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Chapter 2: The changing rural capital and labour markets


2.1 Labour use in smallholder agriculture
2.2 Capital transactions in smallholder agriculture
2.3 Smallholder responses to constrained labour and capital supplies
2.4 Conclusion: Tree growing and factor markets
End notes


2.1 Labour use in smallholder agriculture

Labour transactions in the traditional economy

A number of features of the rural economy are of particular relevance to farmer tree growing. They are mainly concerned with the ways in which land and labour are used within the Kikuyu agricultural economy. Some of the more common tree planting practices - particularly boundary planting and woodlots - are outcomes of historical processes.

Labour in the pre-colonial Kikuyu economy was largely controlled by kinship ties and responsibilities within the mbari (sub-clan), the most important unit of social organization.

One of the chief obligations of a man to his wife (or wives) was to provide her with fields for cultivation, which meant he had the task of clearing the bush and of hoeing it with the digging stick to make it ready for the harrow (Leakey 1977). Subsequent cultivation and harvesting responsibilities rested with the man's wife, but if it was needed, particularly during times of illness or incapacitation, additional labour could be drawn from the man's other wives. Communal labour (ngwatio) was organized if a household had insufficient labour to carry out an agricultural task. Groups of three to ten women, not necessarily related, would work from day to day on each others plots. (Cowen and Murage undated). Contemporary derivatives of this type of communal labour continue to exist today.

The only system which bore any resemblance to wage labour per se was the work party (wira). When labour was needed to complete a large task, such as digging or weeding, as many as 80 people would be enlisted for assistance by the individual concerned. He or she was obligated to provide beer, at least, and often provided food as well.

Significant changes in labour use were brought about in Kikuyu areas between 1900 and 1910 as the boundaries of the forest were fixed by the Colonial Administration and as the pace of the take-over of lands for European settlement accelerated. It wasn't so much that the Kikuyu lost land (although they clearly had), but that the process of European settlement limited further expansion. In many areas, the man's labour tasks of land clearance and hoeing were no longer as vital because expansion had stopped. The limits clearly disrupted traditional agricultural practices. The chief forest offences registered by the Forest Department in 1909 were for "making new gardens and enlarging old ones" in the newly reserved forests (FD 1909).

The emergence of the migrant and wage labour economy

Subsequent to these events the migrant labour economy developed. The first "hut taxes" (East Africa Hut Tax Ordinance 1903) and the later Poll Tax (Native Hut and Poll Tax Ordinance 1910) were partly intended to coerce Africans, who would not otherwise have sought wage employment, into finding jobs in plantation agriculture or in urban areas in order to be able to pay their taxes (Kitching 1980, van Zawanenberg 1975, Stichter 1982). Opportunities for wage employment in smallholder agriculture were nearly non-existent whereas the rapidly-expanding white settler economy was dependent on these labour supplies for agricultural expansion and development.

The development of wage labour markets in smallholder agriculture dates from around 1915 (in Nyeri District). Existing forms of labour organization - household labour, communal labour, and work parties - were not sufficient given the emerging class of traders, teachers, and artisans. This class of peasant elite introduced crops such as English potatoes and wheat which were far more labour-intensive than traditional maize, millet, and bean crops. Men were employed for heavy digging and women were employed for planting, weeding and harvesting. Labour supplies expanded greatly in the early 1930s; but plantation agriculture still competed with smallholder agriculture for labour and both became more or less dependent on migrant labour (Cowen and Murage undated).

Labour migration and landlessness

By the mid-1930s, nearly 30,000 ha of high potential agricultural land in Kikuyu areas had been taken for European cultivation. Advocates for European settlement argued that this land did not actually belong to the Kikuyu in the first place; that they had replaced the Ndorobo, and that the rights of individual Kikuyu had never amounted to ownership. Over a relatively short period of time, a large number of Africans found themselves without land use or tenancy rights. A system of "squatting" (reported as early as 1904) allowed Africans to farm plots on European farms in exchange for a fixed amount of labour (Government of the United Kingdom 1955).

