The decision by the Government of Kenya in 2013 to increase tax revenue by imposing excise duty of 50 percent on sorghum beer resulted in economic losses for smallholders, the brewery, and the government itself because it effectively killed the value chain. In 2015, the government reversed the policy decision and reduced excise duty to 10 percent. The purpose of this paper is to analyze the impact of this policy decision on the value chain, adaptation by growers and the brewery, and the rationale for this policy change and its reversal.
The author analyzes this episode using a conceptual framework derived from complex adaptive systems, focusing on four properties of such systems: sudden, endogenous shocks, interacting agents, and adaptation.
The author shows how the nature of politics in Kenya exposed the value chain to endogenous shocks as the result of conflicts between interacting agents, where smallholder farmer organizations were important for successful adaptation. Conflicts between development and political objectives in neo-patrimonial states are sources of complexity and uncertainty in smallholder value chains.
Complex adaptive systems proved a useful framework to understand decision making by government and business actors in the value chain.
The paper applies a novel conceptual framework to the analysis of an important value chain in Kenya.
This paper forms part of a special section “Smallholder Value Chains as Complex Adaptive Systems”. The research on which this paper is based was funded by the CGIAR Research Program on Policies, Institutions and Markets. The author is grateful to Steven Haggblade and two anonymous reviewers for helpful comments.
Orr, A. (2018), "Killing the goose? The value chain for sorghum beer in Kenya", Journal of Agribusiness in Developing and Emerging Economies, Vol. 8 No. 1, pp. 34-53. https://doi.org/10.1108/JADEE-03-2017-0028
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