THE MACROECONOMY OF THE EXPORT FISHING … · THE EXPORT FISHING INDUSTRY IN LAKE VICTORIA (KENYA)...

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Socio-economics of the Lake Victoria Fisheries THE MACROECONOMY OF THE EXPORT FISHING INDUSTRY IN LAKE VICTORIA (KENYA) Crispin Bokea 1 and Moses Ikiara 2 April 2000 1 Research Manager African Program International Centre for Economic Growth P.O. Box 55237 Nairobi. KENYA 2 Lecturer Moi University School of Environmental Studies P.O. Box 3900, Eldoret KENYA

Transcript of THE MACROECONOMY OF THE EXPORT FISHING … · THE EXPORT FISHING INDUSTRY IN LAKE VICTORIA (KENYA)...

Socio-economics of the Lake Victoria Fisheries

THE MACROECONOMY OFTHE EXPORT FISHING INDUSTRY IN LAKE VICTORIA (KENYA)

Crispin Bokea1 and Moses Ikiara2

April 2000

1 Research Manager

African Program

International Centre for Economic Growth

P.O. Box 55237 Nairobi. KENYA

2 Lecturer

Moi University School of Environmental Studies

P.O. Box 3900, Eldoret KENYA

Lake Victoria is the second biggest freshwater lake in the world. with its 69,000 km2, the lake has the samesize as Ireland. The lake is shared between three countries; Tanzania (which possesses 49%), Uganda(45%) and Kenya (6%) of the lake.

The findings, interpretations and conclusions hl this publication are those of the authors and do notnecessarily reflect those of IUCN or the partner organisations in this project.

Newspaper Cutting: Excerpt of The East African, October 18 - 24, 1999

Design & Layout: IUCN EARO Communications Unit

Table of Contents

ACKNOWLEDGEMENTS.................................................................................................................... 5

1. INTRODUCTION .............................................................................................................................. 6

2 OVERVIEW OF KENYA'S LAKE VICTORIA................................................................................ 7

ECONOMIC IMPORTANCE ....................................................................................................................... 7HISTORICAL OVERVIEW......................................................................................................................... 7

3 THE NILE PERCH TRANSFORMATION OF THE FISHERY .................................................... 10

CATCH EXPANSION AND EXPORT DEVELOPMENT ................................................................................. 10OTHER FISHERY DEVELOPMENTS......................................................................................................... 14

4 THE MACROECONOMY OF THE FISHERY............................................................................... 18

BENEFITS OF THE TRANSFORMATION ....................................................................................................... 18FOREIGN EXCHANGE (FOREX) EARNINGS ............................................................................................. 18INCOME EARNINGS TO OWNERS OF PROCESSING AND FEEDS FACTORIES ............................................... 20TAX INCOME ....................................................................................................................................... 20FISHERMAN INCOME AND INCREASE IN FISH PRICES ............................................................................. 21EMPLOYMENT AND LIVELIHOOD .......................................................................................................... 22COMMERCIAL SPIN-OFF ACTIVITIES ..................................................................................................... 24SUMMING UP THE BENEFITS................................................................................................................. 25

COSTS OF THE TRANSFORMATION ............................................................................................................ 26LOSS OF CONTROL OF THE RESOURCE BY LOCAL FISHERMEN ............................................................... 26LOSS OF EMPLOYMENT AND LIVELIHOOD............................................................................................. 26INCOME DISTRIBUTION ........................................................................................................................ 27FOOD INSECURITY AND NUTRITION...................................................................................................... 28ECOLOGICAL UPHEAVAL ..................................................................................................................... 30

DO THE BENEFITS JUSTIFY THE COSTS?..................................................................................................... 34

5 CONCLUDING REMARKS: POLICY IMPLICATIONS .............................................................. 36

MANAGEMENT OF FISHERIES IN KENYA ............................................................................................... 36FISHERY POLICY AND DEVELOPMENT OBJECTIVES ............................................................................... 37ALTERNATIVE APPROACHES ................................................................................................................ 38

REFERENCES..................................................................................................................................... 40

Acknowledgements

This report is prepared by Mr. Crispin Bokea (principal researcher) and Dr Moses Muriira Ikiara. Mr.Bokea, an economist, has for the last three years worked with the International Center for EconomicGrowth, Africa region office based in Nairobi as the Research Manager while Dr Ikiara is currently alecturer at the School of Environmental Studies, Moi University, Eldoret, Kenya.

Preparation of this report was mainly based on review and synthesis of secondary data and information aswell as visits to fishing beaches, markets and factories around Kisumu. The authors are grateful for theuseful comments and general direction provided by Ms. Mine Pabari, Programme Officer with IUCNEastern Africa Regional Office and Dr Eirik Jansen, Technical Advisor to the Socio-economics of theNile Perch Fishery on Lake Victoria project. The authors also acknowledge the support and contributionsprovided by Mr. Booker Oduor, Director of Fisheries. Mrs Jane Kinya of the Fisheries Departmentassisted in reviewing literature from the Department.

1. Introduction

Kenya is a coastal state with a marine coastline of640 kms and a marine fishing industry. In spite ofthis, Lake Victoria dominates Kenya's fishingindustry. In 1995, for instance, the lake accountedfor 94% of the 193,789 tonnes of fish producedwhile marine fishing accounted for only 3% ofthis output. This is notwithstanding the fact thatKenya claims only 6% of Lake Victoria's totalsurface area, with 45% being owned by Ugandaand 49% by Tanzania. Kenya's portion is themost heavily fished, commercialized andproductive of the three countries, producing anestimated 33% of the lake's entire fish output in1990.

In terms of contribution to the gross domesticproduct (GDP), Kenya's fishing industry is smallbut growing. Thus, white the industry accountedfor an average of 0.2% of the country's annualGDP between 1971 and 1981, the contributionrose to 2% and 4.4% of the non-monetary andmonetary GDP, respectively, by 1990 (Ikiara,1999)3. This increase is largely attributable to theNile perch export business that emerged in themid-1980s and expanded significantly in thesubsequent years. This lucrative external trade inNile perch has engendered a notabletransformation of the hitherto artisanal fishery,ushering in an unprecedented inflow of nationaland international capital and completely new setof players. Within a few years of the emergenceof this lucrative export business, the fishprocessing capacity grew from nil in the early1980s to 15 registered factories by 1998 with acurrent processing capacity far in excess ofproduction capacity.

In the 1990s, moreover, a fishmeal-based animalfeeds industry developed with considerableconsequences. In less than a decade, a total ofeight animal feeds factories have prospered, sixusing large amounts of Rastrineobola argentea asan input while another two use the Nile perchskeletons to produce fishmeal.

The increasingly worrisome implications of theexpanding Nile perch export industry and the useof fish and fish products in the animal feeds

3 Kenya has limited capacity for regulation and data collection. For thisreason, we believe that some of the contribution that the fishingindustry makes, especially with regard to local incomes andsubsistence, escapes recording and that the industry's contribution toGDP is much higher than reported.

industry have provided the motivation for thispaper. While foreign exchange earnings continueto be highly appreciated in a country that has aperpetual deficit in its current account, these havenot come without cost. Specifically, food securityfor Kenyans has been increasingly compromisedas more fish finds its way to external markets oranimal feeds factories. In addition, jobs have beenlost as the traditional small-scale processors andmarketing agents have been pushed aside to pavethe way for national and international capital. Thebiggest cost, moreover, has been the adverseimpact on the ecosystem and threats to thesustainable exploitation of these crucial fisheries.The objective of this paper is therefore to assessthe costs and benefits of the Nile perch exportprocessing industry in order to determine whetherthe foreign exchange earnings in the country arelarge enough to offset the loss of food security,environment, employment and other factors?These are the macroeconomic trade-offs thatconstitute the subject of this paper.

The paper proceeds as follows. In the next sectionfollowing this introduction, a brief historicaloverview of Kenya's Lake Victoria fisheries ispresented. emphasizing particularly the rapidmodernization that has occurred since themid1980s. Section 3 describes the Nile perchexport industry as the form of modernization thathas had the most profound impact on the socio-economy of the Lake Victoria region and perhapsthe entire Kenyan economy. The section alsodiscusses the increasing use of fish in themanufacture of anima' feeds. This development isincreasingly compromising the goals ofsustainable fisheries management, food security,living standards of fishers and employment.Section 4 assesses the benefits that rapidmodernization and commercialization have hadand weighs these against the related costs. Themain objective of this analysis is to find outwhether this rapid commercialization has beenjustified and whether it should be encouraged ordiscouraged. Government policy for fisheriesdevelopment is evaluated, in the light of theemerging picture of benefits and costs, asconcluding remarks in Section 5.

2 Overview of Kenya's Lake Victoria

Economic ImportanceEven though fishing constitutes only a smallportion of Kenya's GDP, it is, nevertheless, animportant source of livelihood for manyKenyans and has been so for many years. Firstand foremost, fish is an important source ofanimal protein, especially for most poor peopleliving immediately around the lake. Panos (aLondon-based research institution) for example,estimates that fish provides about 19% of thetotal animal protein consumed by Africanpeople. In addition, sources cited in Myers(1997) estimate that seafood contributes 50% ofall the animal protein consumed by humanbeings around the world, more than thatsupplied by beef and poultry combined. InKenya, many ethnic communities. especiallythose in parts of Central and Eastern provinces,did not consume fish as recently as 198O, butfish has now become a an important source ofcheap protein in almost all parts of the country.Thus, per capita annual fish consumption hasincreased from 3kgs in 1980 to 7.5kgs barely 10years later (Kenya Fisheries Department.various years). In a later section of the paper, amore accurate picture of per capita fishconsumption in the country will be presented.

Many Kenyans engaged in fishing earn incomefrom the activity. This income has beenincreasing over the years, although distributionis becoming increasingly more inequitable, withthe export-oriented fish processing sector takingthe lion's share. In 1995, fishermen earned anestimated Kshs 5.9 billion from fishing, lessthan 30% of the value of the retail trade (Ikiara,1999). The rest went to the people engaged inprocessing and marketing and the governmentin taxes. In the same year. fish exports earnedKenya Kshs 1.5 billion in foreign currency.These foreign exchange earnings are, in fact, anunder-estimate as earnings from sport fishingare not included. In addition, there isspeculation that fish processing firms frequentlyunder-report their export quantities for taxevasion purposes.

Employment is the second avenue throughwhich fishing provides a livelihood not only toKenyans but many other people in developingcountries. The Food and AgricultureOrganization of the United Nations (FAO) has

estimated that the livelihood of 100-200 millionpeople, 95% of them living in developingcountries, directly or indirectly depends onfisheries (Konstapel & Noort, 1995). In Kenya,the Fisheries Department recently estimated thata total of 798,000 people were directly orindirectly supported by the fishing industrycompared to 720.000 in 1995. There were34,000 fishermen, 238,000 dependants and596,000 people engaged in the provision ofsupport and ancillary services such as trade infishing inputs, fish handling, processing andmarketing4. A majority of these people live inthe Lake Victoria region, an area in whichalternative economic opportunities are limitedlargely due to low rainfall, poor soils and ashortage of paid jobs. In a country where theunemployment rate is estimated at between 25and 30°/o and is in fact rising, fishing is clearlya very important economic preoccupation. In1995, for instance, 560,000 people wereestimated to have been employed in Kenya'sfishing industry accounting for 25% of thecountry's total employment in the informalsector and 14.5% of the country's totalemployment.

Finally, the fishing sector supplies rawmaterials for other economic activities, notablymanufacturing and agriculture. Thus, spoiltfish, by-products of fish processing and somefish species such as Rastrineobola argentea andCarodina nilotica are increasingly finding use inthe manufacture of animal feeds, importantinputs in poultry, dairy and beef production.

Historical Overview

The changes that have occurred in the fisheriesof Lake Victoria have taken place in thiscentury. Before the arrival of colonial rule, thefishery resource existed in harmony with theresource users (Geheb, 1995). The fishingcommunity had traditional and territorial rulesand regulations which ensured that the fishery

4 The estimate for employment in support and ancillary activitiessuggests that for every job created in Kenya's fish harvesting sector,15 others are created in support and ancillary activities. We find thishard to believe given international estimates. FAO estimates thatevery individual employed in developing country industrial fishingfleet creates 4 - 5 other jobs in support and ancillary activities whilethe ratio in artisanal fisheries is 1:1. Since Kenya's fishing industryis semi-industrial, we feel that a more realistic ratio is 1:3. This isthe ratio we will use in this paper.

was exploited in a sustainable manner bylimiting access to a specific group of people andto specified stock areas. The use of simpletraditional technology such as traps and spearsby artisanal fishermen, moreover, kept fishingintensity and pressure in check.

During the colonial period (1901-i962), theharmony existing between the resource usersand the resource base started to crumble as aresult of escalating fishing pressure (Geheb,1995). This pressure was caused by factors suchas the expansion h1 the market and demand forfish following the extension of the railway linefrom Nairobi to Kisumu in 1901. Theintroduction of taxes by the colonial governmentalso forced Kenyans to join the cash economy.These factors, coupled with the introduction ofmore efficient technologies5, the rapid growthof the fisher population. displacement of peopleto pave the way for cash-crop plantations inWestern Kenya and lack of alternativeemployment (Geheb, 1995) contributed to thegrowth of the fishing industry.

