Role of Standards in Kenya’s Horticulture Sector Spencer Henson University of Guelph Canada

Key Messages…. Standards continually evolve over time Standards continually evolve over time Collective impact of standards Collective impact of standards Interaction between public and private standards Interaction between public and private standards Need to consider impact of standards in the wider context Need to consider impact of standards in the wider context Standards can be a threat to established supply chains Standards can be a threat to established supply chains Standards can create strategic opportunities Standards can create strategic opportunities

Outline Context Context Kenyan fresh produce exports Kenyan fresh produce exports Standards regime: Standards regime: European Union European Union Compliance strategies: Compliance strategies: Public sector Public sector Private sector Private sector Strategic responses Strategic responses Conclusions Conclusions

Context Trends in agricultural exports: Trends in agricultural exports: Shift from basic commodities Shift from basic commodities Export diversification Export diversification Increase in exports of fruit and vegetables Increase in exports of fruit and vegetables Increased role of non-traditional crops Increased role of non-traditional crops Linked to contract production: Linked to contract production: Large-scale Large-scale Small-scale Small-scale

Average Annual Growth Rates for EU Imports of vegetables, Vegetable Total Imports Imports from Third Countries Tomatoes Carrots Potatoes Onions Green peas Green chillies/Peppers Green beans ‘Minor’ vegetables

Context Trends in agricultural exports: Trends in agricultural exports: Shift from basic commodities Shift from basic commodities Export diversification Export diversification Increase in exports of fruit and vegetables Increase in exports of fruit and vegetables Increased role of non-traditional crops Increased role of non-traditional crops Linked to contract production: Linked to contract production: Large-scale Large-scale Small-scale Small-scale

Kenyan Exports of Horticultural and Floricultural Products,

EU Imports of Green Beans,

Evolution of Kenyan Fresh Vegetable Exports Up-market off-season vegetables Asian vegetables Non-traditional vegetables Prepared products

Drivers of Change in the Kenyan Fresh Vegetable Export Sector Push Transport costs Transport costs Decline in margins Decline in margins Increased supply-base Increased supply-base Supply chain consolidation Supply chain consolidationPull Novel products Novel products Value-added products Value-added products Supply continuity Supply continuity Quality standards Quality standards Supply standards Supply standards

Comparative Freight Rates for Fresh Green Bean Exports, 2003

Drivers of Change in the Kenyan Fresh Vegetable Export Sector Push Transport costs Transport costs Decline in margins Decline in margins Increased supply-base Increased supply-base Supply chain consolidation Supply chain consolidationPull Novel products Novel products Value-added products Value-added products Supply continuity Supply continuity Quality standards Quality standards Supply standards Supply standards

Standards on Fresh Vegetable Exports to the European Union StandardPublicPrivate PhytosanitaryX HACCPX Microbial contamination X TraceabilityX Good agricultural practice XX Pesticide residues XX Social welfare X Quality grades XX

Evolution of Hygiene Standards in the UK UK Food Safety Act 1990 Private hygiene standards Collective retailer hygiene standards Third party certification

Evolution of EU Standards on Pesticides Predominantly Member State controls Evaluation of existing approved pesticides Establishment of Maximum Residue Levels Good Agricultural Practice standards

Evolution of EU Phytosanitary Standards Member State controls Notification pests Rapid alert system Border inspection Approved Third Country authorities

Evolution of EU Quality Grades Limited EU grades Private quality standards Certificate of conformity Third Country approved authority

Enforcement Regimes Border inspection Border inspection Surveillance Surveillance Regulatory actions Regulatory actions Private inspection Private inspection Third party certification Third party certification

Stringency of SPS Requirements for Fresh vegetables in Alternative Markets

Challenge Facing Fresh Vegetable Exporters Compliance Compliance Control Mechanisms Cost Cost

Compliance Strategies: Public Sector Phytosanitary surveillance Phytosanitary surveillance Plant health certification Plant health certification National standard National standard

Compliance Strategies: Private Sector Industry code of practice Industry code of practice Development of human capital Development of human capital Facility development Facility development Backwards integration Backwards integration Intensified extension Intensified extension Out-grower control systems Out-grower control systems

Supply-Base for Fresh Vegetable Exports from Kenya, 2002

Role of Small Producers in Kenyan Exports of Fresh Vegetables

Compliance Strategies: Private Sector Industry code of practice Industry code of practice Development of human capital Development of human capital Facility development Facility development Backwards integration Backwards integration Intensified extension Intensified extension Out-grower control systems Out-grower control systems

Off-Setting Responses Integration Integration Premium markets: Premium markets: Countries Countries Customers Customers Value-addition Value-addition Crop diversification Crop diversification

Kenyan Exports of Fresh Vegetables by Destination, 1990 and 2002 Very High Medium LowLow High

Off-Setting Responses Integration Integration Premium markets: Premium markets: Countries Countries Customers Customers Value-addition Value-addition Crop diversification Crop diversification

Kenyan Exports of High-Care Prepared Vegetables,

Off-Setting Responses Integration Integration Premium markets: Premium markets: Countries Countries Customers Customers Value-addition Value-addition Crop diversification Crop diversification

Kenya Exports of Fresh Beans and Peas,

Conclusions Kenya faced a range of public and private standards Kenya faced a range of public and private standards Standards evolve within existing challenging business environment Standards evolve within existing challenging business environment Response to standards largely within private sector Response to standards largely within private sector Standards used as a means to strategic gain Standards used as a means to strategic gain Challenges for small-scale sector Challenges for small-scale sector