Mangoes and More – Building a Better Business Enabling Environment for Investment in Kenya’s Makueni County

May 25, 2021

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Workers sort out mangoes at the Makueni Fruit Processing Plant.

The Opportunity – Massive Mango Production and Processing Potential

Makueni County is Kenya’s top mango-growing region, producing more mangoes (38,000 metric tons per year) than any other county. With a short harvest season from November to March, more than 40% of production goes to waste due to processing and demand constraints. Further, mango farmers struggle with dramatic price fluctuations, including an annual collapse in mango prices during the peak production season in January.

Following extensive consultations with the community, the Makueni County Government established the county owned Makueni Fruit Processing Plant (MFPP) in 2017. The MFPP, which converts fruit to purees and juices that have longer shelf lives and can be sold outside of harvest seasons, was meant to stabilize fruit prices, provide local farmers with sustainable channels to generate income, train farmers on new technology and processes, and create employment opportunities for community members.

The processing plant, however, has suffered from ongoing operational challenges. For example, inefficient procurement processes meant that the facility could only absorb 5% of the county’s production. In addition, operational expansion was constrained by its financial reliance on the county government, which was not able to invest additional capital while it awaited initial investment returns, having already invested $10 million to establish the plant.

The Solution – Tackling Firm and Enabling Environment Constraints to Growth

To address the challenges faced by the processing plant, Makueni County approached USAID’s Kenya Investment Mechanism (KIM) to help facilitate policy reform efforts to remove investment barriers and create an enabling environment that unlocks private sector financing for target value chains in the agriculture sector in two ways.  First, as county officials realized that their sole ownership of the plant constrained its success, they requested KIM support in conducting a diagnostic review of the ownership structure and explore alternative arrangements to unleash the plant’s potential. Second, the county needed technical assistance to review the Makueni County Investment Authority Act (MCIAA), which established an investment authority to promote and coordinate investments in the county. The need was informed by the Act’s lack of the necessary regulations that would clearly guide the implementation of its policies.

To address the sole ownership issue, KIM collaborated with the county government’s agriculture and trade departments, MFPP management, and technical experts, to analyze the processing plant’s ownership structure. The analysis led to proposed alternative ownership structures for consideration by the county government. KIM demonstrated to the county government how engaging various stakeholders ultimately leads to a grounded solution. KIM employed strategic balance of power dynamics to help the county government bring various stakeholders to the table for achievement of the two activities. This came in handy when solving challenges, including difficulty coordinating meetings, collecting information, and securing buy-in from MFPP leadership. The result was a final report that gained the approval of all relevant stakeholders.

KIM also supported the county government to work closely with a legal expert to review the Makueni County Investment Authority Act (MCIAA). Upon review of the Act, it emerged that the investment authority itself would require structural changes to remove conflicts of interest, further requiring amendments to the MCIAA. KIM guided county officials, including its legal team, to immediately address this need. By collaborating with these internal stakeholders, KIM was able to draft new regulations and amendments to the MCIAA to empower the county to create a positive investment environment for years to come.

To build the county government’s capacity and create a better business enabling environment, KIM worked hand-in-hand with county officials to enhance these county-initiated projects. Both activities and their respective recommendations have gained widespread approval from key stakeholders, including the Governor’s Office, County Executive Committee, and Agriculture and Trade Ministries, and have been adopted by the County Executive Committee and the County Assembly.

Lesson Learned – Firm-level support can drive market system impact

KIM’s work with Makueni County is an important proof point in the program’s broader strategy of improving the investment enabling environment by starting with specific investment opportunities Thanks to the collaborative effort between Makueni County and KIM, the county is now equipped with improved laws and regulations that will allow its investment authority to operate efficiently and attract increased outside investment. The county government also possesses a suite of ownership reorganization options and an understanding of how to better leverage internal resources to unlock the full potential of the MFPP so it can support local farmers, create employment opportunities, and develop the local industry.

By applying its technical expertise through a collaborative approach, KIM has succeeded in supporting Makueni County to take leadership in strengthening the investment authority and fruit processing plant’s operations. The technical support offered to Makueni County has resulted in skills and capability transfer to the county leadership, who are now ready to replicate the processes in other sectors in the future and make Makueni County an attractive business and investment hub.