The fishery started to decline following theescalation of fishing pressure. The catch perunit of effort (CPUE) and the average size ofindividual fish started to fall and the traditionalregulatory mechanisms were subjected toincreasing pressure, culminating in their totalcollapse by 1960. The colonial administrationresponded by introducing minimum mesl1 sizeand closed season regulations in the 1940s andof exotic fish species like Nile perch and Niletilapia between 1950 and 1962 to enhance thelake fishery (Ikiara, 1999).

There have been various effects of escalatingfishing pressure, collapse of traditionalregulatory structures and remedial actions of thecolonial administration. On the positive side,total fish catch from the lake has increased five-fold following the introduction of exoticspecies, particularly the Nile perch. Forexample, from 1960 to 1979, the annual catchfrom the three countries sharing Lake Victoriaaveraged 100,000 tonnes. The ownership offishing equipment was highly decentralized sothat fishing income was evenly distributed

5 The introduction of gillnets in 1905, in particular, was the key tothe initial commercialisation of the lake fishery.

among fishermen. In 1989 the total catch fromLake Victoria reached about 500,000 tonnes.Total annual catch from the lake now fluctuatesbetween 400,000 and 500,000 tonnes. Whileless than 1,000 tonnes of Nile perch werelanded from the entire lake in 1981, this figurerose to about 363,000 tonnes in 1993 withKenya accounting for about 29%. There havebeen many benefits associated with this increasein Nile perch landings (as will be discussed insection 4).

Pundits believe that the negative effects ofincreased fishing far exceed the positive ones.In less than a century, about half of the fishspecies that once existed in the lake have beenlost. Out of an estimated 400 species thought tohave existed at the beginning of this century,only about 177 remain (Kenya FisheriesDepartment, 1980; Witte and Van Densen,1995). Barel (1986) estimates that as many as300 species may be facing extinction.Moreover, the ecological make-up of the lakehas experienced drastic changes. Ecologicalupheaval has been wrought by the introductionof alien fish species, overfishing and pollution,among a myriad of other factors. The oncemulti-species fishery is now a three-speciesfishery and is under increasing pressure toreduce further to a two-species fishery (Table1). While the three species that now constitutethe commercial fishery (Oreochromis niloticus,Rastrineobo1a argentea and Lates niloticus)accounted for only 5% of the total landings in1970, this reached 95.5% twenty years later andremain at more or less that level today. This isshown in row 10 of Table 1. The exotic tilapiaspecies (Oreochromis niloticus) shows signs oflosing its importance in the commercial fishery.From its peak of 23.4% in 1990, tilapiadropped sharply to 6.5% in 1996 (Row 3 ofTable 1). Consequently, the Nile perch andRastrineobo1a argentea now dominate the fishcatches of Lake Victoria.

Other adverse consequences of the newdevelopments in the Kenyan Lake Victoriafishery in the course of this century includedeclining CPUE and the associated switch todestructive technologies. These in turn havereduced the number of fish processing andmarketing jobs as well as the availability andaffordability of fish to local consumers, leading

to basic food insecurity. Hence, the control offishing technology and marketing has shiftedfrom local fishers to large commercial entrants

with access to capital, and one result has beenthe erosion of responsible fishing behaviour.

Table 1: Species Composition of Fish Landings in Lake Victoria (Kenya), (% of total weight landed)

1968 1970 1975 1980 1985 1990 1992 1994 1996

1. Haplochomis 25.53 34.39 28.97 13.78 0.01 0.00 2.00 2.17 2.35

2. Protopterus 19.15 10.46 9.21 1.40 0.17 0.05 0.99 0.10 0.09

3. Oreochromisniloticus*

0.00 0.00 1.27 4.49 8.78 23.37 11.09 6.10 6.47

4. Other Tilapine 16.50 28.95 2.76 14.52 2.17 0.34 4.00 1.97 3.08

5. Rastrineobolaargentae*

4.99 3.36 28.52 35.80 30.00 28.52 23.42 35.70 29.84

6. Lates niloticus* 0.00 0.18 0.32 16.34 58.02 43.64 51.14 53.70 57.95

7. All others 33.83 22.66 28.95 13.67 0.85 4.08 7.36 0.26 0.22

8. (5+6) 4.99 3.54 28.84 52.14 88.02 72.16 74.56 89.40 87.79

9. (3+5+6)* 4.99 3.54 30.11 56.63 96.80 95.53 85.65 95.50 94.26

* These three species currently dominate the fishery.

Source: Adapted from Ikiara (1999)

3 The Nile Perch Transformation of the Fishery

Desiring to enhance the fisheries of Lake Victoria the colonial government introduced several species oftilapia and Nile perch into the ecosystem between 1950 and 1962. These new species, especially the Nileperch, established themselves fully within only ten years. Two of these species, the Nile perch (Latesniloticus) and Nile tilapia (Oreochromis niloticus), now occupy a dominant position in the three-speciescommercial fishery that Lake Victoria has been transformed into. Without doubt, the non-indigenousspecies have served the fishery enhancement objective. Catches have expanded five-fold, and a lucrativeexport business based on Nile perch has taken root. Consequently, the price of Nile Perch increased inreal terms, and the tilapia came to dominate the national fish market. Reynolds et al. (1992), report thatthe Lake Victoria fisheries produced a total value of US$ 280million between 1975 and 1989.Employment, too, increased from 158,000 employees in fishing and ancillary activities in the entire laketo 422 000 by 1992 when Nile perch fishery was at the peak (Wilson, 1993). Fishery expansion has notbeen costless unfortunately. It is now widely acknowledged that the introduction of alien species into anecosystem causes biodiversity loss (Konstapel and Noort, 1995). Studies in Scandinavian lakes and NorthAmerica show that such introductions lead to irreversible changes in food webs (Ochumba et al., 1991).

Catch Expansion and Export DevelopmentFollowing their introduction into Lake Victoria, catches of tilapia and Nile perch started appearing in themid-1970s (Table 1). Initially, there were more catches of the tilapia relative to Nile perch as consumersand fishermen were already familiar with other closely related species and therefore targeted the tilapia.On the other hand, fishers and consumers in Kenya regarded Nile perch as fatty, smelly and unpleasantas there was no prior experience with it.4 It was not until the late 1970s that significant amounts of theperch started to be landed in the Kenyan waters of Lake Victoria For example, 1,000 tonnes were landedin 1978. This increased to nearly 23,000 tonnes in 1981, 50,000 in 1985 and reached a peak of 123,000tonnes in 1991 (Abila and Jansen, 1997). There has since been a declining trend.

Thus, the dislike of Nile perch among the Kenyan fishing community around Lake Victoria was short-lived. This development, coupled with the popularity of perch in Uganda and Tanzania saw the EastAfrican market absorbing thrice as much fish in the mid-1980s as in previous years withoutcorresponding changes in prices (Abila and Jansen, 1997). During the initial years of the Nile perchboom, therefore, Kenyans and East Africans in general benefited enormously from increased availabilityof fish at affordable prices. In fact, Reynolds et al. (1992) observe that the dollar prices of Nile perch inLake Victoria as a whole fell over the 1975 - 1985 period and then began to rise as export demand grew.This observation is supported by the data, plotted in Fig. 3.

The Nile perch strengthened the dominance of Lake Victoria as Kenya's leading source of fish. Thelake's share of total catch rose from 50% in 1970 to about 94% in 1995 (row 8 of Table 2). Thisdominance continues. Row 10 of table 2 demonstrates the dominance of Lake Victoria fisheries in thecountry's fish output from all freshwater sources while row 11 shows the role of fish farming oraquaculture in the country's fishing industry. It is worrisome that the performance of aquaculture isdeteriorating instead of improving. The worry arises from the fact that aquaculture ought to serve as analternative source of fish. The last row of Table 2 shows the size of Kenya's marine fishery over time.The serious decline in marine catch since 1965, is, to some extent, a reflection of the fact that thepotential officially thought to exist in this sub-sector is largely illusory. The value of fish produced fromLake Victoria has also recorded phenomenal growth, in real terms, since 1980 (Fig. 1), that is, fromKshs 0.2 billion to about 2.2 billion in 1995.

The initial low demand for Nile perch in thedomestic market and large supply stimulated thegrowth of an export business that now earns thecountry about Kshs 1.5 billion in foreignexchange annually. To meet the export marketdemand, fish processing factories were firstestablished along the shores of Lake Victoria inthe early and mid-1980s. In Tanzania. the firstfish processing firms were opened between1990 and 1995 (I VFRP/Techi99,'09, 1999).Even though the largest of the Kenyan fishprocessh1g firms, Samaki Industries, wasestablished in Nairobi as early as 1965, it onlyestablished a commercial presence in Kisumu in1986. The first firms established in Kisumuwere Afro Meat Co. Ltd. and Prinsal in theearly 1980s. These earned such high profitsthat, within a short period, many more factorieswere built. Currently, a total of I 5 fishprocessing factories are registered but only tenare operating. These include Samaki Industries,East African Sea Food, Prinsal, Peche FoodLtd., Tropical Food Products International (notcurrently operational), Modern Fishing Ltd.,Afro Meat Co. Ltd., Kendag, Capital Fish, .E.Tilley (M) Ltd., Kenya Cold Storage (Foods)Ltd., Lake Victoria Fish (under receivership),Star Fisheries (not operational) and EagleFisheries (sold its factory to Samaki Industries).At the peak, in 1995, there were 15 registeredfish processing firms in the country. Some ofthese have since either relocated to Uganda orTanzania or closed due to raw material supplyconstraints. lack of access to markets or qualityproblems. Some companies close. relocate, sellor re-name once the 5-year tax holidayinvestment incentive ends. Consequently, six ofthe eight filleting firms surveyed byLVFRP/Tech/99/09 (1999) in Kenya wereestablished in the 1990s. In fact, 88% of all thefirms in the three countries sharing the lakewere found to have been established since 1990.

Because of the efforts of these processingfactories, Kenya changed from a net importer offish in the 1970s and early 1980s to a netexporter in the mid-1980s (Table 3). The realvalue of fish exports from Kenya grew by anannual average rate of 268.5% between 1985and 1995 compared with - 2.5% over the period1975-1985. In 1998, LVFRP/Tech/99/02(1999) estimates that the three East Africancountries earned a total of US$ 219.4million

from the export of Nile perch, out of whichKenya accounted for US$ 34.8million5. Hadmost of this income reached the local fishers,their welfare would have appreciably improved.

In 1995, Kenya exported 12,052 tonnes of fishworth Kshs 1.5 billion (US$ 25million) innominal terms or Kshs 0.7 billion in constant1990 prices (Table 3). In that year, thecountry's fish trade account had a surplus ofKshs 1.43 billion (US$ 24million), a substantialsum for a country whose current accountbalance in one of its best fiscal years, 1996/97,stood at only US$ 90million (Ikiara, 1999).Viewed from this perspective, the Kenyagovernment's encouragement of a vibrant fishexport business, almost to the exclusion of theother development objectives of the fisheriespolicy, is hardly surprising.

Nile perch is the dominant fish species inKenya's trade, accounting for about 91% and92% of total fish export volume and value,respectively, in 1995 and all the fish importscoming into the country that year (Ikiara,1999). Other fish and fish products exportedfrom Kenya include octopus, beche-de-mer,marine shells and small quantities of fishbladders, prawns, lobsters, gray fish, live fishand dry shark fins. In 1995 Nile perch bladders(fish maws) earned the country Kshs22.6million in nominal terms or Kshs10.27million in constant 1990 prices, downfrom Kshs 23million (nominal value) in 1991.This Nile perch product is, therefore, veryimportant too.

The EU and Israel have been and continue to bethe principal export markets for Kenyan fish. In1987, Israel alone accounted for about 55% ofthe country's total fish exports. This sharedropped in subsequent years to stand at 32% in1997. Meanwhile the share of the EU rose toreach 56% in 1995-96. Following three fishbans in the EU market since 1997, however, theshare of the EU market dropped to only about19% in 1998. Israel absorbed 48% of the fishexported from Kenya in 1998. A high and risingdemand for Nile perch in these and other exportmarkets has led to a tremendous increase in theprice of Nile perch, especially the price in theexport market, and therefore the value of theexports. While the volume of fish exports roseby 66% between 1989 and 1995, for instance,

the value increased by 386% in nominal termsand by 106% in real terms over the sameperiod.

The Nile perch export business is facingincreasing and challenging obstacles which castdoubt over its temporal sustainability. Thus, thecountry's fish export performance has started todecline. From the peak export of 14,412 tonnesin 1996 that earned the country Kshs963.6million in real terms, performance hasdeclined to 13,295 tonnes in 1997 and further to10,861 in 1998. The value has also declined by12.0% in 1997. The most daunting of thesechallenges are the dwindling supplies of fish,and serious quality problems.

The quantity of Nile perch available forprocessing has been declining since 1991. Froma peak of 123,000 tonnes landed from theKenyan side of Lake Victoria that year, theperch catch dropped gradually to only 96,500tonnes in 1996. This decline occurred in spite ofa substantial increase in fishing pressure.Between 1993 and 1995, for instance, thenumber of fishers and boats increased by 15%and 7% respectively (Ikiara 1999). In additionto these increases, previously existing fishermenand fishing units increased their fishing effortssubstantially to compensate for decliningCPUE. Diminishing availability of fish hasmeant that installed fish processing capacity isnot fully utilized. In a recent survey involving

the 12 fish processing firms in operation, Abilaand Jansen (1997) estimated that only about50% of the daily processing capacity of 380tonnes was being realized. This is supported bya more recent survey which estimates fishprocessing capacity utilization of 49% in Kenyaand 57% in the East African region(LVFRP/Tech/99/027 1999). This surveyestimates that in the entire lake, 469 tonnes ofNile perch are processed daily out of aninstalled daily processing, capacity of 823tonnes; twenty one out of the twenty threefilleting firms surveyed by LVFRP/Tech/99/02(1999) cited fish supply problems primarilyattributed to low catches and high competition.