Squatting was not dissimilar from the traditional practice amongst the Kikuyu of land borrowing - the ahoi system - which allowed individuals to cultivate underutilized land in return for gifts to the person with hereditary cultivation rights. Under the ahoi system, tenancy was not assured, as land could be redeemed by the original rightholder if it was needed. The process of European seizure, closure of the forests to agricultural expansion and consequent increasing land scarcity, led to cancellation of many of these land lending agreements and created a new landless class amongst the Kikuyu. Many -former ahoi tenants settled on European farms as squatters.

In 1918, the Administration legislated that squatters had to be contracted as labourers for 180 days per year for a small wage and the right to live and cultivate plots on European farms. Later changes prohibited squatters from keeping stock, limited cultivation to two acres per family, and increased the labour requirement to 270 days per year (Kanogo 1987). In the mid-1940s, as their numbers burgeoned, a move to evict squatters from European farms and force them to the Reserves, gathered momentum. By then, most squatters had lost any cultivation rights they may have had as ahoi tenants or as rightholders in the Reserves. Their eviction from settler farms created a huge class of landless unemployed, and their absorption into the Reserves created enormous problems.

In 1952, African protest against the Colonial Administration came to a head with widespread destruction of settlers property and murder, especially of Africans perceived to be loyal to the government. The government response to this was to declare a state of emergency. Leading Kenyan nationalists were arrested and a "villagization programme" begun in which the widespread rural communities were forced to live in fortified compounds with a strict night curfew.

During this villagization programme and subsequently during the land consolidation process in the early 1960s it was assumed that the landless, or near landless, could provide wage employment for smallholder agriculture. The relationship between agricultural employee and employer had little traditional precedent in Kikuyu areas, although reciprocal labour arrangements were (and remain) relatively common. The very small formal labour markets in smallholder areas were clearly not able to absorb the increasing mass of unemployed and consequently the migrant labour economy grew.

At the present time, rural agriculture can support only a small wage labour market. Fewer than 10 percent of smallholder labour inputs are provided by hired labour. Of these hired labourers, between 50 and 75 percent are landless or near-landless (Collier and Lal 1986). In a survey of labour requirements for the tea industry in Embu District, over 90 percent of tea pluckers did not have land of their own, but plucked tea primarily on holdings of relatives (Technoserve 1987).

Labour, crops and gender

Labour use and cropping patterns were closely linked to cultural norms of social responsibility. As mentioned above, land clearing and the first digging of the soil were the responsibility of a man to his wife. Most other labour tasks were the responsibility of women. Women's crops were generally labour intensive seasonal ones "sprouting foods" such as cereals and legumes, while men's crops were generally labour extensive perennial crops or "digging foods" such as yams, taro, cassava, and bananas. Men's crops were also more commonly famine foods (Fisher 1954). The gender links had important implications for contemporary patterns of labour use and may account in part for the predominance of subsistence crops in areas where male labour migration has skewed the labour supply.

Most of the Colonial Government's labour ordinances, and the system of taxation resulted primarily in male labour migration. Much of the legislation was drafted under the assumption that there was idle male labour in the reserves. Some conceded that the encouragement of African men to seek wage employment would pose serious problems for the women and children by increasing their labour load.

With the emergence and development of the market economy, and the relatively higher wages that could be earned in cities and on plantations, gender related patterns of labour use and distribution became entrenched. In Murang'a District, the transition in gender-specific patterns of rural labour availability seems to have taken place between 1924 and 1948. The 1924 census for the district reported a ratio of women to men in the "working age range" of 0.89 to 1 (KNA undated: DC/FH/6/1). The 1948 census, however reported the ratio had increased to around 1.4 to 1 (KNA 1950:DC/FH5/1).

