Could Climate Change Build Big Business in Kenya?

Published: Dec. 29, 2016

By Tim McDonnell for National Geographic

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Powering Agriculture: An Energy Grand Challenge for Development supports the development and deployment of clean energy innovations that increase agriculture productivity and stimulate low carbon economic growth in the agriculture sector of developing countries to help end extreme poverty and extreme hunger.

The country is riding a wave of entrepreneurialism, but the Rift Valley is still a long way from Silicon Valley.

When Sam Rigu was a kid, growing up on a maize farm in central Kenya, his grandmother made a disturbing prediction.

“She said something I’ll never forget,” he recalls. “She said, ‘Twenty years ago we were harvesting double this. Twenty years from now we might have nothing to feed our children.’ That really scared me.”

It wasn’t until many years later, when Rigu first learned about climate change as a university student, that he realized just how right she was.

After college, Rigu began managing his own maize farm, and saw firsthand the toll that rising temperatures and unpredictable rain had on his corn. He sought solutions, but he was never much of a green thumb: His dream was to help farmers with the business side of farming. One day, on a shopping trip to the rice-trading hub of Mwea, he saw his opportunity.

Outside every rice processor’s storefront were great mountains of chaff, the featherweight rice husk that is separated from the grain during processing. Many of the heaps Rigu saw were burning, just to get rid of the stuff. But where most people saw trash, Rigu saw shillings.

“I decided to work around the waste and see if I can make it into something economically viable,” he says.

Rigu’s entrepreneurial spirit is common in Kenya, where everyone seemingly has a side hustle and every sidewalk teems with ad-hoc businesses. But he’s also part of a growing niche that could help small-scale farmers—the lifeblood of Kenya’s economy—adapt to the challenge of climate change.

Outstretched hands holding rice husks

Most people saw rice husks as garbage. Sam Rigu saw an opportunity. Photo: Tim McDonnell

New start-up companies offer tools like solar-powered irrigation pumps and all-natural pesticides that are tailor-made to Kenyan conditions. Meanwhile, nonprofits and financial institutions are trying to improve farmers’ access to such products through microloans and weather-based insurance.

Three years later, Rigu has quit the maize farm and now operates a thriving business, Safi Organics, that turns rice chaff into high-quality organic fertilizer. He buys chaff from a network of local rice processors for about $30 per ton. He burns it into a kind of loose charcoal, then mixes it with a secret cocktail of crushed limestone and other plant waste, to produce a fertilizer that he sells back to local farmers for $15 per 50-kg bag. He can typically process four tons of chaff in a day; once sold, a single ton can net him up to $200.

Rigu’s success also enriches the processors, who now get paid for a product they used to throw away, and his farmer customers, who are enjoying improved yields for about half the typical price of traditional (often imported) fertilizer.

“We realized that we can create a new value chain to empower farmers,” he says. “We’re the first people to pay for the husk."

A Hungry Market

Companies like Safi Organics are at the forefront of a larger movement to equip Kenyan small-scale farmers with the tools they badly need to cope with global warming.

Temperatures across East Africa are rising—up nearly 2 degrees Fahrenheit since the 1960s on average—as seasonal rainfall becomes increasingly unpredictable. Meanwhile, millions of farmers still operate without the basic implements; things like high-quality seeds, fertilizer, and irrigation, that are needed to make farms more resilient.

According to a 2015 World Bank survey of 22,000 farming households across sub-Saharan Africa, two-thirds use no fertilizer; no more than 3 percent use irrigation; and fewer than one percent use more than one of these improvements on the same plot of land.

There are many reasons. For one, so-called “inputs” like seeds and fertilizer are expensive: Fertilizer in sub-Saharan Africa is two to six times the global average price, according to Harvard University agro-economist Calestous Juma, thanks to high import and transportation costs. And it’s hard to access: Juma estimates that up to 70 percent of farmers live between two and five hours away from the nearest market.