Factors responsible for this decline in catchesinclude ecological consequences of overfishing,introduction of alien fish species, pollution andthe water hyacinth infestation that has recentlyassumed alarming proportions. Overfishing. inturn, has been caused by excessive demand forfish in both local and external markets andimproved fish prices. Other factors areexcessive processing capacity, high rates ofpopulation growth, lack of alternativeemployment opportunities and open access tothe fishery (Ikiara, 1999). Further discussion ofthese factors is beyond the scope of this paper.

Quality is the other major challenge to Kenya'sfish export business. Even though most of theprocessing factories in Kenya generally meet

EU hygiene standards of design andconstruction, unscrupulous processing byunregistered and unhygienic factories occursand the conditions at the landing beaches aregenerally poor (Goulding. 1997). Currently,Kenya's fish exports are going through adebilitating ban from the EU market, the largestmarket until last year. This comes only a shortwhile after another ban, from the same market,of fresh fish imports from East Africa followinga cholera outbreak which lasted from January toJuly 1998. Also, in March 1997, East Africanfish consignments to Spain and Italy were foundto contain unacceptably high levels of bacterialcontaminants, prompting stricter inspectionprocedures for subsequent consignments fromthe region (Ikiara, 1999).

These export bans have been accompanied byextremely heavy losses. The 1998 ban, forinstance, led to a fall of 45-67% in the ex-vesselprice of Nile perch in a period of only 3-4months, reduction of the scale of operations byas much as 75% by some processing factoriesand laying off of workers (as many as 150workers from only one factory), increased lackof confidence in East African fish even inmarkets outside the EU, and deterioratingconfidence in other export commodities fromthe region. Others include the exit of somefishermen and their boats from the fishery, lossin tax income and incomes for people employedin the fishing industry and loss of business toairlines (as much as US$ 0.5million per weekfor one airline), among other losses (Ikiara,1999).

Other Fishery Developments

In the last decade a fishmeal-based animal feedsindustry has developed and generatedunprecedented demand for the second mostimportant commercial fish species in LakeVictoria, R. argentea (or omena in the locallanguage), and for Nile perch skeletons. Thedevelopment of this industry has, in effect,subjected omena, like Nile perch, to regionaland international commercialization.

In a 1997 survey, Abila and Jansen (1997)found that six animal feed manufacturingcompanies in Kenya were using about 70% ofall the omena that was produced every year tomanufacture fishmeal while another twocompanies were using 60% of the Nile perch

skeletons produced for the same purpose. It isnoteworthy that up to the late 1980s, all theNile perch skeletons (popularly known asmugongo wazi) were used for humanconsumption and that in the early 1990s all theomena was also consumed by humans. Thedemand for local fishmeal in the animal feedsindustry is largely unmet, as it is rich inproteins and cheaper than imported fishmeal. Itis obvious, therefore, that more and more of theskeletons and omena and perhaps other fishproducts are finding their way into animal feedsproduction. The implications of thisdevelopment to food security, employment,living standards of the fishers and thesustainable exploitation of the resource systemare discussed in section 4 below.

Besides catch and Nile perch export increases,there have been other developments in theKenyan fisheries of Lake Victoria. The firstsignificant change that accompanied thedevelopment of the Nile perch fishery was theintroduction of new technology for bothharvesting and processing. Until the mid-1970s, Lake Victoria fisheries were exploitedby small-scale fishers with little technologicalinputs. The gillnet technology introduced in1905, however, was an early technologicalimprovement. This initiated commercializationof the lake fisheries. Even though 80% ofartisanal fishers in the pre-Nile perch fisheryderived their primary income from fishing,many also farmed, returning to fishing duringagricultural off-peaks and in times of poor cropperformance. In general, each fisher ownedonly a single canoe and a nominal number offishing gears. This ensured that resource controland income were evenly distributed and thatparticipation was widely distributed. Even atthat time, however, increasingly larger numbersof people were entering the fishing enterprise asurban unemployment rates rose. In spite of thecontinued use of traditional technology,therefore, the increasing number of fisherscaused a decline in individual earnings.

In the pre-Nile perch period, small-scaleoperators dominated the fish processh1g andtrading sub-sectors too. These were mainlywomen from the communities living around thelake. They sold some fresh fish and processedthe surplus, using such simple technology assmoking, salting and sun-drying. for later sale.

There were hardly any wholesalers. The fishprocessors and traders, moreover, exerted nopressure or control on fishers through creditrelationships or any other mechanisms.

Since 1980, the situation has changeddramatically. The number of fishers grew by200% between 1973 and 1995 to reach, 30,000while that of vessels increased by about 95%over the same period to reach 8,000 (Ikiara,1999; Table 4). This indicates that the numberof fishers operating from the same boatincreased from 2.5 to almost 4 during thatperiod, ushering in an extremely intensivefishing regime. Current Fisheries Departmentstatistics indicate that the number of fishers andboats has continued to increase, reaching40.000 and 15,000 respectively, in 1998. Thisincrease is, in fact, only a small proportion ofthe total increase in fishing effort, implying adeclining catch per fishermen.

The industry is also witnessing increasedinvestment in more efficient technologies suchas gillnets, beach seining, mosquito seining,trawling, and lately tembea (drift net fishingtechnology) most of which are detrimental tothe integrity of the lake ecosystem. Even thoughtrawling has been banned for many years it isestimated that 15 trawlers, loosely related to theprocessing firms, are still operating, mainlyfrom one beach (Jansen et al., 1999). Theeffects of trawling and tembea technologies,rapidly expanding as a result of the fish export

business, will be discussed in a later section ofthis paper.

Furthermore, there is increasing evidence thatfish processing firms are becoming involved infish harvesting, either by extending credit tofishers or by purchasing their own equipmentand hiring fishers. Tembea boats, for instance,are normally in fleets, and considering that theaverage investment in one tembea boat isapproximately Kshs. 500,000, most of the fleetsare owned and controlled by the processingfactories. At the same time, one fish-processingfactory owns Kenya Fishnet Industries, whichproduces and supplies 90% of fishing nets andbeach seines in Kenya. As a result of increasedvertical integration and control of theproduction, processing and even marketingfunctions within the sector, the exportprocessing factories may soon have a monopolyof the industry and which in turn willmarginalise the local fishers gradually and otherfishery participants.

In a recent development (see the memorandumfrom a representative of the Kenya FishProcessors Association in Box I below), the fishprocessing factories are striving to achieveincreased centralization of the Lake Victoriafisheries, a positive step towards improving thequality of handling fish and consistency with theexport market (the EU in particular) standardsand specifications. This objective, however, isin direct conflict with the interests of the localfishermen and fishing communities as its

implementation will deny the local fisherfolkaccess to the landing beaches. This is, no doubt,a very significant development which must becritically examined by the regulatoryauthorities, if the objectives of the FisheriesDepartment have to be achieved in a balancedfashion.

Moreover, resulting primarily from theecological disruption associated with theintroduction of alien species and also fromoverfishing and pollution, the ecosystembalance of the lake has changed substantially.The Nile perch is now known to be a predatorof most of the fish species found in the lakeincluding its own juveniles. As alreadymentioned many of the endemic fish specieshave now disappeared from the catches and theoriginally multi-species fishery has beenreduced to a three-species commercial fishery.

The processing and marketing sub-sectors havealso experienced transformation. Newtechnologies for processing Nile perch weredeveloped. Small-scale traders and processorswere edged out by capitalized operations. Theby-product of Nile perch filleting, the skeletonformed the basis of a new processing andtrading business to which displaced womenturned. An aggressive use of R. argentea andthe skeletons for animal feeds manufacture alsoemerged. Artisanal traders and processors, 84%and 56% of whom are women in Kenya and theEast African region, respectively,(LVFRP/Tech/99/02, 1999) now deal largely insmall fish which are not accepted by theprocessing factories (Abila and Jansen, l997;Medard and Wilson, 1996).

BOX 1:

MEMORANDUM

Following our various discussions about fish export trade relations with the European Union, this letteris to give you a more in-depth understanding of the situation. The European Union is very concernedover the unhygienic environment of Lake Victoria's beaches. Their constant cry is in reference toinadequate landing sites and laboratories. These issues most definitely fall under the Government'sumbrella and not the fish-processors, as is commonly implied.

To the European Union, more priority goes to landing beaches. Their recommendations is to enclose thelanding sites and jetties restricting access to only the Department of Fisheries, Veterinary, FishCooperatives, Fish traders and Fish processors from the export industry. By restricting human trafficaround the beaches, it will assist the government representatives to efficiently follow the requiredEuropean Union Standards and Regulations. These officials are also expected to be in hygienic attire,such as white dust-coats, gum boots and gloves.

As far as laboratories are concerned, they require well-equipped labs to test for harmful chemicals(pesticides), as well as water-borne bacteria (E coli, Salmonella). The Government labs in existence areunfortunately ill-equipped and outdated according to European Union Standards.

In reference to the landing beaches, here are some suggestions that we feel may adhere to the EUrequirements. First, four South Nyanza beaches and five Uyoma beaches should be upgraded to EUstandards. This can be done by building 100-metre jetties into the water and making the landing sitesrestricted zones to the fishing industry and the relevant Government departments, in a bid to eradicateany sort of contamination. Also, by locating the landing sites away from the villages will assist incontrolling human traffic (hawkers, vendors...). For your information, we have taken the initiative toupgrade the beach at Port Victoria by building a 100-metre jetty into the water This has costed usapproximately Kshs. 2,000,000/- and as far as laboratory is concerned, we have collectively upgradedthe Lab. in Kisumu. We have managed to repair all electrical fittings and add new refrigeration

In our estimation, to upgrade our Kenyan beaches to EU standards will cost in the tune of Kshs. 200-250million. If appropriate measures are taken, there is still hope for the fishing industry to survive.

We have information that the EU is planning to send officials around November this year. We hope weshall be prepared for them.

The most appropriate way to handle this situation is for the Fish Processors Association to takeresponsibility for the upgrading since they are the major stakeholders, as well as having a very goodunderstanding of the EU rules and regulations. These measures may also influence Tanzania and Ugandato follow suit.

Summarily, we would like to appeal to you sincerely to give not only the fishing industry but also allother fish related industries a chance to survive and also benefit the country's economy.

Your cooperation and attention to our plea will be greatly appreciated.

Once again, thank you for your concern and cooperation.

Signed

For and on behalf of the Kenya Fish Processors Association.

October 2, 1999.

4 The Macroeconomy of the Fishery

In this section, we trace the socio-economic andenvironmental effects of fishery transformationthat has occurred since the explosion of the Nileperch fishery and the development of an animalfeeds industry using local fishmeal. Wecompare the costs and benefits of thistransformation. Specifically, the section tries toanswer the following questions: Have thebenefits of the transformation been large enoughto cover the costs? What has been the officialpolicy position with regard to thetransformation? In light of the assessment of thebenefits and costs of the fishery transformation,has the official policy been well informed ordoes it need re-formulation?. Environmentaleffects are treated as part of the macroeconomicimpact that fishery transformation has had sinceenvironmental effects ultimately affect theeconomy. It is, indeed, becoming increasinglycritical that national accounts become "green"as a result of this realization so as to ensuresustainability.

Benefits of the Transformation

The commercialization of the Lake Victoriafishery that has been increasing since the late1970s has, undoubtedly, yielded substantialbenefits to the Kenyan economy. These benefitsinclude foreign exchange earnings. incomeearnings to the owners of fish processing andanimal feeds manufacturing factories, taxincome to the government, a marginal increasein the real ex-vessel Nile perch price andtherefore fisher incomes, creation ofemployment opportunities and commercial spin-off activities such as the processing and trade inNile perch skeletons and the positive impact ofhigher quality animal feeds in the livestockindustry.

Foreign Exchange (forex) Earnings

As noted earlier, Kenya changed from being anet importer of fish in the 1970s and early1980s to being a net exporter ever since (Table3). This is largely attributable to thedevelopment of a vibrant export business basedon the Nile perch. The Nile perch now accountsfor about 92% of the country's total fish exportvalue. From Kshs 18.3million earned as foreignexchange from the export of fish in 1980, forexearnings grew to reach Kshs 963.6million, in

real terms, in 1996 (Table 2). This translatesinto a substantial annual average growth rate of303.5%. In 1998, Kenya exported fish worthKshs 1.67 billion or US$ 27.8million. Thisconstituted only about 1.4% of the country'stotal exports that year. While this is small,external trade in fish is very important forKenya, as it is almost entirely a credit to theexternal account. One need only know that, in1998, Kenya had a deficit in its overall currentaccount of Kshs 24.5 billion to appreciate theseforex earnings. The role of such forex earningsin the stabilization of Kenyan currency andgeneration of investible funds is highlysignificant. Thus, the fishery has no doubtincreased foreign exchange receipts andpotentially improved the foreign exchangeposition of the country.