Fig. 2.1 Women and children collecting fuelwood from the Nyandarua Forests, around 1905

Photo: Consolata Fathers, Turin

Trees, with their perennial nature (particularly black wattle which later became an extremely important cash crop), played a similar role as earlier traditional perennial crops. While wattle was not a man's crop (Fisher undated: 231, 241), both perennial crop planting and participation in the migrant labour economy were somewhat gender-specific making wattle the ideal crop for filling a particular niche: wattle could be planted on holdings when men sought wage employment elsewhere providing a source of income during times of environmental or economic stress.

Labour migration in contemporary Kenya

Labour migration continues to be a dominant feature of the rural economy, placing heavy constraints on smallholder agriculture. The Integrated Rural Surveys (particularly IRS1) found that nationally, 20 percent of landowners of smallholdings lived away from the holding and were not in charge of day-to-day decisions about its operation (Republic of Kenya 1977). Men remain the main participants in the migrant labour economy.

Even if men have chosen not to seek employment out of their area, they may not be willing to work on their smallholding, preferring wage employment in local businesses or engagement in their consultative roles as elders in the community. In some areas children, formerly an abundant source of labour, are not widely available to work on farms because they are in school. One outcome of all this movement has been labour shortages in smallholder agriculture.

Where land endowments per household are large or where the family operates several parcels that are widely dispersed as a result of inheritance or purchase, the supervision of hired labour to farm the entire holding efficiently can present problems. In these cases, the real cost of hired labour (because of its relative inefficiency due to a lack of supervision) may be so high as to encourage the development of labour-extensive types of cultivation.

Alternative labour strategies

In the face of these constraints, traditional labour use has changed in order to deal with seasonal shortages and more effectively use the available resources. The participation of women in rural associations in Murang'a District has provided a number of important alternatives to the conventional approach toward labour use (Thomas 1988). Women's collective participation in labour activities, similar to that of the men, is undertaken for income generation, to provide labour during periods of peak demand, or to otherwise ease labour constraints. In Weithaga location, women's associations often work as groups in seasonal wage employment for one morning a week - weeding, mulching, picking coffee, or carrying out other tasks. Income from collective employment is used to support the group's activities, or can be tapped through a revolving credit fund (Thomas 1988). During illness, women's group members can be called on to work on the ill member's farm and expect such support in return in the future if needed.

2.2 Capital transactions in smallholder agriculture

Traditional capital transactions

In pre-colonial Kenya, capital accumulation primarily involved the accumulation of livestock. Cattle, sheep and goats were clearly important for milk, meat and skins, but also had exchange value. Livestock could be exchanged for food crops, land, utilitarian objects such as spears, hoes, baskets and shields, and formed the basis for bridewealth (Kitching 1980).

Information about traditional credit arrangements amongst the Kikuyu is extremely sparse. Probably the most widespread arrangement involved the redeemable sale of land for the generation of capital. Redeemable land sales were initiated by the seller, and were generally undertaken to obtain livestock to pay bridewealth or compensation for death or injury. The purchaser (muguri) of the land had full cultivation and building rights, in exchange for the agreed upon livestock. The seller's land would be returned upon repayment of an equivalent number of livestock to the purchaser at either party's request.

Informal credit arrangements

Until the mid-1950s, there were few formal mechanisms for channeling capital into the smallholder agricultural sector. Even if they had existed, controls and regulations discouraged individuals who might have wanted to do so. No debt, for instance, could be incurred by an African from a non-African in excess of 10 unless permission to become indebted had been granted by a Provincial or District Commissioner (Government of the United Kingdom 1955).

These restrictions channelled demand for credit into informal systems which flourished long after Independence. These include: kinship credit, merchant credit, money lending, mutual savings societies, and the redeemable sale of crops or capital assets.

