial telephone conversations with KMT’s agricultural inputs and seeds team to
Preliminary understand KMT’s role and strategy for sector.
Meetings &
Document Review • Review of documents received from KMT which included strategy note, case studies, bi-
annual reports, and monitoring dashboards

Phase 2: • Identification of stakeholders or beneficiaries that directly and indirectly benefitted from
Consultations with KMT’s program. These included suppliers or manufacturers, distributors, agro-dealers,
Stakeholders farmers, service providers, government agencies and KMT’s prior consultants

• Design of questionnaires for each stakeholder with the objective to understand the
following:
1. Partnership with KMT
2. Situation before KMT intervention
3. Description of intervention and its evolution
4. Challenges in implementation, any changes and course corrections
5. Impact achieved
6. Lessons learnt, success and failure factors
7. Systemic changes (i.e.; ability of the stakeholder to adopt, adapt, expand and respond)
8. Upcoming trends in Kenya’s agricultural inputs and seeds sector
9. Additional support needed from donors
10. Constraints in scalability and sustainability

• Conducting meetings with stakeholders in Nairobi, Kisumu, Kirinyaga, Meru and Machakos

Phase 3: Analysis • Analysis of inputs from literature review and primary research
& Filling Gaps in
Research • Development of the case study outline and review of the same by KMT and Gatsby

• Second round of interviews with KMT’s agricultural inputs team

Phase 4: • Submission of first draft of the case study

Documentation of
Case Study • Review by KMT and Gatsby

• Submission of final report

44
A.2. List of stakeholders interviewed
The following stakeholders were interviewed for documenting the case study.

# Name & Designation Organisation Type of Stakeholder Location

1 Susan Maina Kenya Markets Trust Nairobi
2 Ruth Buyanzi Kenya Markets Trust Nairobi
3 Michael Kamau Kenya Markets Trust Nairobi
4 Charles Warria Kenya Markets Trust Nairobi
Freelance Consultant (Seed
5 Anna Wamache Consultant Nairobi
Sector) to KMT
6 Doris Kinya Farmers Centre Distributor Meru
7 Ken Jeff Kamau Meru Vet Centre Agro-Dealer Meru
8 Favour Agro-Chemicals Agro-Dealer Meru
9 Ayub Mwirigi Small Holder Farmer Meru
Sabina Wairimu, Moses
10 Murimi & Gabriel New DownTown Ltd Distributor Kirinyaga
Muchira
11 John Mwenda Riungu LimeZone Enterprises Ltd Agro-Dealer Kirinyaga
12 Nehemia Ondongo Magos Farm Entreprises Distributor Kisumu
13 Beatrice Okello TIVA Agrovet Agro-Dealer Kisumu
14 Antonio David Moiben Connections Ltd Distributor Uasin Gishu
15 Pannar Seed Seed Company Uasin Gishu
Three Farmers at MoiBen
16 NA Farmers Uasin Gishu
Exhibition
Seed Trade Association of
17 Duncan Onduu Industry Association Nairobi
Kenya
18 Rogers Mugambi East Africa Seed Co. Seed Company Nairobi
19 David Kiplagat Simlaw Seed Ltd Seed Company Nairobi
20 Willie Njoroge Dot Matrix Service Provider Nairobi
Jacob Cheptaiwa &
21 KEPHIS Regulator Nairobi
Caroline Muteti
Dr Wellington Mulinge
22 KALRO Research Nairobi
and Dr Joyce Malinga
23 Fredrick Muthuri Quest Agriculture Ltd Soil Testing Company Nairobi
Toyota Tshusho Fertiliser
24 Kentaro Yoneda Fertiliser Company Nairobi
Africa Ltd
25 Annabel Karanja Afri Business Solutions Service Provider Nairobi
26 Samuel Munguti Farmers Pride Ltd Franchisor Machakos
Dr Mulemia Maina and
27 Agri Experience Ltd Service Provider Nairobi
Aline O’Connor

45
14 Riverside, Cavendish Block, 2nd Floor, Suite B, Riverside Drive.
P. O. Box 44817 - 00100 GPO, Nairobi, Kenya.