Chapter 6
Dialing Maize 411—Kenya
DR. ADRIAN MUKHEBI GREW UP ON A TWO-HECTARE (FIVE-ACRE) FARM in western Kenya with his parents, brother, and two sisters. Nearby was the second-largest agricultural market in the country, where each year thirty thousand small-scale farmers come from miles away to trade their goods. His father was basically a subsistence farmer, but whatever produce was not consumed by the family was sold at market. Adrian remembers accompanying his father on market trips and watching him sell his vegetables and grain. He was always struck by his father's lack of control in price negotiations.
My father along with the other farmers was a price taker, not a price giver. The buyers seemed to have all the power to determine what prices they were going to pay. And if the buyer came and said, well, I see that you're selling tomatoes. I will pay you this much, and my father would say, but can you give me a little bit more? And the buyer would say, no thank you, and would walk off to another seller. And so—because my father needed to get some money from his trip to market to pay my school fees—he is saying, no, no, wait, it's OK, just give me anyway.
In 2010, census results indicated that 70 percent of Kenya's 38 million people were surviving from agriculture, a field dominated by small-scale farmers. More than 70 percent of the formal and informal labor force was employed in some sort of agriculture-related work. As in many African countries, the agricultural sector has been identified as key to poverty alleviation. Despite its importance, over half the people living in rural areas of Kenya live below the poverty line, earning less than $1 a day. According to the Food and Agricultural Organization of the United Nations, more than 4 million people in Kenya (as of August 2011) do not have access to sufficient food. Although it is believed that the country has the capacity to produce enough food to feed its entire population, the government has resorted to importing food.
The Sorrows of a Small-Scale Farmer
Adrian's father made such a poor living selling his produce at market that, as is unfortunately the custom in poor families with girl children, his two sisters were forced to drop out of school and marry early so there would be enough money for Adrian and his brother to go to school. As he grew up and studied agriculture, Adrian became fascinated with how farmers market their produce and how little money they make out of it despite all their sweat and hard work. While getting his degree in the United States in agricultural economics and marketing, he took a class that involved students in buying and selling commodities—mimicking the Chicago Board of Trade. Every morning during class, he would study the Wall Street Journal and its agricultural price information on wheat, corn, pork bellies, and other commodities throughout the United States. The class would simulate buying and selling, and at the end of the semester the students added up how much they had actually made trading over time. Adrian ended up making quite a bit of (fictitious) money and in the process became fascinated by the world of commodities trading.
Later on, when he had an opportunity to visit the Chicago Board of Trade in person, it all clicked into place for him.
They took me to this little museum and into a small room where there was a blackboard and chalk dating from 1848, when the Chicago Board of Trade was created by farmers who were tired of buyers offering them very low prices at market. And so the farmers got together and asked what they could do in order to get better prices. They decided they would sell collectively. They would bring their corn or wheat together, and whoever wanted to buy would pay to buy out of all this grain that the farmers had brought. They would write how many bushels of wheat or corn was there that day on the board. In this way they limited the buyers' negotiation power and their bids resulted in higher prices to the farmers. In the end, the farmers discovered that by working together instead of competing, they had the edge over the buyer. That is how the Chicago Board of Trade started. When I saw this I knew that when I got back to Kenya, I must do this.
And so KACE—the Kenya Agricultural Commodity Exchange—was born in Adrian's mind.
Adrian returned to Kenya with a doctoral degree, but because the Kenyan government now controlled all the agriculture prices, setting up a commodities market was anything but a simple matter. It would take him another seventeen years to fulfill the promise he made to himself at the Chicago Trade museum. His opportunity came when, influenced by the International Monetary Fund and the World Bank in the early 1990s, Kenya liberalized and privatized the agricultural sector, which ironically resulted in depressing prices and more exploitation of farmers. Now was the right time.
