This presentation was prepared and presented by J. K. Munguti from the Ministry of Industrialization Enterprise and Development during the Industrialization Week conference held at KICC Nairobi on 19th November 2013.

1. FOOD INDUSTRY IN KENYA
November 2013
Prepared by
J. K. Munguti
Ministry of Industrialization &
Enterprise Development
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2. Or der of
Pr esentation
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•
•
•
•
Introduction
Importance of the sector
Current Status
Challenges and opportunities
Proposed Interventions
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3. Introduction
Objectives
The two major social-economic challenges facing the country
are poverty and unemployment. The food sector can provide
both jobs and wealth by leveraging our success in the
agriculture sector.
The objectives of this presentation are:
oIdentify the major challenges facing the sector
oIdentify the areas (both cross-cutting and sub-sector
specific) the public and private sector can intervene to grow
the sector
oIdentify areas of collaboration between government,
development partners and private sector
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4. Intr oduction
Food Processing covers: foods, beverages and
tobacco
Includes:
Dairy, Vegetable oil, Grain Milling, Baking and
Confectionery, Fruits and vegetables, Beverages,
Meat and Fish, Honey, nuts, mushroom, etc.
The food sector constitutes about a third of the
manufacturing sector.
The sector adds value to agricultural produce and
therefore its success depends on efficient
agriculture sector.
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5. Importance of the sector
i.
ii.
iii.
iv.
Employment – The manufacturing sector employed 266,400 people in
2009 out of which 89,319 jobs (or 33.5%) were in the foods processing
sector.
Contribution to the Economy –The Manufacturing sector contributes
about 10% of the GDP. The food sector contributed about a third
(33.4%) of the total manufacturing production in 2009.
Exports- in 2011, Kenya total exports were valued at Ksh 482,944
million. The food and beverage sector exports were valued at Sh
197,888 million (or 41%). The exports are mainly tea, horticulture,
coffee, Tobacco and fish products.
Imports- In 2011, a total of Ksh 1,315,671million was spend on imports
out of which ksh 106,539 million was for imports of foods and
beverages ( of this amount Ksh 59,133million or 55.5% was utilized to
import animal/vegetable fats and oils).
The food processing sector can therefore be a key driver of the economic growth.
Growth in the sector can have a direct and significant impact on the whole
economy. Furthermore it is possible to increase export volumes through
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diversification from the traditional exports ie tea, horticulture, coffee and tobacco.

6. Current Status
Dairy processing
Milk In-take by processors
Year
Volume (in Million litres )
1
2008
398.5
2
2009
406.5
3
2010
515.7
4
2011
There were 78
registered
manufacturers of
dairy products in
2010.
Only about 12%
of the milk is
processed.
549.0
Both FAO and the official statistics place the milk production for 2007 at
approximately 3.5 billion liters. In 2007, only 423 million liters were processed (or about
12%). It is estimated that another 10.5% of milk produced is consumed by calves, 34.5%
On-farm and 55% is marketed, including both formal and informal market channels
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7. Current Status
Dairy processing: Challenges and opportunities
Challenges
•Low milk production due to lack of investment
•Processors face challenge of low capacity utilization
due to competition with “fluid cash-based informal
milk market”
•High feed costs
•Insufficient investment in chilling plants and
transport (challenge of cost vs utilization)
Opportunities
Investments in animal feeds, AI and other extension
services, chilling facilities, transportation of milk,
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Niche products, etc

8. Current Status
Meat Processing
Livestock Population
Exotic Cattle
Indigenous Cattle
Sheep
Goats
Camels
3,355,407
14,112,367
17,129,606
27,740,153
2,971,111
NAIROBI
25,536
29,010
34,717
46,837
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CENTRAL
800,227
325,678
664,237
531,209
231
74,119
885,846
467,439
1,570,728
51,045
EASTERN
373,307
1,886,854
1,890,898
4,729,057
248,634
NORTH
EASTERN
80,422
2,694,786
4,264,155
7,886,586
1,700,893
NYANZA
221,670
1,527,000
495,055
961,269
59
RIFT
VALLEY
1,560,222
5,919,585
9,079,380
11,750,521
968,192
219,904
843,608
233,725
263,946
2,037
KENYA
COAST
WESTERN
KNBS 2009
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Over 60% of all livestock is found in the Arid and Semi Arid Lands (ASAL).
Livestock employs about 90 percent of the local population in ASAL areas.
The livestock sub-sector accounts for about 10% of the entire GDP
Livestock accounts for about 42% of the agricultural GDP contribution.
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9. Current Status
Meat Processing : Challenges and Opportunities
Challenges
•Animal diseases
•Frequent drought
•Timely availability of market information
•High standards of importing countries
•Low investment in value addition
Meat processing
factory
Opportunities
• Investment in value addition
ie meat processing plants
• Collaboration with county
governments to set up
abattoirs
• Investment in niche
products eg wild meat
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10. Current Status
Fruit Production
2010
Quantity
(Ton)
VEGETABLES
2011
Value
Kshs
(Million)
Quantity
(Ton)
2012
Value
Kshs
(Million)
Quantity
(Ton)
Value
(Kshs
Million)
share
by
value
4,600,000
85,736
4,642,522
95,564
6,084,341
104,920
48%
133,736
44,964
123,270
41,608
878,067
39,685
18%
2,768,435
50,578
2,848,028
60,645
5,236,365
61,524
28%
NUTS
123,221
3,796
147,583
5,876
226,785
6,900
3%
MAPS
2,673
44
15,034
429
152,430
4,940
2%
7,628,065
185,118
7,776,437
204,122
12,577,988
217,969
100%
FLOWERS
FRUITS
TOTAL
Source: HCDA
Fruits are a significant part of horticulture in terms of production. The
value is not however proportionate to the quantity produced due to low
value addition. Flowers on the other hand are very low in quantities but
high in value. The potential in fruits processing remains unexploited.
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11. Current Status
Fruit Production
The total domestic value in the horticulture sector in 2012
amounted to Ksh.217 Billion
Fruits contributed Kshs. 61.5 billion accounting for 22% of the
domestic value of horticultural produce in 2012.
The area under fruit was 167,000 Ha with a production of 5.2
million tons.
The main fruit categories grown in Kenya are the tropical and
temperate fruits. The major fruit grown in order of importance
are; banana (37.6%), mangoes (19.6%), pineapples (12.1%),
avocado (9.8%), paw paw (5.4%), oranges (4.6%), water
melon (4.2%) and passion fruit (3.7%).
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12. Current Status
Challenges
- Local sourcing of major raw materials (fruit pulp) due to
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lack of organized production of fruit leading to unreliable
supply of sufficient quantity of required quality of raw
materials.
Lack of facilities for post harvest preservation (cold
storage, etc).
Insufficient investment in processing facilities (especially
primary processing like pulping facilities)
Opportunities
Investment in storage facilities, Sub-contracting in primary
processing, collaboration with counties to set up fruit
processing facilities
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13. Current Status
Value addition in Fruits
Price: Ksh 150/Kg
Value addition include packaging
Price: Ksh 50/kg
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14. Current Status
Summary of the main Issues in Food Processing:
•Inadequate
supply of quality raw materials
•Low
value addition,
•Low
investment in post harvest storage and
primary processing
•Market
access challenges (both local and export)
Low value addition: only about 50% of fruits reach the market, and only 1%
is processed.
There is a tendency along the value chain for “Adding Price Without Adding
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Value !”

