Kenyan traders not sharks
Traders in Kenya are not held in high esteem by farmers or politicians. Wholesalers are seen by farmers and the government as extortionists. According to the Wageningen development economist Tjalling Dijkstra, who is about to receive his PhD on the subject, this attitude is not justified
According to their critics, the vegetable and fruit traders go too far. In isolated areas they take advantage of the fact that it is difficult for farmers to find an outlet for their perishable produce, and make huge profits on the way. In his PhD thesis, Horticultural Marketing Channels in Kenya, however, Dijkstra makes the case that the current marketing system of wholesalers, retailers, brokers and agents is efficient due to its flexibility. He also argues that farmers would not be better off taking their produce themselves to the big cities like Nairobi and Mombasa. Dijkstra does not deny the fact that there are some traders who make huge profits, especially in the export sector, but the profit margins of most traders are generally not excessive
Horticultural products form an increasingly important source of cash income for Kenyan farmers. Unlike the market for grain which is highly controlled, horticultural produce is bought and sold on the free market, and it was this system that Dijkstra studied for his research
The road network in Kenya is relatively good. Perishable goods are transported over distances of up to 800 kilometres, which is exceptional for Africa. As a result the marketing system for vegetables and fruit in Kenya is very diverse. Small-scale farmers in thinly populated isolated areas grow produce mainly for their own consumption, and take the surplus to market themselves. Sometimes they take neighbouring farmers' produce along as well. If local consumer demand grows, then selling tends to be taken over by retailers
The system becomes more complex when wholesalers enter the scene as middlemen between farmers and retailers. Wholesalers as a group are also divided into collecting wholesalers and distributing wholesalers. The former specialise in collecting produce from farmers which they then sell to the distributing wholesalers in towns. The distributing wholesalers in turn make use of brokers who negotiate with retailers
The distinction made between the various actors is to some extent an artificial construction, according to Dijkstra, as many people play a number of different roles in the whole system. At the end of the day wholesalers often sell produce that they have left over directly to consumers, thus taking on the role of retailers. Retailers themselves sometimes buy produce from other retailers, thereby putting the latter into the category of wholesalers. The system is very flexible, tells Dijkstra
Of all the links in the chain, the wholesalers earn the most, explains Dijkstra. This is not so much that their profit margins are so high, but their turnover is larger than that of farmers and retailers. However, this is still not sufficient reason to be able to argue that individual wholesalers hold disproportionately large amounts of power in the chain. According to Dijkstra there are too many wholesalers involved: A wholesaler working in an isolated area where there is not much competition from others will of course have a strong position, but this is offset by the relatively high risks he has to take. The roads are very bad, which means a fully loaded truck can easily get stuck, and then the quality of perishable goods declines rapidly.
Traders come from all levels of society and from all ethnic groups, but they have one characteristic in common: 95% of all traders are women. Male retailers are especially rare. Dijkstra tried to ascertain how this situation has arisen. The most common argument given ran along the lines of: In our culture men don't sit on the ground and sell food, but Dijkstra doubts whether this is really the case. You often see men sitting on the ground selling clothes. I think men consider the profit margins in the food trade too small. If there were more money to be made then you would see more men in this branch. That's also why there are more male than female wholesalers.
The more lucrative work of a collecting wholesaler is more difficult for women. It involves hiring a truck, paying farmers in advance so that they don't sell their produce to another trader and hiring porters. Dijkstra explains that access to finance is difficult for women. Nevertheless he did come across a woman who was doing very well as a wholesaler. Her only problem was that at the end of the day she had such a lot of money on her that it was dangerous. In order to get it home safely she struck a deal with a bus driver: he kept her money under his seat
Using a simple model Dijkstra shows that the role of wholesalers grows as population density increases. Not such a surprising result, but something that policy makers should bear in mind when planning markets. For instance, the wholesale market in Nairobi was built in colonial times, and is now far too small. On the other hand, improving the roads would lead to an opposite trend: farmers themselves would then go to market more often according to Dijkstra's argument
These tendencies indicate just how flexible the marketing system is in Dijkstra's view. Policy makers should not try to control the process through measures such as forbidding retailing to take place in wholesale markets. New markets are often set up with help from Western donors. Experts from Europe are often flown in, but they usually think in rigid categories, thus making a sharp distinction between wholesale and retail markets. As a result they disregard the farmers who come to market themselves as well as all the retailers involved in wholesale and wholesalers who also engage in retail activities.
According to Dijkstra the government should not mess about with the marketing system, but would do better to make improvements in infrastructure: market places that do not turn into mud baths, better roads, better price information systems, improved credit facilities. There is also room for improvement in extension facilities for farmers and control of suppliers. The quality of horticultural produce is often very bad as a result of inadequate inputs. Dijkstra tells about farmers who he found using packet soup as pesticide. It was sold in plastic bags with a label on it saying it was pesticide: It smelled wonderful but didn't help at all, he laughs