There is little help to be had from local banks; farmers typically have little or nothing to offer as collateral, and are seen as a risky bet for loans. The World Bank found fewer than one percent of households use any kind of credit—even informal loans from neighbors—to purchase inputs.

All of this, combined with rapidly rising rural populations, notoriously poor soil quality across much of the continent, and climate change, has led to sub-Saharan Africa being the only place on Earth where per-capita food production is falling.

But in Kenya, a market is gradually emerging for climate solutions for small-scale farmers. That’s where entrepreneurs like Sam Rigu come in.

“The climate change space in Kenya is vibrant,” says Edward Mungai, CEO of the Kenya Climate Innovation Centre, a startup incubator based at Strathmore University in Nairobi. “It’s heating up, let me put it that way. And agriculture is the focal sector.”

KCIC takes funding from the World Bank and the Danish and British governments and distributes it in the form of small grants,ranging from a few hundred to a few thousand U.S. dollars,for climate-related startups. When Mungai opened the centre in 2012, he expected to receive around 150 proposals and be able to fund one-third of them. Instead, he received 3,000 proposals, of which he was able to fund fewer than ten percent. More pour in all the time.

“That shows that Kenyans are thinking about this concept and how it can be commercialized, this concept of climate change,” he says. “That means the opportunity is huge.”

Kenya Biologics is one company that used KCIC funding to take advantage of that opportunity. The company’s signature product is an all-natural pesticide targeted at crop-destroying caterpillars. Lab technicians at a facility outside Nairobi raise millions of caterpillars and then infect them with a virus lethal to them but harmless to other organisms (including humans). The caterpillars themselves act as a living petri dish for mass producing the virus that will go on to kill their cousins in the wild.

“They reproduce the virus in millions, then you squash the caterpillar, you put it in a bottle, and that is what the farmer sprays,” says Chris Kolenberg, the company’s CEO.

The product allows farmers to control pests without synthetic chemicals that can damage soil, pollute water, pose health risks, or cause a crop to fail quality control tests for export to foreign markets.

“At the moment East Africa is a booming market” for agricultural products, Kolenberg says, because farmers are becoming more sophisticated, more eager to tap export markets, and more determined to overcome adverse environmental conditions. Although it started in the late 2000s with an exclusive focus on large-scale commercial farms, Kenya Biologics is increasingly focused on smallholders: The company now employs a dozen sales staff who fan out across the country to connect with farmers at local markets and pitch the product.

But even with customers in sight, you still have to spend money to make money. And that remains a major hurdle. Both Kolenberg and Rigu shared similar stories about the difficulty of securing their first round of investment. In a well-established startup hub like Silicon Valley, a good idea can quickly attract financing from venture capitalists. But in Kenya there are still few financial institutions willing to gamble on small, unproven ventures.

“During our first period, we weren’t asking for enough money,” Kolenberg says. “If you ask for $400,000 or less from a private equity fund, they’ll say it’s not even worth putting one guy on this project.”

Mungai agreed that finance is the biggest challenge Kenya’s entrepreneurs face.

“We still haven’t been able to provide an enabling environment to these enterprises, and I attribute it mainly to lack of understanding: The people with the money not understanding the people with ideas,” he says. “These are new technologies, innovations. The commercial banks and private equity funds do not understand them, at least at the startup phase. When they start scaling up, then you start seeing the big boys becoming interested.”

But scaling up could be difficult if farmers aren’t able to afford what the innovators are selling. So the next challenge is to improve farmers’ access to finance

Cash On Hand

Christine Wasike’s farm in Bungoma is typical of this region of western Kenya, not far from the Ugandan border. Her plot is no bigger than a football field, tucked between a towering rock outcrop and a cluster of wood and mud brick buildings where she lives with her husband, some extended family, and crew of rowdy children that seems to grow ever larger over the course of the morning.

Here, she grows maize, beans, and kale, and keeps a few chickens, goats, and cows. On the day I visited, she was hard at work shelling beans by hand, tossing them in a woven basket to get them clean and ready to eat and sell.

