From payment to co-investment for ecosystem services: Stewardship and livelihood improvement in the Lake Naivasha agro-production landscape, Kenya

19.02.2018

SUBMITTED ORGANISATION :
World Agroforestry Centre (ICRAF); Department of Agricultural Economics and Agribusiness Management, Egerton University
DATE OF SUBMISSION :
19/02/2018
REGION :
Eastern Africa
COUNTRY :
Kenya (Nakuru County)
SUMMARY :
Ecosystem degradation in upper catchment of Lake Naivasha in Kenya poses major threats to the overall watershed and people living in the Lake Naivasha agro-production landscape. In upstream areas, where mostly poor smallholder farmers practice traditional farming methods, people suffer from low agriculture productivity caused by unsustainable farming practices. While in downstream areas, urban dwellers and highly commercial industries, which are key to national income, endure costly living standards and inefficient production processes caused by decreasing ecosystem services (ES). The payment for ecosystem services (PES) scheme in the Naivasha basin provides lessons on how joint investment in social and financial capital enhancement among upper and downstream communities ensures better livelihoods and a healthier socio-ecological production landscape (SEPL). Lake Naivasha, located downstream of Naivasha basin, is a designated Ramsar Site with rich biodiversity and an important global floriculture centre accounting for 35 percent of all flower sales in the European Union. Other industries include ranching, tourism, pastoralism and geothermal power generation. The upstream areas, consisting of a national park, forest reserves and smallholder farming lands, are important water towers for Lake Naivasha and its surroundings communities. Landscape degradation in the upstream catchment due to unsustainable agricultural farming practices, such as cultivating on high gradient land across contours and slash and burn of vegetation, has led to low farm productivity. The situation has significantly diminished the livelihoods and food security of upstream indigenous people and accelerated siltation and pollution of water bodies, thereby reducing water quantity and quality flowing downstream, and increasing the threat to the lake’s ecological potential to support socioeconomic and cultural activities. The PES scheme was initiated by NGOs in collaboration with government agencies, communities and the private sector to reverse the degradation trend. The scheme links upstream smallholder farmers and downstream commercial private investors as providers and beneficiaries of ES respectively. This study analysed the influence of PES practices on livelihoods and environmental conservation in this Kenyan SEPL. The PES contractual agreement covers rehabilitation and maintenance of riparian zones through tree planting, grass strips, terracing along steep slopes, contour cropping, agro-forestry, improved seed varieties, crop rotation, fallowing and reduction in agrochemical use. The types of PES interventions were selected based on level of farm degradation, implementation cost, expected benefits, indigenous knowledge and gender. The main challenges to the PES scheme included involving more voluntary co-investors, incentive distribution and institutionalizing PES. Lessons learned revealed that feasibility studies, benefits of increased farm productivity over and above actual payments, and stakeholder willingness to participate in PES are all vital attributes to PES design as an incentive-based intervention tool to sustain ES provision in the SEPL and enhanced local livelihoods.
KEYWORD :
Upland smallholders; Payment for ecosystem services; Agrobiodiversity; Watershed services; Lake Naivasha
AUTHOR：
Josephat Nyongesa (ICRAF, Egerton University); Beria Leimona (ICRAF)

Summary Sheet

The summary sheet for this case study is available here.

Introduction

[Note: This case study was first published in the Satoyama Initiative Thematic Review vol. 3]

Watersheds in developing countries reflect terrestrial socio-ecological production landscapes with human and nature linkages. Upstream areas are typically characterized by agricultural landscapes supporting indigenous smallholders who mostly live in remote villages and depend on natural resources (NR) including land for their livelihoods. Downstream areas are dominated by lucrative commercial agribusiness and highly populated industrial cities that demand a huge amount of ecosystem goods and services mainly sourced from upstream areas. The interlinkage between upper and downstream areas becomes a vital relationship to ensure sustainable flows of ecosystem goods and services that support the livelihoods of people living in the watershed.

The Lake Naivasha watershed is an important socio-ecological landscape in Kenya (GoK 2013a), where 46.3% of people in the watershed is below the poverty line (GoK 2013, p. 43) and depend on healthy ecosystems. The upstream area of the Lake Naivasha watershed hosts national conservation areas including the Aberdare National Park and Aberdare Forest Reserve, surrounded by agricultural lands that support local farming communities’ livelihoods and habitats for biodiversity. The downstream watershed has similarly rich biodiversity, ranging from Lake Naivasha as a designated Ramsar Site, the Oserian Wildlife Sanctuary and the Hell’s Gate National Park (Figure 1). The downstream areas are commercially important for Kenya’s GDP. Commercial global floriculture investment contributes to over 35% of all flower sales in the European Union (EAC-EU 2015, p. 12), and 280MW of geothermal power generation is connected to the national grid (KENGEN 2017). Other industries include tourism, as well as various local livelihoods such as ranching, fishing, pastoral livestock and farming.

