Comparative analysis of organization of centralized and decentralized tree nursery development approaches in Kenya: A case of Nairobi and Kisumu districts

Abstract

Kenya like most countries in Sub-Saharan Africa will continue to depend largely on agriculture in the foreseeable future. Agricultural activities have however been shown to create problems such as soil erosion, soil nutrient depletion and fuel wood and timber shortages. These problems can be mitigated through planting of trees but this is hindered by lack of availability and accessibility of tree seedlings to farmers. To identify the sources of this marketing inefficiency, this study sought to investigate the influence of the existing market environment on the performance and organization of the tree seedlings market. This study was undertaken in the Kisumu and Nairobi districts of Kenya. Structured questionnaires and interview schedules were used to collect both primary and secondary data from a total sample size of sixty tree nurseries and nine organizations involved in the tree nursery development process. Data analysis was done within the Structure Conduct and Performance (SCP) modelling framework for performance and an Ordered Probit Model for organization. The study revealed that the tree seedlings market has a monopolistically competitive market structure comprising of several or many nursery operators/managers each producing similar but slightly differentiated tree seedling species. Each nursery manager /operator can set tree seedling prices on the basis of cost, demand and market without affecting the tree seedlings market as a whole. However the market has tendencies towards perfect competition in Kisumu and oligopolistic competition in Nairobi where central nurseries control most of the output and utilize non price competition (product development and advertising) and low prices. Cost plus pricing mechanism is utilised by all nursery operators and managers although there is no market leader for price leadership. Both markets comprise of a high proportion of decentralized nurseries managed by men aged between 30- 50 years with primary and secondary education. The market offers 10-30 species comprising of exotic, medicinal and indigenous species in three sizes (Transplanting, medium and landscaping). Decentralized nurseries offer all three sizes with landscaping services while central nursery managers offer transplanting and medium sized tree seedlings with extension services. Hard support is provided through collaboration, contracting and use of local materials while soft support is provided through interactive extension and media. Main barrier to entry is access to capital. The overall market efficiency of the tree seedlings market is 54% and is influenced by both production and market aspects while the organization of the xiii market is influenced by prices and infrastructure. Production (sourcing of soil, manure, seeds, polytubes and implements) and management constraints (pest and disease control and funding shortages) still continue to plague the production of tree seedlings. These issues can be addressed through formulation of policies to ensure the provision of security, infrastructure, market information, credit and capacity building opportunities for entrepreneurs to ensure a sustainable supply of tree seedlings to farmers.