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Boosting the Fertilizer Production in Kenya

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Boosting the Fertilizer Production in Kenya Boosting the Fertilizer Production in Kenya: a CGE analysis Pierre Boulanger Hasan Dudu Emanuele Ferrari Alfredo Mainar Causapé Ilaria Proietti 2017 EUR 28695EN This publication is a Technical report by the Joint Research Centre (JRC), the European Commission’s science and knowledge service. It aims to provide evidence-based scientific support to the European policymaking process. The scientific output expressed does not imply a policy position of the European Commission. Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use that might be made of this publication. JRC Science Hub https://ec.europa.eu/jrc JRC104685 EUR 28695 EN PDF ISBN 978-92-79-70976-0 ISSN 1831-9424 doi:10.2760/64233 Luxembourg: Publications Office of the European Union, 2017 © European Union, 2017 Reuse is authorised provided the source is acknowledged. The reuse policy of European Commission documents is regulated by Decision 2011/833/EU (OJ L 330, 14.12.2011, p. 39). For any use or reproduction of photos or other material that is not under the EU copyright, permission must be sought directly from the copyright holders. How to cite this report: Boulanger, P. H. Dudu, E. Ferrari, A. Mainar Causapé, I. Proietti; Boosting the Fertilizer Production in Kenya: a CGE analysis, EUR 28695 EN, Publications Office of the European Union, Luxembourg, 2017, ISBN 978-92-79-70976-0, doi:10.2760/64233, JRC104685 All images © European Union 2017, except: Cover page, Eric Isselée, Source: Fotolia.com Table of contents Acknowledgements ................................................................................................ 4 Abstract ............................................................................................................... 5 1. Introduction .............................................................................................. 6 2. Context ..................................................................................................... 8 3. Data ......................................................................................................... 9 3.1. Estimation of Social Accounting Matrix ...................................................... 9 3.2. Structure of Kenyan Economy ............................................................... 11 4. Model ..................................................................................................... 18 4.1. Computable General Equilibrium Models and Kenya Applications ................ 18 4.2. STAGE_DEV Model ............................................................................... 20 5. Policy Issues ............................................................................................ 22 5.1. Main constraints .................................................................................. 23 5.2. Fertilizers ............................................................................................ 24 6. Simulations ............................................................................................. 25 6.1. Boosting Fertilizer Production ................................................................ 25 Scenarios ................................................................................................... 25 Results ...................................................................................................... 27 7. Conclusion .............................................................................................. 33 References ......................................................................................................... 34 Annex 1: Kenyan indicators .................................................................................. 38 2.1 Macroeconomic indicators ......................................................................... 38 2.1.1 Economic Indicators ............................................................................ 38 2.1.2 Population and labour force Indicators ................................................... 43 2.1.2 Government Indicators ........................................................................ 46 2.2 Agricultural Indicators .............................................................................. 47 2.3 Food and nutrition security ........................................................................ 52 2.4 Social indicators, Millennium Development Goals and Food and Nutrition security situation ....................................................................................................... 56 2.4.1 Human development index and inequality .............................................. 56 2.4.2 Health ............................................................................................... 57 2.4.3 Education .......................................................................................... 60 2.4.4 Millennium Development Goals ............................................................. 62 Annex 2: Food Balance Sheet 2014 ....................................................................... 69 Annex 3: Kenya SAM data .................................................................................... 71 Annex 4: Production Structure of the Agricultural Sectors ........................................ 74 Annex 5: Food and Nutrition Security Working Glossary ........................................... 75 Annex 6: Additional Tables and Figures for Model Results ......................................... 77 2 List of abbreviations ............................................................................................ 81 List of figures ...................................................................................................... 83 List of tables ....................................................................................................... 85 3 Acknowledgements We are grateful to colleagues from the European Commission for comments during the different phases of the report. In particular, we would like to thanks colleagues from the EU delegation to Kenya for their support, both scientific and logistic, to this study. Participants to the workshop on Modelling impacts of national policies on Kenyan economy held in Nairobi on 28th of April 2016 gave important suggestions for the design of the study. In particular a special thank goes to prof. W. Kosura and M. Mathenge for their support in the organisation of the workshop and their valuable comments on the scenario design and preliminary results. A special thanks to Mr. Gatungu (KNBS) to provide valuable data. 4 Abstract Food security remains a key challenge in many Sub-Saharan African countries and in Kenya in particular. Kenya addresses this concern with a noteworthy policy mix, aiming at giving to the agricultural sector a leading task in improving food security. In this paper, through a Computable General Equilibrium (CGE) model specifically modified for the context of developing country analyses, we address the impacts of the construction of a new fertilizer plant on the agricultural sector and the rest of the economy. For the purpose of the study, a desegregated version of a 2014 Social Accounting Matrix (SAM) has been developed. Results suggests that increasing domestic production of fertilizers do not fully achieve the objectives of reducing rural poverty and increasing agricultural production without complementary policies that help small-holder farmers to overcome the backward technology trap and give them better access to input and output markets. 5 1. Introduction "Food security, at the individual, household, national, regional and global levels [is achieved] when all people, at all times, have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life" (FAO, 1996). Adopted at the World Food Summit, this definition remains the most widely cited, albeit different definitions of food security have been proposed over time. The Joint Research Centre (JRC), the European Commission's in-house science service, is committed under the Administrative Arrangement JRC №33272-2013-10 DEVCO 325- 863 between DG Development And Cooperation – Europeaid and DG Joint Research Centre (DG JRC) to provide support for: i) improvement of information systems on agriculture, nutrition and food security, ii) policy and economic analysis to support policy decision-making process and iii) scientific advice on selected topics concerning sustainable agriculture and food and nutrition security. Tools for policy design in the agriculture and food and nutrition security will be made available to policy makers. This will allow impacts of policies to be better known, while good practices can be captured and made available for further policy decisions, which are based on thorough policy and economic analysis. In the framework of this commitment, Economics of Agriculture Unit (JRC.D.4) of the Sustainable Development directorate is responsible to elaborate the methodology and tools to provide macroeconomic analysis of the national and regional economic systems related to: sustainability of policies in the sectors of agriculture, social transfer and fight against food and nutrition insecurity. The analyses should support the EU institutions, DG DEVCO and the partner countries for the formulation of policies and programmes in the sustainable agriculture and food and nutrition security areas through the provision of demand-driven technical and scientific advice. Among
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