It should be noted that forex earnings and totalfish sales reported could be only a part of theactual figures. Pundits believe that fishprocessing firms and other medium- and large-scale dealers in fish under-report their sales andexport figures for tax evasion reasons. Reliablesources have actually estimated that for everyfive kilograms reported in sales and export, twoare not. If this is true, it implies that the valueof the fish harvested annually is under-estimatedby as much as 29%. This, from a simplecalculation, seems not to be so far-fetched. Asurvey by the Lake Victoria Fisheries ResearchProject in 1998 (LVFRP/TECH/99/02, 1999),estimated that Kenya-based fish processingfirms earned US$ 34.8million from the exportof Nile perch. The officially reported figure ofUS$ 27.8 million is, thus, only 80% of theactual export revenue.

Forex receipts have thus been advanced as oneof the largest benefits accruing from the fisherytransformation. This position or argument,however, begs some questions. How much ofthese forex receipts are retained in the countryconsidering that exchange controls have beenremoved? How sustainable, in temporal terms,is this benefit in light of the challenges currentlyfacing Kenya's fish exports? Moreover, howsignificant is this forex benefit weighed againstthe economic cost of the fish export businessand other benefits?

Even considering tax revenue, employment ofKenyans, sourcing of raw materials locally andthe ownership structure of the fish processingfirms, we believe that a high proportion of theofficially reported forex receipts from fishexports is not retained in the country. Of the 12processing firms operating in 1997, three werefully owned by Kenyan Africans, eight byAsians (some of whom were Kenyan nationals)either solely or in partnership with investors ofother nationalities, and one by Israeli nationals(Abila and Jansen, 1997). Current informationindicates that only ten fish processingcompanies are in operation, each of which hasat least one Kenyan shareholder. Seemingly, asa rule, the fish processing firms employinfluential Kenyan Africans as directors(Jansen, 1997). Since foreigners usuallyrepatriate their forex, the ownership structurepainted above suggests that most of the moneyearned from the export of fish may not beretained in the economy.

Even though the survey by Abila and Jansen(1997) indicated that some of the processingfactories with foreign ownership have investedin other sectors of the Kenyan economy,including hotels, bakeries, bars, butcheries,meat processing plants and manufacture offishing nets, there is no evidence to suggest thatit is the revenue generated from the fishbusiness that is re-invested in the country. Mostlikely, these businesses are set parallel to andindependent from the fish processing business,hence they are avenues for making andrepatriating profits - which makes sense fromthe perspective of good business practices. It isprobable that most of the fish processing firmsthat relocated from the country or closed, since1994, were foreign owned. It has been noted, insome quarters, that foreign fish processingestablishments in the country benefit from theinitial five years of tax exemption only torelocate, sell or close on the expiry of thisperiod. Thus, even though Kenya had as manyas ten fish processing firms in 1987 (Reynoldsand Greboval, 1988), a survey carried out in1998 indicated that six out of the eight firmssurveyed in Kenya were established after 1990(LVFRP/Tech/99/02, 1999).

On employment, the fact that the top managersof most of the processing factories areforeigners implies that a substantial amount of

the total salaries paid leave the country. In1998, for example, returns from three fishprocessing firms indicate that Kenyans took55.8% of the salaries while the rest went toforeign employees. The same returns suggest,furthermore, that salaries took up 12.6% oftotal sales. It should not be forgotten, however,that Kenyans employed in these firms benefitfrom the transfer of technology and are in aposition to open their own factories. Someproprietors of locally-owned factories are pastemployees of the foreign-owned factories.

As mentioned already, fish exports from Kenyahave been banned from the EU market thrice inrecent years. The latest ban is still in force.These bans have been due to inadequate quality.If the quality challenge is not dealt withexhaustively and urgently, there will soon be nofish export business. Encouragingly, there isexternal assistance to boost the quality of fishexports from East Africa. Earlier this year, forexample, FAO gave over Kshs 20.6million forthis purpose while the EU gave COMESA US$2.5million to enhance its Standards QualityMetrology and Testing (SQMT) project.

The declining productivity of the lake reflectedin falling catches despite increasing fishingeffort, falling CPUE and increasing proportionof juveniles in total landings is another seriouschallenge which casts doubt on the sustainabilityof the fish export business. The fall in thenumber of fish processing firms from 35 in1995 to only ten in 1999 and the increasing useof small immature perch for processing areclear manifestations of the threat to the futureperformance of fish exports from Lake Victoria.

Another consideration in the forex benefit thatKenya enjoys from Lake Victoria fishery isexposure to international market fluctuationsand risks. The recent fish export bans havedramatically illustrated this vulnerability. Thebans do not only cause drastic fish price fallsbut also interfere with planning from theharvesting sector to the processing, marketingand transportation sectors and the generaleconomy.

Additionally, with respect to the benefits of theforeign exchange earnings is the enormouseconomic and environmental cost associatedwith fish exports. These costs are discussedlater in this section.

To summarize the discussion of the foreignexchange benefit of Kenya's fish exportbusiness we argue that the Kshs 1.5 - 2.3 billionearned annually should not be taken at facevalue. The actual value could be 20-29% morethan these reported figures. It is doubtful thatthis unreported revenue ever gets into thecountry. Assuming that up to 50% of thereported revenue is retained in the country (areasonable assumption), the Kenyan economybenefits from almost Kshs I billion every yearin foreign currency. This would generatesubstantial growth benefits in the country'seconomy. This, however, has beenaccompanied by enormous economic andenvironmental costs. In addition, the futureperformance and sustainability of this benefit iscast into doubt on account of decliningproductivity and fish quality problems.Moreover, following the repeal of the ExchangeControl Act, there is no statutory requirementobliging exporting firms to retain foreignexchange earnings in Kenya! The vulnerabilityof this trade to international market fluctuationscasts further doubt on the real value of theseforeign exchange earnings. We feel that thepolicy attention or priority given to this benefitover the other benefits cannot be justified, aswill be demonstrated in section 5. In addition,other objectives like employment creation, foodsecurity and improved welfare of fishers are asimportant, if not more important, than the forexobjective in the macroeconomic arena. Theseobjectives are currently being sacrificed at theexpense of the export market and foreignexchange earnings objective.

Income Earnings to Owners of Processing andFeeds Factories

Owners of fish processing firms andmanufacturers of animal feeds are the mainbeneficiaries of Lake Victoria fishery. On thebasis of their survey of 1997, Abila and Jansen(1997) estimated that. on average, each fishprocessing firm in Kenya incurred a total costof US$ 2.00 for every kilogram of filletexported and received an average income ofUS$ 3.50. This implies that the owner of thefirm receives a profit of US$ 1.50 per kilogramof fillet exported. The owner of a factory thatprocesses an average of 20 tonnes of Nile perchper day could obtain 7 tonnes of fillet (35%recovery rate) and earn an impressive US$

262,500 (Kshs 18.4 million) in profits permonth, assuming a 25working-day month andthat all the processed fish is exported. This isvery high compared with the Kshs 6,000 earnedby the average fisher in a month of 30 days.

We could estimate the income accruing to fishprocessing firms by an alternative method.From Abila and Jansen's estimate, theseinvestors receive about 42.9% of the exportmarket price as their profit. Thus, in 1998 whenKenya's actual Nile perch exports stood at Kshs2.1 billion (US$ 34.8), according toLVFRP/Tech/99/02 (1999 report), owners offish processing firms received Kshs 0.9 billionfrom the export business alone. Since most ofthe firms also sell fish in the domestic market,they earn even more income. In 1996, Abilaand Jansen (1997) estimated that 21,000 tonnesof Nile perch fillet were produced. In that year,statistics from the Fisheries Department indicatethat 13,368 tonnes of Nile perch fillet wereexported. Thus, about 36% of the filletproduced that year was sold in the local market.The fact that the demand in the external marketis largely unmet and yet the processing firmssell some fillet in the Kenyan market suggeststhat the profit margins in the two markets aremore or less the same. Since 10,861 tonnes offillet were exported in 1998, 6,109 tonnes musthave been consumed in the domestic market(assuming the 1996 market shares at aboutKshs. 0.916 billion). The owners of the fishprocessing firms, therefore, must have receivedabout Kshs.0.39 billion from the domesticmarket, bringing total earnings to Kshs 1.29billion.

Owners of animal feeds manufacturing factoriesalso obtain large profits by using omena andNile perch skeleton as sources of fishmealinstead of using imported fishmeal as these arealmost as rich in protein as the importedsubstitutes and yet cost almost half the price ofimported fishmeal. It is not possible to estimatethis, unfortunately, without a detailed primarysurvey of these animal feeds factories.

Tax Income

The Government of Kenya earns a substantialamount of revenue through the licensing of fishprocessing factories and animal feeds firms andthrough the taxation of export revenue. It isestimated, for example, that the government

receives 0.5% of the market price for everykilogram of fillet exported, as export levy. Thislevy is collected by the Fisheries Department.In 1995, the export of 12,470, tonnes of Nileperch fillet ought to have generated a total ofKshs l0.5million.

Government receipts from this export levyreached an all-time high of Kshs 13million in1996. Between 1991 and 1997, the governmentreceived a total of 42.4million from this source.Between 1991 and 1995, an additional Kshs0.44million was received as export levy on Nileperch bladders. These benefits can be entirelyattributed to fishery transformation as fish wasnot previously exported. However, Kenya couldbe exporting more fish than is reported in theofficial statistics. We have estimated, in aprevious section of this paper, that perhaps 20-29% of the actual fish exports are not reported.This suggests that the Government of Kenya islosing tax income amounting to Kshs 2millionper year.

The government receives other income from thefishing industry. First, it is estimated that theFisheries Department collects US5 30,000(Kshs 1.8million) annually from the registrationof boats, issuance of fish trader licenses, courtfines for violators of fishing regulations andother similar sources (World Bank, 1996).Since this figure has remained unchanged forabout the last nine years. it is incorrect toattribute this entire benefit to the fisherytransformation. Nevertheless, in this paper weattribute this entire benefit to the fisherytransformation as we lack data to indicate theproportion that should be attributed to thetransformation. This assumption is reasonablegiven that the fishery transformation startedmore than nine years ago. Secondly, theMinistry of Health issues an export certificate atKshs 500 for every container of fish. Since eachcontainer weighs 8,000 kilograms, it meansthat, in 1997, when 12,470 tonnes of Nile perchfillets were exported, the Ministry of Healthreceived Kshs 0.78million through the issuanceof export certificates. Thirdly, the KenyaBureau of Standards (KBS) charges Kshs200,000 for each annually renewable license.KBS is thus able to collect a total of Kshs2.8million annually from the fish processingand animal feeds firms that are based on LakeVictoria fisheries. The Kenya Chamber of

Commerce and Industry (KCCI) also receivessome fee from these firms.

Finally, fishing co-operatives and localauthorities receive a sizeable amount of revenuefrom fish trade. The co-operatives charge acommission of Kshs 0.2 for every kilogram offish handled while the local authority of Busiadistrict, for example, receives about Kshs 2 aslevy for every kilogram of fish. It is estimatedthat all the local authorities and co-operatives inKenya receive about US$ 2million (Kshs120million) annually (World Bank, 1996).However, because of mismanagement and otherinstitutional problems, our survey revealed thatthis money does not benefit the local fishersthrough improved services or infrastructure.

In total, we estimate that the governmentcollects at least Kshs 131.6million (US$1.9million) annually from the Lake Victoriafisheries, most of which can be attributed tofishery transformation. This revenue is quitesubstantial (though there are opportunities tocollect more!) and supports the argument thatforex earnings do not comprise a significantbenefit emerging from fishing.

Fisherman Income and Increase in Fish Prices

A look at the nominal fish prices indicates largeincreases across the species, particularly in the1980s and 1990s when the Lake Victoria fisherybecame increasingly commercialized (Fig 2).The ex-vessel price of Nile perch, for instance,increased approximately nine times between1988 and 1995. These high prices are, however,largely illusorv because of increasing inflation.After the prices are deflated, it is shown thatonly the ex-vessel price of Nile Perch hasincreased in real terms since the 1970s and1980s (Fig 3). Even this increase, however, ismarginal. Thus, the price a fisher received for akilogram of Nile perch in 1995 was only 26%higher than what a counterpart received in 1975(Ikiara 1999). Figures 2 and 3 indicate that thetrends of prices for the three commercial fishspecies of Lake Victoria were more or less thesame until 1991 when the real prices of Nileperch and tilapia followed a closely similartrend but the price of R. argentea followed theopposite trend. Thus while the real prices ofNile perch and Tilapia increased between 1991and 1993 but dropped between 1993 and 1995,the price or R argentea dropped between 1991

and 1993, and increased between 1993 and1995. If the data plotted are accurate, thesetrends suggest that prior to 1991, the markets ofthese three commercial species were largelyindependent but after 1991 the Nile perch andtilapia behaved as substitutes. As the price ofone species increased, demand would beswitched to the other, causing its price also torise. The prices of the two substitutes would,thus, tend to follow the same trend. R argenteaon the other hand continued to operate in anindependent market.

Higher prices are one of the importantmacroeconomic benefits of the Lake Victoriafishery transformation. High prices havetranslated into higher incomes for the fishers. Itis estimated that fishers earned Kshs 5.2 billionin 1995, representing 26.7% of the value of thefish retail trade. Had the fishery transformationnot taken place, ex-vessel fish prices would nothave reached present levels and the earnings tofishers would have certainly been less inabsolute terms. Increasing fish prices havesocio-economic and environmental costshowever. These are discussed in a later sectionof this paper.