Despite the area’s enormous economic potential, unsustainable land use practices mainly in the upper catchment have been a major source of ecosystem degradation (Figure 2). Unsustainable farming practices, such as farming on high gradient and riparian areas, overuse of agrochemicals, slash and burn of vegetation, and cultivation across contours, have led to low farm productivity, diminishing the livelihoods and food security of almost 600,000 upstream inhabitants dominated by the indigenous Bantu people. Historically, however, the indigenous people in this watershed, with beliefs that flora and fauna are sacred, applied indigenous knowledge to conserve nature and cultivate their lands. These people protected forested areas as shrines for communal worship, practiced a system of fallowing and rotational cropping to allow the natural regeneration of soil fertility, maintained agricultural diversity through mixed cropping and agroforestry practices using indigenous species including medicinal plants and herbs, and applied organic manure rather than inorganic fertilizer. Related government agencies, including the Kenya Forest Services (KFS), Kenya Wildlife Services (KWS), Ministry of Agriculture (MoA) and Water Resource Management Authority (WRMA), have supported initiatives to preserve local wisdom through joint collaboration in formally publishing a forest conservation gazette, rehabilitating degraded lands using indigenous trees, and organizing collection of non-forest timber products to ensure sustainable harvesting. Apparently, these efforts have not been sufficient. Poor farming practices, due to population increase, economic pressures and other human-induced factors, have continued to accelerate siltation and pollution of water bodies, and reduce the water quantity and quality of the rivers flowing downstream (Figure 2), thus threatening the lake’s ecological potential to support socioeconomic, cultural and business activities downstream (Nyongesa et al. 2016, p.2).

Payment for ecosystem services (PES) as a voluntary and performance-based policy instrument can influence people’s values and behaviours concerning ecosystem services (ES) and change their modes of livelihood towards more sustainable agricultural practices (Namirembe et al. 2014). PES involves smallholder farmers as land managers who provide ES to beneficiaries of ES through mutual voluntary contractual agreements. PES[i] schemes have gained global popularity as alternative livelihood conservation mechanisms to restore and maintain ES, and the PES concept has evolved beyond market-based policy instruments (Van Noordwijk & Leimona 2010, p. 1). PES has the potential to conserve biodiversity and enhance sociocultural and economic well-being and is therefore used as a tool for natural resource management (NRM) in socio-ecological production landscapes (SEPLs) in Africa (Nantongo 2016, p. 120; ADB 2015, p. 9; Kisaka & Obi 2015, p. 175). For Lake Naivasha, the PES scheme particularly targets the restoration of the watershed, biodiversity conservation and improvement of local livelihoods. The PES incentive principally motivates subsistence farmers to adopt practices that sustain provision of ES (Bymolt & Delnoye 2012, p. 33). Disregarding the livelihoods of local communities under a PES scheme can undermine the role of PES in providing the ES benefits humans derive from natural ecosystems. Thus, in developing countries, where poor rural communities are integral parts of agro-conservation practices linked to their own livelihoods, PES becomes a sustainable co-investment scheme. The ES providers and beneficiaries jointly invest their livelihood capital in the provision of ES and put economic benefits back into the ecosystems as landscape stewardships (Leimona et al. 2015).

This chapter presents how the payment and co-investment for ES scheme in the Lake Naivasha landscape serves as a major policy driver for local smallholder farmers to revive their socioeconomic and cultural wisdom in providing ES through watershed, riparian and conservation farming, and to simultaneously enhancing their livelihoods over the long term. Downstream ES beneficiaries jointly invest in a healthy watershed. Supported by intermediary NGOs (World Wide Fund for Nature and CARE Kenya) and in collaboration with government agencies, the PES scheme connects upstream smallholder farmers and downstream commercial private investors as ES providers and beneficiaries (Figure 3).

[i] The PES concept is based on the proposition that those who provide ecosystem services by conserving natural ecosystems are paid by those who benefit from the ecosystem services.

Figure 1. Above: Biodiversity around Lake Naivasha (Photos: WWF 2012); Bottom-left: Horticulture greenhouses around Lake Naivasha; Bottom-right: Inside a greenhouse (Photos: Nyongesa JM 2013)

Figure 2. Left: Farming on high gradient in the upper catchment before PES scheme; Right: siltation around Lake Naivasha riparian land (Photos: WWF 2008)