Wasike, a lifelong farmer, said she constantly worries about how deteriorating climate conditions will impact her family. The farm is watered exclusively by rain, which has been increasingly in short supply.

“This year and last year, drought was very bad and it affected crops,” she says. “When there is drought, farmers suffer a lot. There is a lot of hunger, especially with children at home. But as farmers, we don’t give up. We must have food. We must continue.”

Wasike is sometimes able to spring for better seeds, fertilizer, or other inputs. But a shopping trip to the local supply store can set her back up to $55. In a year like this one, when she’s only able to produce two or three sacks of maize to sell, she won’t even break even on that investment. In other words, investing in inputs is a huge risk: If severe drought hits, she will have thrown away a season’s worth of income, and with it her childrens’ school fees, healthcare budget, and other vital expenses.

And that’s if she can even get her hands on the money at all. As in many Kenyan farming households, the family purse is controlled by Wasike’s husband, even though women are the ones who perform most of the farm labor. Getting money means having to beg for a handout, she says, which is an exhausting and often fruitless exercise.

“Most of the farmers here are women; it is very rare to find a man farming,” she says. “We face many challenges in farming. Getting seeds to plant is very difficult because we need money, and it is hard to get money.”

So a few months ago, Wasike followed the advice of some neighbors and signed up for One Acre Fund. The nonprofit grants small loans to farmers in the form of seed and fertilizer delivered directly to the farm, that farmers have a year to pay back. Each loan is worth about $100, and comes with an insurance policy so farmers aren’t on the hook in the event of a totally lost crop. Founded in Bungoma in 2006 with 37 clients, in the decade since One Acre Fund has grown to serve 200,000 Kenyans as well as farmers in several countries across East Africa.

“Smallholder farmers are the most vulnerable population when it comes to the effects of climate change,” says Kelvin Owino, a spokesperson for One Acre Fund in Bungoma. “With climate change, their potential of producing enough food reduces year by year, or season by season. They need access to high-quality seed, high-quality fertilizer, and training. That will enable them to produce much more than before, and also become more resilient to shocks.”

A woman writing in a ledger in her farm shop

Maureen Simiyu runs a farm supply shop in Bungoma, Kenya. Because many small-scale farmers struggle to afford basic supplies, business is often slow. When drought hits, it can drop by half. Photo: Tim McDonnell

Josephine Wamela, another One Acre Fund farmer in Bungoma, says in the last few years she lost so much of her harvests to drought that she almost had to give up on farming altogether.

“As the climate keeps changing,” she says, “farmers are scared of planting because they plant but don’t get anything out of it.”

One Acre Fund was the first institution willing to give her a loan, she says, and now “even when there is drought I’m still able to harvest.”

One Acre Fund was a pioneer in finance for small-scale farmers, but the field is steadily growing, and farmers’ access to financial instruments seems to be improving across East Africa. The continent’s largest weather-based insurance program, known as the Agriculture and Climate Risk Enterprise (ACRE), added more than 160,000 farmers between 2010 and 2013, and is projected to grow by an order of magnitude by 2018. That program acts as a kind of middleman between traditional insurers and farmers, using high-tech weather data to predict crop yields and then distributing payouts if conditions worsen beyond a predetermined threshold. A 2015 study led by Columbia University scientists found that farmers enrolled in ACRE earned 16 percent more by the end of the harvest season than their uninsured neighbors. A similar program sponsored by the World Bank was launched in spring 2016, which included specialized offerings for Kenya’s nomadic pastoralists in addition to crop farmers.

Programs like this create a positive feedback loop: When Kenya’s farmers are able to afford technology, the country’s climate innovation sector grows, making technology more easily available. The end result is a stronger national economy, and a vulnerable population made more resilient.

“If we can manage to provide better technologies for agriculture,” says KCIC’s Mungai, “then we have gone a long way in terms of fighting the menace of climate change.”

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