Largely because the transformation has notaffected Tilapia and R. argentea as it has Nileperch, real prices for these two species in the1990s have remained lower than their 1970levels, although the declining trend that wasevident in the 1970s and early 1980s wassomewhat slowed down in the late 1980s andthe 1990s. In fact, we predict that as thecommercialization of omena intensifies in thecoming years, the real earnings for fishers willsurpass the 1970 level. As Figure 3 shows,prices have been on an upward trend since 1985except for the decline experienced between1991 and 1993 due to unprecedented high ratesof inflation in Kenya. The same is true for Niletilapia. As fish processing firms turn to theprocessing of tilapia in an effort to increasecapacity utilization and as the domestic demandfor this species increases, competition is likelyto push the price upwards.

Employment and Livelihood

Due to superior infrastructural capacity, thelarge scale processing and trading companiessoon pushed aside the small-scale operators inthe Nile perch business, which was generating a

substantial number of jobs. It has beenestimated that a total of 180,000 new jobs werecreated in the harvesting, processing anddistribution of sub-sectors of the Kenyan lakefisheries during the 1980s. During this time thelake community came to regard the Nile perchas 'the saviour" (Reynolds and Greboval, 1988;Greboval, 1989), and people who had beenpreviously under-employed became fullyemployed as the fortunes associated with theNile perch soared. Medard and Wilson (1996)suggest that for the whole lake the totalemployment in fishery (including that inancillary activities), rose from 158,000 peoplebefore the Nile perch dominance to 422,000people by 1992 when Nile perch fishing was atthe peak. This suggests that the fisherytransformation created 264,000 jobs.

The initial Lake Victoria fishery transformationcontributed greatly to national food security andnutrition. Annual per capita fish consumption inKenya increased from 2 kgs in 1963 to 8 kgs in1992 (Kenya Fisheries Department). Eventhough the per capita consumption figuresignored the amounts of fish exported and usedfor animal feeds production, it is widelyacknowledged that the initial years of thetransformation wrought substantial food securityand nutritional benefits. This initial beneficiaryperiod of fishery was soon reversed, however.As large-scale capitalized processors and tradersgradually took control of the harvesting,processing, distribution and marketing of LakeVictoria fish, jobs in the traditional sectorsdisappeared. These losses are described in detailin a later section, where it will be shown thatthe net employment effect of fisherytransformation has been negative in theprocessing and trading sectors. Moreover, asfish prices increased, fish became increasinglyinaccessible to the local fishing community andother poor Kenyans seriously threatened byfood insecurity. This is also discussed in detailin later in this section.

In the harvesting sector, the transformation ofKenya's Lake Victoria fishery has had apositive impact on employment so far. Asdemand for fish at the ex-vessel market hasexpanded and prices risen, many people havebeen attracted to the fishery. This has beenreinforced by credit relationships between theprocessing and harvesting sectors, whereas

previously there were capital constraintshindering the growth of harvesting. Of coursethe increase in the numbers of fishers and boatsthat has occurred following the growth of theNile perch export business and the fishmeal-based animal feeds industry cannot be entirelyattributed to these developments. Current levelsof population growth and unemployment rateswould have definitely caused some entry.Nevertheless, our opinion is that the fisherytransformation has had a notable impact onemployment in the harvesting sector.

Between 1979 and 1985, the number of fishersin Lake Victoria grew by 19.4% compared with9.1% over the 1989- 1992 period. 25% over the1992-95 period and 33.3% over the 1995-1998period. From this, we conclude that the rate ofgrowth in the number of fishermen in the pre-Nile perch days was about 86% of the rate ofgrowth in the era of fishery transformation. Webelieve that this acceleration in the entry offishermen is largely driven by the rise in ex-vessel fish prices. This employment is aconsiderable benefit given that not only thefishermen but also their many dependants obtaina source of livelihood.

It is now estimated that there are about 40,000registered fishers exploiting the Kenyan LakeVictoria fisheries (Fisheries Department). Giventhe high incidence of unregistered fishermenfound during our random survey, we estimatethat 80,000 Kenyans are employed as fishers inthe lake. Our estimate is based on the fact thatup to 20% of the boats were thought to be

unregistered in 1991 (Hoekstra et al., 1991), yetthese are easier to monitor and register thanfishers. It is possible, therefore, that up to 50%of the fishers who operate in the lake are notofficially known.

Total employment in the fishery can beestimated. Assuming that for every job createdin the harvesting sector three others are createdin support (boat building and repair, fishinggear manufacture and repair) and ancillaryactivities (processing, transport and marketing),we estimate that a total of 240,0000 people areemployed in the Kenyan fisheries of LakeVictoria. Of course even if commercializationhad not taken place, employment would havegrown but at a lower rate; Lake Victoria fisherywould have remained largely artisanal. Goingby the FAO estimates that every job created inthe harvesting sector of artisanal fisheries indeveloping countries creates one other job insupport and ancillary activities, employment inLake Victoria fishery (had the transformationnot taken place) would have been 80,000. Thetransformation, thus, could be credited withcreating an additional 160,000 jobs so far. Thisis an enormous benefit for a country which hasunemployment in excess of 25%.

The value of these jobs in monetary terms canbe estimated. In his study, Ikiara (1999) foundthe average monthly income for boat owners tobe Kshs 6,000. Fishing crew-members earnKshs 1,000-2,000 per month. We believe thatpeople employed in the fish-processing sectorearn slightly more than fishing crews. Since the

vessel owners are few in number, we assume anaverage monetary income of Kshs 3,000 permonth for all categories of employment. Thistranslates into a current annual amount of Kshs5.8 billion.

Commercial Spin-off ActivitiesProcessing and trade based on Nile perchskeletal by-products are the most importantspin-off activities that have emerged from themodern processing industry. This by-product,which was a disposal nuisance for theprocessing factories in the early 1980s, hasfound a large market not only as food forhuman consumption but also as an input into themanufacture of animal feeds. There is, in fact,serious competition between the users of fishskeletons. An estimated 2000 workers, mostlywomen, were engaged in processing skeletonsand sales in the early 1990s (Abila and Jansen,1997). This commercial activity has served as asignificant source of livelihood to these peopleand their dependants. This is a directemployment and income benefit of the fisherytransformation. Assuming that the monetaryvalue of each of these jobs is Kshs 3,000 permonth, the annual income of this spin-offactivity is Kshs 72million. This is, however,only part of the value estimated for employmentin the entire fishery.

Commercialization of Lake Victoria fisherieshas produced another important spin-off. Theexpansion of beaches along the lake-shore bymore and more fish dealers setting up camp hasattracted a significant amount of commercialand service activities. Most of the largerbeaches are now dotted with cafes, bars andsmall hotels, among other business premises.Ikiara (1999) found that such business has beenso good that more fishers are welcome now tojoin the beaches despite the negative externalitybound to affect individual catch rates. To most,the benefits of this spin-off outweigh thenegative externality. More research into thisspin-off is needed in order to quantify theassociated benefits.

The development of an animal feeds industrybased on local fishmeal has yielded anadditional benefit. Since fishmeal is rich inproteins, the quality of animal feeds which havesome fishmeal is definitely high. This must havea positive effect on livestock production and,thus, the economy. Once again, we feel thatresearch based on primary data is required toquantify the value of this spin-off.

Table 5: Annual benefits from Lake Victoria in Kenya

Benefit Beneficiary Annual amount, Kshs

Foreign exchange earnings Kenyan economy 1 billion

Income to owners of fishprocessing and animal feedsfactories

Investors, both Kenyan andforeign

1.12 billion + higherprofits for owners andanimal feeds factories

Tax Revenue:♦ Export levy♦ Registration of fishing

operations♦ Issuance of export certificate♦ Kenya Bureau of Standards

(KBS) charges♦ Fisherman Co-operatives

and local authorities

Government of Kenya

Local Authorities

Fishing Cooperatives

♦ 6.2 million1.8 million

♦ 0.78 million

♦ 2.8 million

♦ 120 million

Income in fish sales and fishersincome

Fishers 5.2 billion

Employment and livelihood 160,000 Kenyans employed since1980

5.8 billion currently*

Spin-off commercial activities 2,000 Kenyans employed incommercial and serviceenterprises in the beaches in thelast 10 or so years

7.2 million plus theunestimated but large valueof enterprises

Total** At least 7.1 billion

* This, of course includes income to fishers reported as Kshs 5.2 billion, and the value ofspin-off commercial activities

** Care is needed in totaling to avoid double counting

Summing up the Benefits

It is evident that the fishery transformationassociated with the development of a lucrativefish export business and an animal feedsindustry based on local fishmeal has wroughtsubstantial benefits. These benefits aresummarized in Table 5. One of the benefits thathas received disproportionately large attention isforeign exchange earnings from the export offish. It is easy to understand why. With a tradeaccount surplus of up to Kshs 1.5 billion, fishtrade is literally indispensable for Kenya whichhas a perpetual deficit in its current account.We feel, however, that the other benefits shouldreceive as much, if not more, attention andtherefore policy support. In particular, fishers'earnings is a benefit that ought to receive thelargest attention with a view of finding how theexport trade and other developments impact on

it. So should employment generation, foodsecurity and resource sustainability as these arekey macroeconomic concerns for Kenya. AsTable 5 shows, employment and livelihood is amuch larger benefit than foreign exchangeearnings.

The annual value of fish trade in Kenya standsat about Kshs 20 billion, compared to Kshs 1.5-2.0 billion export value. This indicates that, asmuch as foreign exchange is seriously needed inthe country, fish exports should not receiveexclusive attention. All aspects of the fishingindustry need to be considered because, over-emphasis on fish exports is diminishing thecapacity of the fishing industry to fulfill itsother objectives: sustainable resourcemanagement, food security and employment.

Costs of the Transformation

The transformation of Lake Victoria fishery thathas been caused by the development of the fishexport business and a local fishmeal-basedanimal feeds industry has had negative impactstoo. These include an ecological upheaval, lossof control by the local community over mostaspects of the fishing enterprise anddisplacement of people who were formerlyemployed in traditional fish processing andmarketing sectors. In addition, there has been askewed distribution of income and increasingfood insecurity in the lake region and the entirecountry as fish has gradually becomeunaffordable and unavailable. These costs arebriefly discussed in the remainder of thissection.

Loss of Control of the Resource by LocalFishermen

The loss of control over the means ofproduction as well as processing, pricing andmarketing by local fishers to industrial investorshas generated substantial costs. There isdiminished access due to investments in suchmodern technologies as trawling and tembea. Inthe harvesting sector, newcomers haveintroduced trawlers and tembea boats, investedin many boats and a lot of fishing equipmentand hired fishermen to do the fishing for them.The fishers in turn are controlled through creditrelationships. The phenomenon of absenteefishers is now widespread. The local fishershave, thus, lost control of the means ofproduction. Wilson et al. (undated), writingabout the Tanzanian side of the lake, note thatharvesting capacity is now concentrated in thehands of a smaller number of fishers and into aless diverse set of gears and techniques. Inpricing, local fishers have no say because oflack of storage facilities, the perishability of fishand the pressure of credit relationships. Inaddition, each local fisher accounts for aninsignificant portion of total fish supply and istherefore a price taker. In the processing andmarketing sectors, large actors with a lot ofcapital have edged out traditional sellers andprocessors. Wilson et al. (undated) estimatedthat in the accessible, central landing beaches ofTanzania, 77% of all the Nile perch landed wassold to the processing factories, leaving little forother fishery participants. This has increasedstratification within the industry and changed

production relations. Gibbon (1997) estimatedthat in 1996, 50% of all Nile perch landed inTanzania went to filleting factories. In Kenyafor the same year, Abila and Jansen (1997)estimated that about 48% of all the Nile perchwas taken by the filleting factories.

Some traders and agents now literally controlthe fish landings of entire beaches. Entry intoand operations within the fishery have taken ona "free-for-all" atmosphere. Geheb (1995) notedthat the transformation of the once controlledaccess to fishing with proper management bythe indigenous community into a "free-for-all"situation is mostly attributable to thecommercial fishing of Nile perch. This is, thus,another cost of fishery transformation. It is acost because the local fishers have lost controland access to the fishery and thus, no longerhave even the slightest incentive to adoptresponsible fishing behavior, a factor that hasaccentuated the open access attitude (Owino,1999). This may prove to be an enormous costto the integrity of the fishery resource in theforeseeable future, particularly in the context ofoverfishing and biodiversity.

Loss of Employment and Livelihood

The employment situation changed substantiallywhen large-scale processing and fishmealindustries and trading agents gradually edgedout the women who traditionally dominated theprocessing and marketing sectors. On the basisof their survey of the 12 fish processing firms inoperation at the time, Abila and Jansen (1997)estimated that these firms created about 2,400jobs but displaced about 15,000 other workersin the traditional processing and marketingsectors. The net effect of these large firms asfar as employment is concerned has been a lossof jobs. In fact, three quarters of the jobscreated by the fish processing factories arecasual, temporary, low-paying and have nolong-term benefits (Abila and Jansen, 1997).Furthermore, these jobs are given to urbaniteswho live near the factories and not the localfishing community. The large proportion ofomena going for animal feeds productionrepresents loss of employment opportunities forthe women who would have been involved in itsprocessing and marketing.

Our estimate of the current level of employmentin all sectors of fishery, suggests that 20,000

jobs have been lost since the 1980s when180,000 jobs were estimated to have beencreated. The annual monetary value of this loss,using the assumptions made in the previousanalysis, amounts to Kshs 0.72 billion.

The 2,000 jobs created in the processing andtrade of Nile perch skeletons are also underthreat as many of the skeletons are beginning tofind their way into fishmeal production. Abilaand Jansen (1997) estimate that 50-60% of thesejobs have been lost and the remaining workersare underemployed. To take consideration ofunderemployment, we use the upper percentageto estimate that the cost of loss of jobs in theprocessing and trading of Nile perch skeletonsis currently Kshs 43million.