15. Challenges and opportunities
SECTOR ISSUE
INTERVENTION REQUIRED
1
Unreliable availability of raw materials:
Seasonality of raw materials due to reliance of rains and to lack of storage.
Investment is storage and primary processing of raw materials
required.
2
Inadequate information
On appropriate technology, value adding processes, potential markets,
availability and quality of local raw materials, etc
The Ministry is in the process of creating a One-Stop-Shop for all
information required by investors.
3
Access to affordable credit for financing new machinery and updating
technology
Engage the financial institutions to set up suitable schemes.
4
Market access – for export of foods. NTBs on food movement to external
markets very high. (example of export of tea, avocado to SA)
Bilateral and multi-lateral negotiation with individual countries and
RECs (SADC, COMESA, EU). Utilize our participation in
negotiations.
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VAT Act 2013 esp. VAT remission, milk and infant foods, animal feeds,
vegetable seeds,
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Ensure VAT refunds work, Engage National Treasury to
expand the VAT exempt list to include Infant foods, Animal
feeds, vegetable seeds.
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Increased cost of doing business due to devolution – un-procedural
imposition of fees and charges by county governments. Counties have
introduced cess charges for products moving between counties, refusal to
accept permits issued by other counties, etc
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Cess be charged at point of production and at point of sell
Legislation required to guide types of levies and procedure of
introducing them as well as public participation in legislative
process
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EAC Issues
- Full CET by on goods that have benefited from duty remission in Kenya
while Kenya does not charge 100% CET for similar goods made from zero
rated raw materials
-Harmonization of standards – this needs to be fast-tracked, mutual
recognition of standards required
-NTBs on Kenyan beef exported to Uganda
-Zero rating of duty for imported raw material (for juices, confectionery)
and reduction to 10% for industrial sugar
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MoIED to spearhead high level bilateral meetings with Uganda
and Tanzania to discuss negative effect of implementation of
Article 25 to the Kenyan industries.
The Ministry will follow this through the EAC Secretariat and
KEBS
Verification of beef products from Kenya was done in August
2012; Kenya was to review Legal Notice 169 touching on BSE.
The MoIED to follow-up this with National Treasury
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16. Challenges and opportunities
Drivers of Growth
i.
Rise in disposable incomes – increasing middle class
ii. Changing Lifestyles and Aspirations – tastes and
preferences
iii. Increasing penetration of organised retail and branded
food products – supermarkets spread
iv. Increasing demand for ready foods by working
population
v. Increasing spending on health foods
vi. Competitive advantages in tea coffee, horticulture
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17. Challenges and opportunities
What needs to be done
 Transform
agriculture from a “Low input-Low output”
rain-fed subsistence farming system to a “High input –
High output” mechanized system to address shortage of
raw materials
 Increase
Value Addition not “price addition” with the
aim of customer satisfaction
 Invest
in storage ( including cold storage) and Logistics to
ensure food products reach the market as well as
processors
 Be
Internationally Competitive
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18. Proposed Interventions
Cross-cutting interventions
•Packaging improvement
•Quality related interventions- standardization,
traceability, ISO certification
•Cold storage and logistic related interventions
•Market access related interventions
•Subcontracting arrangements
•Market information availability
Sector specific Interventions
•Promotion of investments in specific subsectors
•Collaboration with county governments
•Collaboration with development partners
•Interventions to address subsector specific issues
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19. The End
Fresh food meets technology …to create
value!
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