Kinship credit may take the form of small loans for farm purchases or for school fees or other expenses. There may be no implicit understanding that these loans must be paid back at some rate of interest or over a particular time period - or at all - but there is the understanding that the creditor may freely ask for a similar loan in return sometime in the future. Merchant credit is relatively common as well (Von Pischke 1977). The amount of credit outstanding amongst surveyed shopkeepers in Nyeri and Machakos Districts was reported to be around 15 percent of average monthly sales. Money lending by merchants and others appears to be relatively uncommon and is largely limited to the Asian community.

Mutual savings and credit are generally a feature of rural women's associations (although they may involve men as well) and may complement other group ventures such as communal labour activities. Monthly contributions to the society are pooled, and given to a different member every month. In two locations of Murang'a District, around 50 such associations each raise and distribute around the equivalent of US$ 500 per year (Thomas 1988). In aggregate, the sums become quite substantial.

Another type of informal credit is the redeemable sale of crops or other assets. Amongst the traditional antecedents was the redeemable land sale. Sales are redeemable when the seller may reverse the transaction (Von Pischke 1977). Though these types of transactions appear to be relatively uncommon where marketing arrangements are well-established or where crops sales occur regularly, they appear with greater frequency for commodities that are irregularly sold.

Wattle and eucalyptus trees are sometimes redeemably sold in Murang'a District. Under this type of arrangement, payment at current market prices would be advanced against standing trees when they were young, giving the buyer the right to harvest them whenever he wished - usually 7 or 8 years later. The seller could buy back the standing trees at any time, at current market prices for an agreed upon product mix (in the case of wattle, for charcoal, bark, building poles or fence posts).

Several entrepreneurs in Kiambu District have attempted to further refine redeemable sale. A number of agreements have been made with wattle producers that they will continue to maintain their woodlots in exchange for annual payments. In most cases, annual payments have eliminated the redeemable feature of the sale. The entrepreneurs had hoped that higher charcoal prices would make their investment worthwhile but the outcome of their initiative is unclear.

When options for the development of formal credit mechanisms were being considered in the early 1950s, trees were recognized as a possible form of security against loans. Wattle bark prices reached historic highs between 1948 and 1952, prompting a local committee in Fort Hall (Murang'a) District to note that "in high wattle areas a man's potential profit from the sale of his wattle bark could be considered to guarantee his loan" (Colony and Protectorate of Kenya 1929a).

Formal credit mechanisms

Formal mechanisms for channelling credit to smallholders are a recent phenomenon in Kenya mostly dating from the mid- to late 1960s. The primary sources of smallholder credit are through agricultural marketing and processing cooperatives. Farmers are allowed to buy inputs against future sales of their crops to the cooperative. There are few mechanisms for channelling credit specifically to support labour activities.

Commercial lending for smallholder agriculture is at an historic low. The gap between the ceiling rates which commercial banks are allowed to charge for loans, and the rate at which they are able to obtain capital from the Central Bank has steadily decreased. This has caused a shift in most commercial banks' lending portfolios away from agriculture and towards urban and industrial investment. Lending portfolios in agriculture have shifted away from smallholder agriculture in favour of larger-scale agro-industrial investments.

2.3 Smallholder responses to constrained labour and capital supplies

Historical and cultural processes have greatly contributed to the evolution and functioning of labour and capital markets in Kenya. Current patterns of labour migration owe much to the institutionalization of labour and wage processes.

In Kenya, when population pressures are low and labour is consequently relatively scarce, larger holdings are used primarily for growing labour-intensive cash crops, and smaller holdings are used for land-intensive food crops which yield low returns to both land and labour (Republic of Kenya 1977).

These types of patterns of labour use are in part a risk management strategy. One way of reducing risk is to ensure the household grows at least some food crops, eliminating exposure to the possibility that cash crops will fail to generate enough income to purchase food. The combination of uncertain prices and uncertain availability make subsistence cultivation a rational choice for those with little land, even though it reduces returns to household labour. Additionally, labour-intensive cash crops generally have long gestation periods. Coffee usually takes four years to yield, while tea is not fully mature for 11 years. Labour-intensive crops pose serious problems for smallholder cash-flow because they defer consumption and because they require heavy investment and recurrent costs.