Employment opportunities have, in addition,been lost as fish processing factories haveinvested in trawlers, other harvesting gear andmotorized boats for fish transport from remotebeaches to more accessible collection points.Trawlers and motorized transport consume lesslabour per kilogram of fish handled (Abila andJansen, 1997), leading to loss of employment.There are currently about 15 trawlers operatingon the Kenyan side of Lake Victoria, despite theexisting ban on trawling. With motorized boats,a few traders or agents are able to control mostof the fish produced, thus reducing theemployment opportunities for other people.Some traders or agents have establishedrelationships with the fish processing andanimal feeds firms and have become very large.Mitullah (1999) reports that a singletrader/agent in 1997 had eight motorized boats,had constructed a modern shed for handling fishmore hygienically, had 50 employees and 40part-time assistants. Tembea technology iscatching on very rapidly, but it unfortunatelyinvolves a substantial loss of employmentopportunity in the harvesting sector. Eachtembea boat uses one more person than theordinary gillnetting boats but catches 5-10 timesmore fish (Jansen et al., 1999). This coupledwith the fact that one beach alone can have upto 40 tembea boats are seriously worrisomedevelopments.

About 84% of the people engaged in fishtrading and processing in the Kenyan side ofLake Victoria are women (LVFRP/Tech/99/02,1999). Consequently the transformation of thelake fisheries engendered by the development of

Nile perch export and fishmeal-based animalfeeds industries, which has led to loss of jobs inthe traditional trading and processing sectors,has created costs associated with genderdisparities in income. Several factors haveenabled Nile perch filleting factories and agentsof animal feed manufacturers to push womenand other artisanal traders and processors awayfrom competition. These firms offer relativelyhigher prices for fish and often establish creditrelationships with fishers; artisanal operatorscannot match such terms. Another factor is therelatively high capital cost of processing theNile perch. One of Kenya's importantdevelopment objectives is to uplift the conditionof women, the attainment of which has not beenhelped by the transformation of Lake Victoriafishery. In these fisheries, commercializationhas pushed women out of employment. Scudderand Conelly (1985) note that in Africanfisheries, commercialization of fishing hasworsened the status of women from part-timeparticipation to exclusion. Our random surveyof beaches along the Lake Victoria suggestedthat many women fishmongers and processorshave been marginalised out of business.

The cost of these job losses is substantial. Notonly are livelihoods taken away but social costssuch as increase in crime rates and socialtensions between the displaced people andfactory owners are also worrisome.Furthermore, the displaced people have resortedto processing and trading in juvenile fish, aserious threat to the sustainable use of fisheriesin the years to come. A detailed research basedon primary data is required to estimate the costof employment losses in the harvesting sector,the cost of increasing gender disparity inincome and the costs associated with increasingcrime rates, social tensions and the switch todealing in juvenile fish.

Income Distribution

Following the development of the Nile perchexport business and fishmeal based animal feedsmanufacturing industry, fish prices have takenan upward trend. As discussed earlier, the priceof Nile perch in particular has improved in realterms, a development that has benefited thelocal fishers. In spite of this, however, fishersare most probably worse off following thesedevelopments than they were before because ofthe fall in catch rates. It is doubtful whether the

increase in price has been large enough tocompensate for the fall in catch rates. Thesituation with the other two commercial fishspecies has been worse as the fall in catch ratesand real prices continues to be below 1970levels.

The upshot of this is that income distribution isincreasingly skewed in favor of the owners offish processing and animal feeds factories andagainst the fishers, factory employees and fishconsumers. The latter are forced to purchasefish at higher prices. The cost of skewedincome distribution is that fishers feel exploitedand ignored by the government. Besides theobvious political cost of such feelings, there isalso an environmental cost since fishermen nolonger have the incentive to uphold responsiblefishing behavior which assists sustainability ofthe fishery and biodiversity of the lake.

Commercialization of Lake Victoria fisherieshas also exacerbated the inequality betweenvessel and gear owners and their crewmembers. Wilson et al (undated) identifyvarious ways in which crew members have beenadversely affected by the internationalization ofthe Lake Victoria fisheries. For example,fishing boats operating from central beachesallocate a higher percentage of the catch to boatowners and less to the crew. Secondly, sharesystems assign "maintenance and depreciation"payments prior to sharing of the catch. Sincefishing units selling in international marketshave investments that are five times higher thanordinary units, internationalization of thefisheries has steepened crew members' careerpath so there has been social disruption andmoral decay in communities along the beaches.In sum, the effect on fishing has been economicand cultural alienation from both theiremployers and communities. Most feel a senseof loss of ownership or long-term commitmenttowards the fishing (Wilson et al., undated).

Food Insecurity and NutritionAfter ecological upheaval, rising food insecurityis perhaps the largest cost of the establishmentof fish export and fishmeal manufacturingenterprises on the fisheries of Lake Victoria.Fish has been an important source of animalprotein for many Kenyans largely because of itsrelatively low price. From the national averageof 2.2 kgs per capita in 1963, fish consumptionin Kenya increased to 8 kg in 1992. A large

part of this increase in fish consumption isattributed to improved catches of Nile perch.Consumption grew even in hitherto non-fish-eating areas of the country. For the fishingcommunity around Lake Victoria, theavailability of cheap animal protein was agodsend for this area of low agriculturalpotential and where people lacked purchasingpower to acquire alternative sources of animalprotein.

The initial years of Nile perch fishery, thus,improved food security as more fish wasavailable at affordable prices. Greboval andMannini (1992) argue that local diets aroundLake Victoria improved between 1975 and 1989as a result of an increase in the production oftable fish from 44,000 to 405,000 tonnes and a'lake-wide fall in the dollar prices of fish overthe same period. This drop (Fig 3) benefitedfish consumers in East Africa but adverselyaffected fisher incomes. However, as thedomestic and external markets for Nile perchexpanded in leaps and bounds, and as demandfor tilapia and omena grew in the hotel andanimal feeds industries, respectively, less andless fish remained for the local community, andwhatever was available became unaffordable.This was exacerbated by declining production,particularly in the 1990s.

Two decades of these developments have nowled to a serious food insecurity problem. Fishconsumption in Kenya is now on a downwardtrend as most of the harvested fish either goesto the export markets or is used in themanufacture of animal feeds. The per capitafish consumption of 8 kgs reported by theFisheries Department for 1992 neglects the factthat a substantial amount of the fish produced inthe country is either exported or used for theproduction of animal feeds and is, therefore,unavailable for domestic consumption.

Abila and Jansen (1997) take these factors intoconsideration and offer a more realistic estimateof per capita fish consumption in the country.Their figures indicate that fish consumption inKenya dropped from 4.5-5.0 kgs per person peryear in 1990 to 3.1 -3.7 kgs in 1996, anindication of increasing food insecurity. Thisshould be a source of concern given that fish isnot only a source of animal protein but is also

cheaper than alternatives. It adds flavour to thestaple diet; is rich h1 essential fatty acids,vitamins and minerals; is easier to process thanother sources of animal protein and it offersfood security at the household level byproviding a safety net during harvest failures(Ikiara, 1999).

The growth of the Nile perch export businessand the increased use of fishmeal in animalfeeds production are largely responsible forworsening food security, especially in thefishing communities. In Tanzania, Wilson(1993) showed that even though there has beenan increase in fish consumption by householdswith at least one fisher member, there has beena definite drop in fish consumption by manyhouseholds within the lake region in generalsince 1989. The highest levels of malnutrition inKenya are now found within fishingcommunities because fisher-folk consume verylittle of what they harvest and yet they have noaccess to supplementary sources of protein(Ikiara, 1999). Thus, Kwale and South Nyanzahad some of the highest levels of stuntingamong children, at 43.4% and 30.9%,respectively, in 1987, which had increased from1982 levels. Kisumu, the seat of the fishingindustry, has the highest prevalence of urbanfood poverty as well as absolute poverty, at44% and 47.75%, respectively (Republic ofKenya, 1997a). The same source reports surveyresults showing that people living around thelake, especially children, suffer from proteindeficiency. Yet daily access to 10 grams ofomena would adequately address the iron, zinc,and vitamin A deficiency among children(Mwaniki, 1998). Since the poor households areunable to access alternative sources of animalprotein, the cost they suffer as a result ofreduced access to fish cannot be estimated fromreplacement cost but from the cost related todeclining productivity, malnutrition and otherailments.

The Lake Victoria fishery transformation hascompromised food security in several ways.First, close to 50% of all the Nile perchproduced is exported, leaving only half fordomestic consumption. Moreover, most of whatremains is consumed by rich urbanites, leavingonly immature perch and poor quality rejectsfor consumption by the fishing community. Thefish processing factories now process fish

smaller than 1 kg in individual weight, leavingonly juveniles and spoilt fish for the localmarket. In Tanzania, it has been estimated thatabout 30% of the Nile perch harvested isretained for local (that is lakeside) consumption(Wilson and Medard, 1999).

Secondly, Nile perch and tilapia becameluxuries to the local fishing community a longtime ago when demand for these fish species inthe domestic and external markets pushed upprices to and made them unaffordable toKenya's poor people. Even the fishers whoharvested these fish could not afford to consumethem as the opportunity cost was very high.Figure 2 shows the tremendous increase in ex-vessel fish prices, particularly since the mid-1980s. This increase in fish prices was notaccompanied by rising purchasing power for thepoor. When they could no longer afford Nileperch and tilapia, fishermen and other poorpeople consumed omena which is also rich inprotein but much cheaper. However, the priceof omena also increased substantially in the1990s following greater demand for it in theanimal feeds industry. Poor Kenyans, includingthe fisher-folk, are thus increasingly beingdisplaced from the consumption of this species.Thirdly, the Nile perch skeleton left afterfilleting was in the 1980s a significant source offood and protein to the poor people in the lakeregion, but it is becoming increasinglyinaccessible because it is used in themanufacture of animal feeds. Abila and Jansen(1997) estimated that in 1996 and 1997, 60% ofall the skeletons were used for fishmealproduction. Thus. not only are the skeletonsunavailable for human consumption, but theyare also becoming unaffordable. Another relatedthreat to food security is that processingfactories have improved their filleting efficiencyso that up to 50% of the flesh is removed,leaving the skeleton rather "naked" (Abila andJansen, 1997). Finally, the current use of about70% of all omena harvested for the productionof animal feeds has taken away what has beenthe main fish diet for the fishing community andother Kenyans. There are six animal feeds firmsin Kenya using this fish. The fish remaining forhuman consumption is unaffordable. While theprice of a kg of dried omena sold at only Kshs20 in 199O, this tripled to Kshs 60 only fiveyears later. There are indications, also, that an

export business based on this species mightdevelop, with even more serious consequences.

One could argue that since fishmeal is used inlivestock production (another source of animalprotein), the use of omena and Nile perchskeletons for the manufacture of fishmeal doesnot constitute a real threat to food security.However, as Ikiara (1999) correctly observes,such use of fish other than for direct humanconsumption constitutes a "redistribution ofnutrients or welfare from the have-nots' to the'haves' since the livestock sources of proteinare largely inaccessible to the poor."

Declining food security is a majormacroeconomic cost of the increasing export offish and use of fish and fish products forfishmeal manufacture, and this cannot beoveremphasized. Abila and Jansen (1997)estimated that had Kenya not exported any fishand not used any for fishmeal production in1996, the country's per capita annual fishconsumption would have doubled to 6 kgs. Thiswould have substantially improved health,productivity and economic growth. Medicaloutlays made to treat malnutrition would have,additionally, been saved and used elsewhere. Amore detailed welfare survey in the directionsuggested here would lead to useful estimates ofthe food security and nutrition cost associatedwith the fishery transformation. No data existcurrently to aid in such estimation.

Ecological Upheaval

The ecosystem perturbation that has occurred inLake Victoria over this century cannot beentirely attributed to pressure emanating fromthe fish export and fishmeal manufacturingindustries as this process was initiated longbefore these industries were established.Certainly, however, these industries haveaccelerated the rate at which the lake ecosystem

has been altered, particularly in the last threedecades, through the effects of alien fishspecies, over-fishing and use of destructivefishing technology. The fish-processing sectorhas responded in various ways to their excessprocessing capacity, all detrimental to thequality of the environment. The mostdestructive of these has been the tendency toaccept smaller and smaller fish sizes forprocessing as supplies dwindle and competitionbetween the factories intensities. Thus, whilefactories previously could never accept fish thatwere smaller in individual size than 2-: kgs,they now routinely accept fish that are smallerthan 1 kg or 44 cm in total length (Abila andJansen, 1997: Wilson and Medard, 1999). Fishof this size are immature. In 1990, it wasestimated that a sexually mature male Nileperch was 60 cm long or 2.6 kgs in weightwhile the corresponding figures for the femalewere 90 cm and 9 kgs (Ligtvoet and Mkumbo,1990). Harvesting of immature fish poses agrave threat to the sustainability of thisimportant fishery resource as fish are removedbefore they have had a chance to reproduce. Itis estimated that catches of juveniles constitute10 - 35% of the total Nile perch landings insome beaches (Abila and Jansen, 1997). Themain factor responsible is the use of nets ofsmall mesh size. A net with mesh size of 5inches and below catches perch that are notsexually mature. From a survey of the Kenyanside of Lake Victoria in 1995, Ikiara (1999)found 29% of the boats engaged in Nile perchgillnet fishery using nets of below 5-inch meshsize; and 71% of those engaged in beach seinefishing were using nets of 3-inch mesh andbelow. The gravity of this situation cannot beoveremphasized.

