PurposeThe decision by the Government of Kenya in 2013 to increase tax revenue by imposing excise duty of 50 percent on sorghum beer resulted in economic losses for smallholders, the brewery, and the government itself because it effectively killed the value chain. In 2015, the government reversed the policy decision and reduced excise duty to 10 percent. The purpose of this paper is to analyze the impact of this policy decision on the value chain, adaptation by growers and the brewery, and the rationale for this policy change and its reversal.Design/methodology/approachThe author analyzes this episode using a conceptual framework derived from complex adaptive systems, focusing on four properties of such systems: sudden, endogenous shocks, interacting agents, and adaptation.FindingsThe author shows how the nature of politics in Kenya exposed the value chain to endogenous shocks as the result of conflicts between interacting agents, where smallholder farmer organizations were important for successful adaptation. Conflicts between development and political objectives in neo-patrimonial states are sources of complexity and uncertainty in smallholder value chains.Research limitations/implicationsComplex adaptive systems proved a useful framework to understand decision making by government and business actors in the value chain.Originality/valueThe paper applies a novel conceptual framework to the analysis of an important value chain in Kenya.
Journal of Agribusiness in Developing and Emerging Economies – Emerald Publishing
Published: Mar 12, 2018