These constraints could be partly overcome if there were financial available for smallholders to expand their area under cultivation either through purchase or tenancy, if capital were available to hire additional labour, and if smallholder labour markets operated in a way that could allow households to specialize in labour-intensive crops. At present however, only around a tenth of smallholder labour inputs are supplied by the market, and the efficiency of hired labour compared with household labour is quite low. Tenancy and land sales are almost entirely absent; Integrated Rural Study 1 (IRS1) indicated that the total area of rented smallholder farming land accounted for less than 1 percent of all smallholder farming land. Access to credit is restricted to a small minority of smallholders (Collier end Lal 1986).

The lack of access to credit for smallholders accounts in part for the focus on food crop production on the smallest holdings: farmers are unable to afford the heavy investment costs in say, coffee or tea, much less the high recurrent costs for fertilizers and other inputs.

One of the most attractive alternatives for those without access to credit or capital is urban wage employment. Because off-farm income is usually generated by household members who live elsewhere, and because of the inefficiency and difficulty of supervising hired labour to replace household labour, this strategy may cause difficulties because of the labour constraints it can introduce.

2.4 Conclusion: Tree growing and factor markets

Within this context we can introduce several ideas about why farmers grow trees. Tree cultivation and management require far less labour than other types of crop production. Where there are markets for different types of tree products - in Kenya these include building timbers, charcoal, bark (for tanning extracts), fence posts, pulpwood (for the paper mill at Webuye), and fuelwood - returns to labour can be quite high. A Senior Agricultural Officer in Central Province noted in the early 1940s, that the labour-extensive nature of black wattle largely accounted for its rapid adoption as a cash crop. People had found out that wattle trees

... grow quickly while they are sleeping, so that it is an easy way to get money. They plant the wattle, tend it for a year or so, then go away to Nairobi and find work for some years and know when they return that their 'bank' has grown to be worth many shillings without the owner doing much work. (KNA 1941: AGR14/343)

Investments required for tree growing can be quite small, and consist primarily of labour for site preparation and planting. Seedlings can be grown by households in small, on-farm nurseries, with very low labour costs for seed collection and bed preparation. In Kisii District, it has been reported that most farmers plant trees every two or three years, and that 65 percent of their seedling stock comes from either their own tree nurseries or from their neighbour's. Another 10 percent of seedling stock is bought in local markets. The balance - 25 percent - is obtained from "official" Forest Department nurseries (Kuyper and Bradley 1985).

Seedlings for cash crops such as tea or coffee, on the other hand, can be quite costly and beyond the reach of the poorest farmers. In addition to sometimes large investment costs, there are usually heavy recurrent costs for fertilizers and fungicides for cash crops. To grow trees as a cash crop requires neither the heavy investment nor the recurrent costs.

Perennial tree crops such as black wattle, may also be playing a role similar to earlier traditional perennial crops. The planting of perennial crops as well as participation in the migrant labour economy are both somewhat gender-specific. Trees are in many ways the ideal crop for filling a particular role within the farm economy: wattle could be planted on holdings when men sought wage employment off the farm and could provide a source of income during times of environmental or economic stress.

Finally, trees can provide a flexible source of household income in the absence of alternative sources of capital because they can be harvested when they are most needed -to provide school fees, dowry, to purchase food in times of scarcity, and for other basic needs. The timing of harvesting is quite flexible: when cash is most needed, when the markets are right, or when labour is freed up from other farming activities. For households that consume most of their marginal output, or that otherwise have too little capital to pursue alternative savings strategies, tree cultivation and management provides a sort of on-farm revolving savings/credit mechanism which can be withdrawn as capital when needed.

End notes

1. The Kikuyu are divided into nine clans (muhiriga) each descended from one of the nine daughters of the ancestral parents of the Kikuyu. The mbari, or sub-clan, was a more important unit of social organization. Members of the mbari lived for the most part on their own land unit.


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