In 1992 Adrian registered KACE and set up a small kiosk with a chalk board in a midsize market place. He was working full time as an economist, but believed so passionately in his idea that he spent every evening and weekend building KACE from the ground up. After a short while, it quickly became apparent that not too many people were coming into the kiosk to check on prices. Adrian came to realize that the farmers were scattered all over the place and before they took a long trip to try to market at the exchange that he set up, they needed to know prices so they could tell if it was going to be worth the extra travel. They also represented so many products that it was hard to aggregate them under the few commodities that Adrian was posting. So Adrian needed to reconfigure a system that covered more markets and included more commodities.
Now, in addition to just having one trading kiosk in one town, he recruited young people and sent them to collect prices in the six major wholesale markets in Kenya, where all kinds of commodities that are produced and sold in the country are traded. He set up a system of collecting, updating, and disseminating information that has now evolved into a market information and linkage system called MILS, which offers two principal services targeting poor smallholder farmers: reliable and timely market information and efficient linkage to input and output markets.
Trees Are Not Only for Sitting Under
At one end of the MILS are market resource centers (information kiosks) located in each of the six markets where small farmers go to sell their produce. Every morning when the prices are collected and updated from each of the markets, they are sent to all of the centers via computer. The information is downloaded, printed, and tacked onto the kiosk wall.
When farmers come to the market they are encouraged not to sit under a tree just waiting for a buyer to come to them but to come to the kiosk and learn the prices in the markets so they can be empowered by that information. Now the buyers, who mainly come from urban centers, cannot cheat them. The buying and selling process is equalized: the farmers also know the prices in all the other big markets, and with this information they are able to bargain for a better price. The farmers go from passive “price takers” to active and equal “price givers.” This change is exemplified in an interview with farmer Martin Kisuya. Like 2,000 farmers who daily send a simple seven-cent text message to access morning commodities prices on their cell phones, Martin can see the going rate in markets around the country.
In Nairobi, they're selling maize at Kenya shillings 3,950 a 90-kg bag. In Kitale, they're selling at 1,600. Then in Mombasa, it's 3,300. I'll automatically get the prices of the commodities from various markets. On the whole, it has actually reduced my costs of looking for markets. Because I would not have managed to go to each and every market looking for the best prices.1
Another asset located at the resource center is the market linkage service. It connects offers to sell with bids to buy. Instead of sitting and waiting under a tree, the farmers are encouraged to post the amount of grain or head of animals they have to sell and have the buyers come to see everything there is to buy at one time. The pricing process becomes more transparent for the farmer and more efficient for the buyer. Through this process, fair prices are set. This was Adrian's adaptation of the Chicago Board of Trade—Kenya style: a market resource center in rural areas that provides market price information and a buyers and sellers exchange through the ease of a chalk board.
Creating a Virtual Agricultural Supermarket
Even though he was using a computer to relay market information to the resource kiosks, Adrian came to realize the geographic limitations and labor intensity of his system. Mobile phone technology was rapidly spreading in Africa, so Adrian determined to find a way to harness its power. He worked with the two largest phone companies in Kenya to upload daily price information so every morning farmers and other players in the agriculture space can now use their mobiles to download the information. All the farmer has to do is type in “maize 411” to one mobile network and “maize 247” for the other.
For farmers who are illiterate or not comfortable with mobile technology there is an interactive voice response service, which is sent in the form of a voice mail. When farmers dial the number they can hear the prices, instead of having to read them. Similarly, for those farmers, traders, and other agricultural users with Internet connectivity, information is sent to the user database electronically via e-mail messages, a website, and spreadsheet tables. But by far, the radio is still the most accessible technology for rural areas. So Soko Hewani, the “Supermarket on Air” radio program, was created along with a companion market call center. Information is compiled on who wants to buy and who wants to sell and these offers and bids are broadcast. If listeners are interested they call for more information and exchanges of contact information are provided. Farmer Willy Wasike Esike, from the Mt. Elgon District, attests to Soko Hewani's usefulness:
Last year I planted a lot of tomatoes. But when they were ready for harvesting I could not find buyers. Then I heard of Soko Hewani. So I called KACE and they placed my tomato offer on Soko Hewani. I immediately received calls through my mobile phone and buyers came from far to my farm. I managed to sell the tomatoes at very good prices that we had never received before. I got enough money and bought a dairy cow that is producing milk now for the family use. My parents-in-law were bothering me about paying them dowry. So I used some of the money from the tomato sales to buy cattle at good prices through Soko Hewani also and paid the dowry. Now my parents-in-law don't bother me anymore; they are happy with me and I am staying with my wife in peace.
