Spatial price integration: A cointegration approach to regional bean markets in Kenya and Tanzania

Abstract

The common bean is an important legume crop in East and Central Africa, providing protein, calories and cash income for rural households. This study identified the problem of lack of adequate information on the cross border bean marketing system between Northern Tanzania and Kenya. The objective of this study was to gauge the performance of the bean marketing system, by the measurement of the degree of market integration between regional markets in the study area. The study covered Arusha and Moshi markets of Tanzania, and Nairobi, Namanga and Taveta markets of Kenya. The monthly average wholesale bean prices for 2000 and 2001were collected from the Ministry of Agriculture and Rural Development (Kenya) and the Ministry of Agriculture and Food Security (Tanzania). The SPSS was used to generate the Pearson’s bivariate correlation coefficients while the Microfit package was used to analyse the extent of market integration under a co-integration framework using the Augmented Dickey-Fuller unit root tests and Granger causality procedures. The study revealed that in 2001, a paltry 122 tons of beans were formally exported to Kenya through Namanga border point, indicating that despite trade liberalization and the advent of the East African Community, cross-border bean marketing is still largely informal. The regional markets are weakly integrated with bean prices in deficit markets jointly interacting to form the bean prices in supply markets. This study recommends the free export of beans by Tanzanian Government and the removal by Kenya Government of the 3.5% HCDA levy on imported beans from an EAC member state.