AGRIBUSINESS: Its Role in The Economic Development in East Africa

In Kenya and other East African countries such as Ethiopia, Djibouti, Rwanda, Tanzania, South Sudan, Somalia and Uganda, agribusiness is a major day-to-day activity of most of the inhabitants. While it is stated by a report released in 2005 by World Bank that about two-thirds of the world’s poor population are mostly concentrated in the rural areas, agriculture and agribusinesses should be the means by which poverty is eradicated and the living standards is improved. IMF’s World Economic Outlook also recognized and registered East African countries as the fastest developing economy in the Sub-Saharan region in the year 2016. The economy of these countries grew by 4.5% the same year and is projected to rise above 8.9% by the year 2022. Although their economies also grew in population and urbanization and is expected to go up to 600 million people by 2050 which is more than double of its current population- an era that will be influenced by the presence of a booming agribusiness activities.

Kenya, for example currently gets fundamental economic development from agribusiness where 35% of its Gross Domestic Product (GDB) is gotten thereby constituting 40% of its export earnings. Its sector establishes industrialization framework through the supply of raw materials for specific industries such as the supply of timber for the paper-making industry and the supply of hides for leather-making industries.

During the process of exporting these raw materials to foreign countries, there is a generation of foreign currencies thereby creating employment to its citizens through business, agriculture, and research activities. The end result of this is the improvement of the standard of living of the citizens. In addition to this, there is an improvement in the purchasing power of the population through the generation of income thereby creating a market with a presence of industrial products.

As these countries engage in agribusiness, there is an establishment of a market for industrial goods such as equipment, fertilizers, and machinery used in the farming process. This promotes and creates variety of off-farm activities such as research programs that searches for improved schemes to be applied in farming and livestock activities.

Furthermore, agribusiness in East Africa guarantees an uninterrupted distribution of food security to the populace thereby ensuring the workforce is supplied with the adequate amount of energy to power labor in the industries and the other sectors of the economy.

In addition, agribusiness saves these countries by ensuring the adequate safekeeping of those funds that would have been used in the importation of foods and other agribusiness products from other countries. This is an added advantage to the affected countries as their Balance of Payment (BOP) is increased and there is excess or surplus money to be invested in other areas other than agriculture.

Above all, agribusiness activities contributes immensely to rural-urban balancing by effectively creating jobs in the rural parts of these countries which is a solution to the problem of rural-urban migration- not overlooking the help it renders in the better distribution of income and the stable use of social amenities. With these multiplier effects, agricultural business in East Africa is termed to be the engine that makes growth and development possible.