The call center operates 24/7 and can handle thirty calls at a time. During the day it is manned by live operators called agents. At night and during holidays, the calls are automatically recorded; they are attended to the first thing the next day. Buying and selling bids and other offers are entered in a database that is accessible to all callers. For example, somebody can call and say they would like to buy a dairy cow. The agent goes to the database to see if someone has made such an offer to sell and how many, how much, and where. To sustain operations, KACE has added two additional services to provide revenue streams. For a small prenegotiated commission, KACE staff can broker the deal for the seller and buyer. And they have negotiated with the phone companies so that when someone calls the center, KACE gets a percentage of the airtime revenues.
All four information dissemination platforms are designed to serve all the actors in the agriculture chain—from the least sophisticated to the most.
So our target client is a smaller illiterate farmer. We want to improve his livelihood. But to develop markets for farmers, we cannot just focus on farmers, we have to involve everyone from the farmer to the buyer to the consumer or processor along the way. That's why we developed a market information and linkage system that is looking at the whole continuum of the value chain.
The Rebirth of Farming and Farmers
KACE is catching on. Each month about eight hundred people visit the centers for information; fifty thousand a month come through the SMS service; fifteen thousand from the website and two thousand through the interactive voice messaging. Adrian estimates that 5 million listeners tune in to Soko Hewani every week. Interestingly enough there are about six hundred KACE users who receive information daily, sent from the electronic database, many of them residing outside Kenya—in America, Europe, Southeast Asia, and South Africa. The number of people who use all these channels is consistently increasing every month.
But most important, with this new source of information, farmers are starting to make money and realize more profits. They are more organized, efficient and empowered. Rural farmers are beginning to see themselves as being able to build a better life for their families, and a younger generation is noticing and beginning to consider agriculture as a way to gain a better livelihood than they previously thought possible.
As Africa's economy grows at about 5 percent a year, it is seeing the rise of a middle class with more money in their pockets and an appetite for better food and higher-value products. A demand and an opportunity is being created like none before, and farmers in Kenya—and, all over Africa—not only need to use market information more skillfully, they also need to harness technology and the skills of the younger educated population to improve agricultural productivity and support economic growth and livelihood improvement. For this reason, Adrian has started to partner with the International Livestock Research Institute in Kenya to develop a dairy industry not just in that country but throughout East Africa.
Suddenly there's a demand for improved heifers by young farmers who are going into the dairy business.
But they don't know where to get the heifers, or some of those who are breeders, they don't know where to sell this demand. So we're developing a platform through the market call center and Soko Hewani that targets the dairy industry and helps people market and improve their breeds.
Adrian's work is clearly changing the model of agriculture from subsistence to commercialization, from illiterate older farmers to educated younger people who see that with improved markets, there is a business to be made, there is a livelihood to be earned from farming. There is an agricultural evolution going on in Africa, and Adrian is in the center of the upward spiral.
Though KACE's information is now helping to grow markets in and outside of Kenya, currently Africa trades more with the outside world than within itself. Adrian's vision is to see Africa create large internal trading blocs so that they create markets that serve the 1 billion indigenous Africans. KACE would expand to improve efficiencies of market systems and build the foundation for promoting not just Kenyan but also inter-regional trade within Africa as well as extra-Africa international trade. Clearly Adrian is already starting to prepare and equip the next generation of farmers for the challenge.