Smallholder production
More pro-poor than commercial farming?

Export horticulture has grown rapidly in Kenya. Would a shift away from smallholder production undermine the overall poverty reduction impact of this export success?

Between 1989 and 1999, Kenyan exports of fresh vegetables to the European Union grew in value by over 12 per cent a year. During this period the United Kingdom (UK) took an increasingly large share of Kenyan fresh vegetable exports. In the UK market, fresh vegetables are sold predominantly by a small number of large retail chains. These retail chains prefer to deal with a small number of large suppliers, who in turn prefer to buy produce grown on large farms rather than by smallholders, in order to ensure quality, timeliness and consistency of produce. How would it affect poverty if commercial farming were increasingly to replace smallholder production?

Labour-intensive production

A research project at the Institute of Development Studies asked, firstly, whether smallholder production was more labour intensive than large farm production. It was found that this was not necessarily the case. If anything, smallholder production used less labour for each unit of output than large farms because it used family labour more intensively. Furthermore, even if smallholder production was more labour intensive, the number of extra jobs created by shifting back to smallholder production would be small compared to the number of jobs being created by two other trends in the industry – rapid export growth and greatly increased post-harvest processing.

Poverty reduction

The second part of the study involved surveying incomes in a sample of 263 households. A model of household incomes was constructed to simulate what would happen if people in rural households moved into export horticulture. Two significant results emerged. Firstly, any shift into the production of vegetables for export purposes substantially reduced household poverty. Secondly, the same degree of aggregate poverty reduction occurred irrespective of whether the movement was into smallholder production or work on large farms.

This analysis does not examine all of the possible benefits of smallholder production and focuses solely on income, ignoring income security and other factors (see Dolan and Barrientos). It should also be noted that the sample was small and certain methodological difficulties arise with this type of analysis. Nevertheless, the results undermine two common arguments made in favour of supporting smallholder production – that it is more labour intensive and that a switch to smallholder production would make the industry more pro-poor – while at the same time demonstrating the overall benefits of export horticulture for poverty reduction.

Policy recommendations include:

• not fixing what isn’t broken: the export horticulture business has been successful precisely because it has operated in an open and competitive environment, thus the government should continue to abstain from heavy regulation of the sector
• promoting the collective involvement of smallholders: as smallholder production reaches a different group of the poor than production on large farms, the government, NGOs and the private sector should encourage the voluntary formation of collective farmer organisation
• supporting agricultural extension: there is an important role for agricultural extension to supply training on quality, timeliness, new technology and standards
• conducting further study on the labour intensity of different modes of production and the wider dimensions of welfare costs and benefits associated with each.

Neil McCulloch, Masako Ota and John Humphrey
Institute of Development Studies
University of Sussex
Brighton BN1 9RE
UK

T +44 (0)1273 678671
F +44 (0)1273 621202

j.humphrey@ids.ac.uk

See also

‘Export Horticulture and Poverty in Kenya’, IDS Working Paper 174, Institute of Development Studies, by N. McCulloch and M. Ota, 2002
www.gapresearch.org/production/publications.html

‘Governance and Trade in Fresh Vegetables: The Impact of UK Supermarkets on the African Horticulture Industry’, Journal of Development Studies, Vol 37 No 2: 147-176, by C. Dolan and J. Humphrey, 2000

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