Export performance of the horticultural sub-sector in Kenya: an empirical analysis

Abstract

The horticultural sub-sector in Kenya has been characterized by sustained growth over the years. However there has been slow growth rate in horticultural exports over the last decade. The horticultural exports are the major exports from the agricultural sector alongside tea and coffee. The main objective of this study was to establish the factors that influence the horticultural exports in Kenya with a view of recommending policies that can be adopted to improve the horticultural subsector. Secondary time series data for horticultural exports, real exchange rate, agricultural GDP, real interest rate and foreign income for a period of 30 years (1984-2014) was used in the analysis. The data was collected from the various issues of Economic Survey and Statistical Abstract of KNBS, various issues of Statistical Bulletin of CBK, HCDA and the World Bank development indicators publications. Five major importers of the Kenya’s horticultural produce (UK, Germany, Netherlands, France and Belgium) were selected. By use of cointegration analysis, an error correction model was adopted in the analysis. The results of the analysis indicated that real exchange rate, agricultural GDP and real interest rate are significant in influencing the horticultural exports. However the coefficient of the foreign income was not significant. Recommendations made is that government policies should be aimed at; increasing agricultural GDP, maintaining the exchange rate at a level that is competitive for horticultural exports and reducing the interest rate in the economy.