BOX 2.

WISHING-AWAY THE FOOD SECURITY CONCERN?

A Review of Findings of a European Union supported Marketing Study titled "Lake Victoria FisheriesResearch Project Phase II" (LVFRP/Tech/99/02, 1999)

Not everyone shares the view taken regarding food security and the adverse consequences of recentdevelopments in Lake Victoria fisheries. In a recent marketing survey carried out in the three countries sharingthe lake, the Lake Victoria Fisheries Research Project (LVFRP/Tech/99/02, 1999), indicates that people livingwithin a 35 km radius of the lake consume an average of 45 kgs of fish per person per year. In Kenya, thisconsumption is estimated at 42 kgs. This is unbelievable given the national per capita consumption figuresmentioned in the previous paragraphs and notwithstanding the fact that average consumption levels forcommunities living around the Lake are likely to be higher than national averages. In fact, the authorsconclude that the widespread belief that Nile perch is practically unavailable to local consumers since most ofit goes to the processing factories and the export markets is not true. The report, in addition, finds no evidenceto support the view that Nile perch available to local consumers is predominantly rejected and undersize. Thereis also no support for the view that the animal feeds industry has reduced omena availability to locals.

We fault the findings of LVFRP Tech/99/02 (1999) on the basis of a number of arguments.

• First, given that total landings from the lake have been declining in the 1990s (which the reportacknowledges) while population and the amount of fish exported and/or used for the manufacture ofanimal feeds have been increasing, the amount of fish available to local consumers must have declinedalso. Moreover, in the LVFRP/Tech/99/02 (1999) survey, 45% of the local consumers cited low incomeas a constraint to the consumption of as much fish as would be desired. A further 25% of these consumersblamed poor catches and 19% blamed high prices. These percentages should indicate that food security isaffected.

• Second, how could anyone return a verdict of no adverse effects without comparing consumption levels?National statistics show that malnutrition has been increasing among most communities around the lakei.e. Western and Nyanza region. In particular, children are suffering from protein deficiencies asdescribed above. This suggests that per capita fish consumption has dropped over time.

• Thirdly, and perhaps more importantly, the methodology used in the survey, is scientifically untenableespecially with regard to sampling procedures applied. The survey sample focussed on consumers in thebeach-side markets, large inland markets and small inland markets. Households were not visited. Thissuggests a high probability for bias. Our thinking and suspicion is reinforced by the large differences inper capita fish consumption obtained by LVFRP/Tech/99/02 (1999) depending on the market in which thesurvey was done Thus, at the beach-side market annual per capita fish consumption was estimated at 66kgs compared with 36 kgs at the inland markets. A more appropriate and empirically-sound methodologywould have been one based on a random sampling of households located within a 35-km radius of thelake, supplemented with an observation of fishers to find out the proportion of their fish catch they retainfor home consumption. In a survey applying the latter methodology, carried out by the authors on theKenyan side of the lake, fishers were found to take home (for consumption) 1.5 kgs out of the average 18kgs harvested per day. Assuming a 25-day fishing month and an average five-member fisher household,we estimate that in 1995, fisher households consumed 90 kgs per person per annum! This suggests thatthe figures obtained by LVFRP/Tech/99/02 (1999) may be close to the reality but also that in only fouryears, fish consumption in the fishing areas may have decreased substantially.

The criticism made above about the survey methodology adopted for consumers does not apply to the entireLVFRP study. Randomly selecting fish traders and processors in the three types of markets, in particular,facilitated the consideration of various community members. The only weakness is that islands were excludedfrom the survey.

Another way in which Nile perch processingfirms have responded to declining fish numbersis adoption of strategies such as sourcing fromtheir other factories in Uganda and Tanzania forenhanced procurement of raw fish. Some offerfishers credit in exchange for exclusive fishsupplies. Others invest in modern harvestingtechnology including trawlers, tembea, largenets and motorized boats. Some processingfactories have resorted to processing of tilapiaas well as Nile perch to raise capacityutilization. The net effect of these copingstrategies has been an unprecedented increase infishing intensity which has adverse effects onthe sustainable use and the very integrity of theresource system. The sourcing of fish suppliesfrom the Ugandan and Tanzanian sides of thelake is also gradually shifting excess processingcapacity, fueling fishing pressure there too.

By creating a strong demand for the secondmost important fish species, omena, the animalfeeds industry has led to an unprecedentedincrease in the ex-vessel price of this species.This, in turn, has initiated an alarming increasein fishing pressure. The danger of this pressureon the ecosystem is expressed through twoavenues. First, high fishing pressure will lead toharvest levels that exceed the optimum ones,seriously compromising sustainable exploitationobjectives. Secondly, omena is now known tobe an important component of the Nile perch'sfood web. The decimation of this species might,therefore, translate into a Nile perchdecimation, effectively sounding the death knellfor the lake fishery. Pollution from industrial,municipal and agricultural wastes, invasion ofthe lake ecosystem by the water hyacinth,destruction of the ecosystem through wetlandsconversion and damming of rivers, and effectsof fish pathogens are other factors that havecontributed to the perturbation (Ikiara, 1999).

There are several manifestations of fisherydecline that have occurred in Lake Victoria.The first of these is a serious erosion ofdiversity that has seen the number of fishspecies decline from an estimated 350-400species in the early years of this century toabout 177-200 currently. Witte et al. (1992),note that two-thirds of the Haplochrominecichlid species of Lake Victoria have eitherbeen lost or are threatened with extinction. The

1988 World Conservation Union Red Book listshundreds of endemic fishes of Lake Victoria asendangered. In the pre-Nile perch period,Haplochromines constituted about 80% of thelake's total bio-mass while the group nowaccounts for less than 3% of the annual catch. Itis now the Nile perch that forms 80% of thebio-mass. Although a general decline in the fishstocks was first noticed in the 1950s, theintroduction of alien fish species between 1950and 1962 triggered an enormous erosion ofbiological diversity, including non-fish species.This erosion has occurred mainly throughpredation and disruption of food webs. Whileprimary and secondary consumers dominatedthe fish fauna before the dominance of the Nileperch, the situation has changed so thatsecondary and tertiary consumers nowdominate. As the Nile perch populationincreased, that of haplochromines decreased,leading to the increase of phytoplankton,macrophytes, shrimps and benthic organisms.Nile perch is now known to be a predator ofmost endemic fish species, including, R.argentea and its own juveniles (Ikiara, 1999).Goldschmidt (1992) blames Nile perch fordestroying about 65% of the endemicHaplochromines cichlids. As the favourite preyspecies are declining, the Nile perch isincreasingly turning to R argentea, the onlyendemic fish species that has survived the perchonslaught to date. The pressure exerted on R.argentea fishery from the animal feeds industryand human consumption is. therefore, veryalarming given that this fish species alsoconstitutes a portion of the Nile perch's foodchain.

It is impossible to start estimating the cost ofthis biological decline as human welfare isintimately related to species conservation andecosystem integrity. Suffice it to say that thecost is monumental as the loss of biologicaldiversity reduces ecosystem resilience, makingit more vulnerable to more adverseperturbations and thus compromising theeconomic foundation. Moreover, some of thebenefits of biological diversity are not yetknown. The African Great Lakes, includingLake Victoria, are considered to be vulnerableto over-fishing, the introduction of alien speciesand pollution (Okeyo-Owuor, 1999).

The second manifestation of the fishery decline is falling productivity. Total fish landings from theKenyan portion of Lake Victoria entered into a declining phase in the 1990s in spite of increasing fishingeffort. This downward trend has continued as CPUE also continues to fall. For instance, daily boat catchrates have fallen from about 400-500 kgs in 1981 to 100-150 kgs in 1996 (O'Riordan, 1996). In addition,from an average catch of 25 tilapia per net from Nyanza gulf at the turn of the century, there was adramatic decline to only seven fish per net by 1920 and to two per net by 1940 (Geheb, 1995).

The cost of declining productivity is large. Not only are foreign exchange receipts reduced but thewelfare of fishers is threatened. There is an adverse effect associated with a general switch to nets ofsmall mesh size and other destructive technology in response to falling catch rates. These technologiesare a serious threat to the sustainability of the resource.

These adverse effects on the environment in general, and resource sustainability in particular, have beenlargely caused by excessive exploitation emanating from high demand for fish in the domestic andexternal markets (Ikiara, 1999). This demand has attracted excessive capacity into the harvesting andprocessing sectors. Fish processing firms have now invested in efficient but destructive harvestingtechnology, such as trawling and tembea, and assisted fishers to expand their harvesting capacity byswitching to efficient but environmentally costly technologies such as beach seines and mosquito seinenets which catch smaller immature fish. The latter, coupled with the increasing tendency of peopledisplaced from the R. argentea and Nile perch sectors to turn to juvenile fish for survival (Abila andJansen, 1997; Wilson et al., undated), have effectively commercialized immature fish, again withdevastating effects to the integrity of the fishery resource. This has led to high prices for immature fish,particularly "table" fish, initiating another strong force to accelerate the switch to inappropriatetechnology.

Table 6: Summary of the costs (annual) associated with the transformation of Lake Victoria(Kenyan Portion)

Cost Who suffers Annual amounts, Kshs

Loss of control of locals meansof production, pricing,marketing and processing

- The local people

- The lake ecosystem

Substantial

Loss of employment andlivelihood

- Local people 763 million, plus

More inequitable incomedistribution

- Local people

- Environment

Substantial

Food insecurity and nutrition - The local people and poorKenyans in general

- The Kenyan economy due toreduced productivity andgreater medical outlays

Substantial - enormous

Ecological upheaval - The lake ecosystem and thusall people dependent on thelake and those with useand/or non-use value for it

Monumental, much morethan the benefits combined

Desperate to increase processing capacity, somefish processing firms in Kenya have openedbranches in Uganda and Tanzania to collectperch and carry out preliminary processing. Inaddition, many traders now have motorizedboats which travel to the Ugandan andTanzanian sides to collect fish for the Kenyanfactories. The excess processing capacityexisting on the Kenyan side is thereforegradually encompassing the entire lake.

Declining real prices, particularly for tilapia andR. argentea, have also increased exploitationpressure as fishermen struggle to increase theirfishing effort in a bid to sustain or improve theirreal income levels (Ikiara, 1999). The highpoverty levels that exist among the fishingcommunity also contribute to high fishingpressure. Even with rising real prices, poorfishers strive to increase their fishing intake asmuch as possible.

In our estimation, the cost of ecologicalupheaval or threatened resource sustainability isthe largest of all the costs associated with thefishery transformation. There are variousreasons for this conclusion. Lake Victoriafishery is currently worth at least Kshs 20billion to Kenya every year. We say "at least"because the fishery has non-market valuebesides the market value. In the case of mostresources, the non-market value could be muchhigher than the market value. At the currentrate of exploitation, the fishery cannot besustained into the future. Within 20 years,under the current regime, the fishery couldeasily collapse. The country would have gainedonly about Kshs 300 billion (not discounted)within that period. However, suppose that thefishery is further transformed by way ofrationalizing export levels and the use of fishfor animal feeds production and by way ofbetter management. Under such a regime, theannual market value could be reduced, sayhalved. The non-market value would, however,increase. Abstracting from the non-market valuefor clarity, the new market value, at the pointwhere the fishery is being exploited optimally,would be received in perpetuity. It is obviousthat the optimal management regime wouldyield much larger benefits to the country. Todemonstrate this, consider a lifetime of 70 yearsonly. Within that lifetime, total benefits fromthe fishery would amount to Kshs 525 billion.

The cost of investment, in terms of rationalizedharvest and processing rates, would be recoupedin less than a lifetime. It is on the basis of suchreasoning that we take the position that noamount of forex earnings, or indeed any otherproduction targets, should justify pushing thefishery to collapse.

This paper has not been able to put actualquantities on most of the costs associated withthe transformation of the Lake Victoria fisheries(Kenyan side) due to data unavailability.Research based on primary data is urgentlyrequired to facilitate the quantification of thesecosts. Even without quantification, however, wefeel that the cost of fishery transformation hasbeen monumental, especially the cost arisingfrom ecological perturbation. This and othercosts, as identified in this sub-section of thepaper, are summarized in Table 6.

Do the benefits justify the costs?The discussion in this section of the paper hasshown that the costs associated with increasingexports of fish from Lake Victoria and the useof fish in the manufacture of animal feeds aremonumental. They certainly surpass thebenefits, in our opinion. In fact, the overallbenefits are not large enough to cover the costof ecological or environmental damage alone.This cost is enormous because uncontrolled fishexports and use of fish in the animal feedsindustry could lead to the collapse of theresource system.

These costs, nevertheless, do not mean that nofish should be exported or that no fish should beused in the production of fishmeal. What itmeans is that the use of fish for these purposesvis-a-vis human consumption should beconsidered carefully with a view to rationalisingthe quantities of fish exported and those used inthe production of animal feeds. Research shouldbe undertaken to establish the optimalexploitation regime for these importantfisheries. Such research would inform on therational export quantities and the quantities offish that can be safely used in the manufactureof animal feeds. Improved management of thefisheries, requiring perforce the input of allstakeholders and the government, is critical inraising the productivity of the fishery, therebymaking more fish available to meet variousneeds.

