Role of agriculture in economic development of Kenya

  

Date Posted: 12/3/2011 5:38:18 AM

Posted By: strictlyurban  Membership Level: Silver  Total Points: 209

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Role of agriculture in economic development of Kenya

Agriculture is the art and business of cultivating soil, producing crops and raising livestock. According to a World Bank report in 2005, stated that about two thirds of the world population poor are mainly concentrated in rural areas, which are predominantly agriculture-oriented areas. Therefore in respect to poverty eradication and raising the welfare standards of the population; more focus should be put on agricultural activities.

In Kenya agriculture is an important fundamental in economic development, it contributes 35% of the gross domestic product (GDP) and constitutes 40% of the export earnings.

It’s a sector that establishes the industrialization framework through; supplying raw materials for industries, example timber for the paper manufacturing industry, skin and hides for leather making industry.

It generates foreign currency through the export process of agricultural products. It creates a source of employment to the population through farming, business and research activities therefore raising the standard of living of individuals.

The purchasing power of the population is improved through income generation, hence creating a market for industrial products.

Agriculture in itself is also a market for industrial goods such as machinery, equipment and fertilizers used in the farming process. It promotes and creates various off-farm activities such as transportation, research programmes that look for better and improved methods to be applied in farming and livestock activities, example Kenya Agricultural Institute (KARI).

Agriculture ensures a constant food supply and food security for the population, this ensures that the work force fed with energy to supply labour to industries and other economic sectors.

It also saves the country funds that would have rather been used in the importing of food from other countries this in turn has a positive effect on the country’s balance of payments and there is surplus money to invest in other areas

of the economy such as social overheads; roads, hospitals.

Above all it contributes towards rural-urban balancing; through the creation of employment in the rural areas it discourages rural to urban migration and this helps in the better distribution of incomes and balanced use of social amenities. Through all this multiplier effects agriculture is perceived to an engine of economic growth and development.


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1. Providing increased food surplus to the rapidly expanding population

In underdeveloped countries, food production dominates the agricultural sector. When output expands with increased productivity, it increases the income of the farmers. Rise in per capita income leads to substantial rise in the demand for food. In such economies, the income elasticity of demand for food is very high. It usually ranges between secondary and tertiary sectors 0.6 and 0.8 percent. Moreover, the increase in the growth rate of population due to rapid decline in mortality rate and slow reduction in fertility rates tends to raise further the demand for food. Besides, the demand for food increases with the expansion of population in towns and industrial areas. If food production lags behind its demand, a substantial food prices is expected. To offset domestic shortage and prevent rise in prices, food may be imported from abroad but it can be at the cost of capital goods needed for development.

2. Increasing the demand for industrial products

A rise in rural purchasing, as a result of increased agricultural surplus, is a great stimulus to industrial development. The market for manufactured goods is very small in an underdeveloped country where peasants, farm laborers and their families, comprising typically two-thirds or four-fifths of the population, are too poor to buy any factory goods in addition to whatever little they already buy. There is lack of real purchasing power reflecting the low productivity in agriculture. The basic problem thus is low investment-returns caused by the small size of the market. Increased rural purchasing power caused by expansion of agricultural output and productivity will tend to raise the demand for manufactured goods and extend the size of the market. Moreover, the demand for such inputs as fertilizers, better tools, implements, tractors, irrigation facilities in the agricultural sector will lead to the greater expansion of the industrial sector. Besides, the means of transport and communication will expand when the agricultural surplus is to be transported to urban areas and manufactured goods to the rural areas.

3. Providing additional foreign exchange earnings through agricultural exports

Underdeveloped countries mostly specialize in the production of a few agricultural goods for exports. As the output and productivity of exportable goods expand, their exports increase and result in larger foreign exchange earnings. Thus agricultural surplus leads to capital formation when capital goods are imported with this foreign exchange. As development gain momentum due to industrialization, the proportion of agricultural exports in country’s total exports is likely to fall as they are needed in larger quantities for domestic production of imported articles. Such articles are import substitutes and conserve foreign exchange. Larger production of food and export crops not only conserve and earn foreign exchange but also lead to the expansion of the other sectors of the economy.

4. Increasing rural incomes to be mobilized by state

An underdeveloped country needs large amount of capital to finance the creation and expansion of the infrastructure and for the development of basic heavy industries. In the early stages of development, capital can be provided by increasing the marketable surplus from the rural sector without reducing the consumption levels of farm population. Labor as the principal input can be a source of capital formation when it is reduced on the farm and employed in construction works (only skilled labor can be utilized). The second possibility of increasing capital formation through reduced agricultural prices is also not feasible in early stages of development. The third possibility of increasing farm receipts is perhaps the best way for capital formation. This can be done by mobilizing increased farm incomes through agricultural taxation, land taxes, agricultural income tax, land registration charges, school fees, fee for providing agricultural technical services and other types of fees that cover all or part of the cost of services provided to the farm population.

5. Improving the welfare of the rural people

Increase in rural incomes as a result of agricultural surplus tends to improve rural welfare. Peasants start consuming more food especially of higher nutritional value in the form of superior quality cereals, eggs, ghee, milk, fruits etc. they build better houses fitted with modern amenities like electricity, furniture, radio, fan etc. Provide themselves with better means of transport and communication, health and education facilities etc. Thus increased agricultural surplus has the effect of raising the standards of the mass of rural people.

6. A number of industries are based on agricultural raw materials such that expansion of industries relies on more materials being produced. For example, the textile industry depends on cotton and wool production. The development of domestic agriculture would addition reduce domestic reliance on imported raw materials.

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