What does the current fisheries management sayabout the issues raised in this paper?Specifically, what is the official policyregarding the export of fish, the use of fish inthe animal feeds industry and humanconsumption of fish? What managementstrategies are currently being used to address

these issues? Are there enough efforts or doessomething more need to be done? Whatalternatives exist to ensure that the fisheryresource is sustainably exploited? These aresome of the questions we attempt to answer inthe concluding section of this paper.

5 Concluding Remarks: Policy Implications

The Government of Kenya policy for thefisheries sector has the broad objective ofmanaging fisheries sustainably in order toobtain the maximum yield while protecting theenvironment and securing benefits for futuregenerations (Republic of Kenya, 1997b). Inmore recent policy statements, "maximumsustainable yield" has been replaced with themore realistic concept of "optimum sustainableyield" but without accompanying indications ofan actual change of regime. The developmentobjectives of fisheries management include:

• Increase in the per capita fish consumptionthrough the production of low cost highprotein fish;

• Generation of employment in fishing, fishprocessing and trade;

• Improvement of the living conditions offishers and their dependants by themaximisation of economic benefits accruingto them through the provision of facilitiesfor cold storage, fish handling andprocessing: and

• Maximisation of export and foreignexchange earnings capacity.

Other important elements of the fishery policyinclude focusing attention on value addingindustries and strengthening mechanisms for theenforcement of rules and regulations, especiallyin Lake -Victoria.

Management of Fisheries in Kenya

The Fisheries Department is mandated todevelop, manage and conserve fisheries inKenya. The Kenya Marine and FisheriesResearch Institute (KMFRI). the Lake VictoriaBasin Development Authority (LBDA), theNational Environment Secretariat (NES),various NGOs and other institutions are amongthe many institutions participating in themanagement of the Lake Victoria fisheries.

The management of Kenyan fisheries of LakeVictoria has relied on command-and-control(CAC) rather than economic or market-basedinstruments. CAC instruments involve aregulatory agency (the government) whichdetermines the efficient level for a specifiedfishery and then enforces rules to ensure this

level. In contrast, economic instruments rely onincentives rather than coercion to achieveefficient resource use outcomes. Economicinstruments or incentives include Pigouviantaxes, well defined and secure property rights,tradable individual transferable quotas (ITQs)and subsidies for generators of positiveexternalities.

In 1940, the first rules for the management ofLake Victoria were promulgated, coveringfishermen licensing, registration of boats, fishnets dimensions, fish size and catch size. Onlytilapia, considered endangered at the time, wasregulated. Currently, the policy of open accessremains, with anyone able to raise the moneyrequired for annual licensing, boat labelling andregistration allowed to join the fishery. Theregulations that are enforced by the FisheriesDepartment at present include mesh sizerestrictions and closed seasons/areas.

Despite having had regulations for a long timeand despite the large number of actors in thedevelopment and management of Lake Victoriafisheries, the fishery has experienced a seriousdecline. We have discussed in detail two of thecauses of this decline: growth of Nile perchexport business and increasing use of localfishmeal in animal feeds industry. Othersignificant causes of fishery declh1e are thepoor management and lethargic enforcement ofregulations.

Management of fisheries in Kenya has been andcontinues to be generally poor. This is hardlysurprising given that management has beenbased on the command and control regime.CAC is verv costly and adherence to regulationspoor on account of weak enforcement capacityparticularly in developing countries. In Kenya,management has been characterised by weakpolitical will; inadequate and outdated laws andregulations; a weak capacity for enforcingregulations; inconsistent and inadequate policiesthat have shifted continuously as the FisheriesDepartment has moved from one ministry toanother; and a generally weak institutional setup (Ikiara, 1999, O'Riordan, 1996).Consequently, there is inadequate logisticalinfrastructure, inadequate staffing, inadequateinformation, corruption, conflicts of interest,regulations that are out of touch with the socio-

economic realities of the fishing communities,lack of incentives for compliance such as secureand well defined property rights, weak databaseand inconsistent fishery policy (Ikiara, 1999). Inparticular, fishery policies, statutes andinstitutional structures have failed to respond todevelopments such as ecosystem perturbation,structural adjustment programmes (SAPs) andthe effects of trade liberalisation on the fishingindustry. The law relating to fisheries in Kenyahas retained colonial elements, despite a numberof revisions, and has failed to respond tochallenges associated with population increasesand their effects and to develop an incentivestructure that would facilitate self-regulationamong fishery participants. Fishery policy andmanagement have failed to respond or interveneas more and more fish gets diverted fromdomestic human consumption to export marketsand the manufacture of animal feeds. Themanagement and policy-making institutionsappear to have been caught unprepared by thetransformation in the fishery.

Economic incentives are powerful and costeffective means of achieving efficient fishing.For instance, the allocation of well-defined andsecure property rights to the fishing community,has the potential to create requisite incentivesfor responsible fishing behaviour. Compared toCAC instruments, market-based instruments areless costly. easier to enforce, and generaterevenues. In spite of their attractiveness andpotential, economic instruments have not beenused in the management of Kenva's LakeVictoria fisheries. Ikiara (1999) found thateconomic incentives could work in themanagement of these fisheries as fishers effortsupply behaviour is responsive to economicvariables. The most effective and efficientmarket-based instruments are landings taxes orITQs. None of these is being used in themanagement of Lake Victoria fisheries and.despite their attractiveness and potential, wedoubt that they could serve as an alternativemanagement strategy under the presentcircumstances. In particular, the fact that thegovernment is unable to effectively andefficiently collect the currently existinglicensing fees suggests that these managementtools would not stand a better chance ofsuccess. Besides this administrative weakness,poor database. difficulties inherent in theidentification of genuine fishers, and lack of

alternative employment for those contemplatingleaving fishery. and other obstacles stand in theway of using economic instruments in themanagement of Lake Victoria fisheries.

Fishery Policy and Development Objectives

The development objectives for Kenya's fisherysector are clear and reflect the country'sdevelopment needs. However, it is doubtfulwhether they were deliberated upon adequatelybefore being adopted. This is because the forexobjective continues to receive top priority overthe other three development objectives yet theseare also important macroeconomic concerns ofthe Kenyan government. Even after the FAOwarned about the negative impacts of the fishexport industry on food security andemployment, the government has not acted inany way to address these concerns.

In general, the development objectives offishing are production-oriented and largelymotivated by the myopic desire to increaseoutput. Conservation is not an explicitobjective. The resource use patterns in LakeVictoria are driven more by markets thanecosystem considerations. The previous sectionshave shown that the export objective has beenfulfilled, even to unexpected levels. This.however, has been at the cost of all the otherobjectives, including sustainable management.Either there were not enough deliberationsbefore the policy was adopted, or the effects offish export and animal feeds developments werenot anticipated. It is also a reflection that thefish processing sector and other large-scaleparticipants enjoy political sway over fisheryartisans.

Where does fish feature in the country's foodpolicy? In 1981, fish was regarded as beingrelatively unimportant in the overall nationaldiet (Republic of Kenya, 1981). The food policydealt mainly with staple foodstuffs. Fish wasviewed as an important source of protein only incertain regions. By 1994, however, fish wasrecognised as one of the nine foods critical tothe country's food policy (Ikiara, 1999). It isestimated that fish supply will have a shortfallof 5490 calories of energy and 1.05 grams ofprotein per person per day by the year 2000 ifthe supply situation is not improved. Thisunderscores the critical role of successfulmanagement of the Lake Victoria fishery so as

to fulfil all the other objectives set for thefishing industry, including foreign exchangeearnings, improved living standards for fisher-folk, employment generation and increased fishconsumption.

Despite the recognition of domesticconsumption shortfalls, nothing has been doneto improve supply. The government erroneouslybelieves that fish production can still beexpanded from all the country's fish sources.Note, however, that fish production has beendeclining since the beginning of the 1990s inspite of increased fishing effort. Unlike foodcrops. no effort has been made to control theexport of fish. This is a serious mistake giventhat fish, being rich in protein and relativelycheaper than alternative sources of protein,should be a key component in country's foodpolicy. The policy with regard to fish appears tobe to generate forex with which to import staplefoodstuffs in periods of acute deficit (Ikiara,1999). There is, thus, export encouragement forfish. The objective of the country's fishprocessing policy are to encourage fish importsfrom the neighbouring countries in order toensure adequate supplies to Kenya's fishprocessing factories, encourage fish filleting forexport through export and tariff incentives,rationalise tariffs on imported fish processingmachinery and inputs, and support to fishers toincrease their productivity. As we have noted inthe previous sections, fish processing andexport factories receive a five-year tax (VAT)holiday as an incentive. This policy isdetrimental as it pursues the myopic objective ofmaximising forex without considering the effecton domestic availability of fish and the integrityof the resource base. Yet, there is no guaranteethat these foreign exchange earnings areretained in the country. Thus, the failure of thegovernment to rationalise the use of fish andfish products in the animal feeds industry andcontrol of the quantities of fish exported aremanifestations of a poorly focused anddeliberated food policy. These failures aremanifestations of a more serious weakness: lackof co-ordination and hamornisation of sectoralor micro-policies with macroeconomic policies.It is difficult to understand why food security,employment and living standards are notaccorded priority in the fisheries policy whenthey are the main objectives of the country'soverall macroeconomic policy.

Alternative Approaches

Intervention is imperative to rectify theincreasingly worrisome situation with theKenyan fisheries of Lake Victoria. Interventionis required at the level of management andpolicy formulation and implementation.Management institutions should be transformedto enhance their sensitivity to natural capital(lake ecosystem) and physical capital (fishingvessels and gears) (Ikiara, 1999). Fisheriesmanagement institutions must either mimicprivate property rights or regulate fishingbehaviour in order to be effective whileregulations require the willing participation ofstakeholders for effectiveness (Wilson et al.,undated).

Co-management offers the greatest scope inLake Victoria (Ikiara, 1999; Wilson andMedard. 1999; Wilson et al. undated). This canincrease the legitimacy of fishing regulations inthe eyes of fishers (Jentoft, 1989). Thegovernment is central to any successful fisheriesmanagement strategy as it is the only agencyviewed in Lake Victoria as having effectivelegitimacy for rule-making and rule-enforcing(Wilson et al., undated). In Kenya, 66.5°/o ofthe fishers surveyed by Ikiara (1999) in 1995felt that the government was the best agency tomanage the lake fisheries while another 22.4%felt that fishers themselves were most suited forthat purpose. Even in the Tanzanian portion ofthe lake, the role of the government isundisputed (Wilson et al., undated). These factssuggest that co-management has enormoussupport in Lake Victoria. Even developmentagencies like the IDRC, UNDP, and the WorldBank are encouraging stakeholder participationin the management of fisheries (IBRD, 1996).In co-management, fishers capacity and interestwith regard to self-regulation is complementedby the government ability to provide enablingpolicies, legislation and institutions (Ikiara,1999). A prerequisite for co-management tosucceed is an assurance to the fishers that theresource belongs to them, an assurance thatwould reduce open accessibility and provideincentives for environmentally-friendly fishingbehaviour. Thus, there should be a gradualtransfer of fishery ownership to the fisher-folk,transfer of management authority to locallevels, enhanced participation of fishers indecision-making and effective mechanisms to

ensure that the exclusive use rights of the fishercommunity are enforced, controlled andprotected (Ikiara, 1999).

Whatever the management regime adopted, itshould be noted that fishers in Lake Victoria aremore supportive of restrictions on gears anddestructive technologies than they are ofrestrictions on access. In Kenya, Ikiara (1999)found that 68% of fishermen support entry ofnew fishers while in Tanzania, Wilson et al.(undated) report that 72% of the fishermen donot support restriction of the number of peopleallowed to fish. This indicates that themanagement strategy adopted should not targetimmediate restriction of access if it is hingedupon fisher support.

Research is urgently needed, not only tofacilitate the quantification of the costsassociated with fishery transformation, but alsoto provide the data required for the successfulinstitutionalisation of co-management. Co-management requires research into such areasor issues as local knowledge, socio-culturalcontexts, resource management systems; andlegal, administrative and institutional aspects(Konstapel and Noort. 1995).

To internalise cross-border externalities, aprerequisite for the effective management ofLake Victoria Fisheries, the efforts of the LakeVictoria Fisheries Organisation (LVFO), theumbrella regional organisation, and the effortsat unified management being made by LVEMPand donors are commendable.

With regard to fisheries policy, it isrecommended that the amount of fish exportedand the amount used in the animal feedsindustry be controlled if the other objectives ofthe fisheries policy are to be achieved. Thiscould be achieved through the introduction of anoutput tax on the fish processing firms andanimal feeds firms using fishmeal, quantitativecontrols on the amount of fish exported and thefish used in animal feeds production similar tothose existing in Uganda, and the shift ofofficial view of fish as a source of foreignexchange to one in favour of fish as a source ofnutritious food. It is, moreover, our opinionthat food security, employment and livingstandards of the fisherfolk, after the objective ofprotecting the integrity of the resource system,receive priority over the other objectives giventhe malnutrition levels and poverty of the peopleliving around the lake. The position taken by"Sessional Paper No 2 of 1994 on NationalFood Policy" of regarding fish as one of thenine foods crucial for the food policy is a stepin the right direction. That step should besupported by the rationalisation of fish use forexports and for animal feeds production.

Finally, the country's record of policyimplementation needs to be improved. It hasbeen noted that, "Kenya's problem is not policyformulation; her policies in most sectorscompare well with the best in the world.Kenya's problem is a very poor record of policyimplementation" (Ikiara, 1999: 59).

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