Figure 3. The conceptual framework of PES business design and fl ow of funds

Lake Naivasha as a socio-ecological terrestrial landscape

The Lake Naivasha basin (upper and lower catchments) covers an area of 3,400 km²(WGC 2013, p. 5) in Nyandarua County (upper catchment) and Naivasha district (lower catchment). Nyandarua is divided into five administrative sub-counties: Kinangop, Kipipiri, Ol’kalou, Ol’jorok and Ndaragwa (ASDSP 2011). The upper and lower catchment (Naivasha district) populations are over 596,268 and 376,243 people respectively (GoK 2013; GoK 2013a). The catchment provides habitats for diverse biological resources that support socioeconomic development and contribute to the resilience of indigenous people. The interdependence and interaction between diverse human socio-cultural and economic activities and natural resources in a highly heterogeneous landscape such as the Lake Naivasha watershed, are illustrative of the area’s importance as a key SEPL in Kenya. The two sub-basins of Tulaga and Geta, covering areas 1, 2, and 5 in Kinangop and Kipipiri sub-counties (Figure 4 and Table 1), were identified for PES interventions based on following criteria: (1) main water recharge areas, both surface and groundwater; (2) existence of high sediment yield and significant pollutants points; (3) significant socioeconomic demographics, high population density and poverty levels and (4) dynamic land cover changes with expansive land degradation.

Table 1. Information on the watershed and PES sites (Source: Gathenya 2007; GoK 2013; WGC 2013)

Description	Area (hectares)
Total upstream and downstream areas	340,000
Total watershed recharge area (upper catchment, Nyandarua County)	324,500
Sub-watershed areas with prioritized interventions
Tulaga area (Turasha and Kinja River)	639
Geta (River Wanjohi)	4,680

Figure 4. Left: Prioritized PES sub-basin sites (Source: Gathenya (2007, p. 5), modifi ed by authors); Right: Position of the selected degraded farms (red) in the Upper Turasha and Wanjohi Water Resource Users Associations (WRUAs) (Source: WWF 2007)

Payment for ecosystem services in Lake Naivasha

The Lake Naivasha PES scheme had two implementation stages (2008-2011 and 2011-2017) involving the Upper Turasha and Wanjohi upstream WRUAs and one downstream Lake Naivasha Water Resource Users Association (LANAWRUA) as legal entities. The upstream WRUAs were composed of the farmers that provide watershed services, and the LANAWRUA was composed of commercial horticulture investors, the buyers of ES (Table 2).

Table 2. Number of upstream farmers registered as WRUA members under PES scheme between 2008 and 2017 (Source: LANAWRUA compiled by authors)

No.	WRUA	Number of farmers (2008-2011)	Number of farmers (2011-2017)	Total
1	Upper Turasha	385	1,025	1,410
2	Wanjohi	615	1,255	1,870
3	Kianjogu[i]	–	455	455
Total		1,000	2,735	3,735

This study focused on the Upper Turasha and Wanjohi WRUAs, specifically famers involved in PES interventions between the years 2008 and 2011. Selection criteria for joining PES included: (1) private farm land owners; (2) land located on steep slope and along rivers with unprotected river banks; (3) degraded farm lands that were highly eroded, infertile, bare, with little or no vegetation cover, or with low productivity; and (4) farm lands dominated by high water consuming tree species (Eucalyptus grandis and Eucalyptuscamaldulensis) close to rivers.

Table 3. Characteristics of the PES scheme in Naivasha

Table 4. Selected PES planting materials (Source: Authors)

Type	Description
Grass	Napier grass—Kakamega 1 variety (Pennisetum purpureum), Elmba Rhodes (Chloris gayana) and cock’s foot* (Dactylis glomerata)
Tree* seedlings	Cedar (Juniperus procera), rosewood (Dalbergia spp.), Prunas africana Dombeya torrid, Grevellia spp.
Fruit tree seedlings	Olives (Olea europaea), tamarillo (tree tomato) (Cyphomandra betacea) and apples (Malus pumila)
Other important improved crops/fodder	Potatoes (Solanum tuberosum)—Kenya Karibu and Kenya Sifa varieties, Livestock fodder: Lucerne (Medicago sativa), Desmodium (Desmodium intortum)

*indigenous species

[i] Kianjogu WRUA joined the PES scheme in the year 2015.

[ii] Payment rate negotiated between buyers and sellers of ES. Price/rate varied increasingly over years depending on the number of buyers joining the scheme and the amount they jointly contribute. The annual contribution is divided and paid equitably as a flat rate to all PES implementing famers after verification of agreed PES interventions on farms. Mode of payment is negotiated and agreed between buyers and sellers of ES.

Figure 5. Left and centre: Joseph Mang’ara Njuguna on his PES conservation farm; Right: PES conservation farm adjacent to Aberdare forest (Photos: Nyongesa 2012)

Figure 6. Left: Joseph Thairu (next to camera, Wanjohi WRUA) shows transplanted vegetable seedlings under drip irrigation on his plot under the grass strip; Right: Joseph on his second plot planted with vegetables along contours (Photos: Nyongesa 2012)

Figure 7. Riparian land under vegetation cover along River Malewa tributaries (Left photo: Peter Muigai and right photo: Nyongesa 2011)

Establishing the PES scheme

The PES scheme was initiated through a stakeholder engagement process in a three-phased approach:

1) Feasibility assessments

Feasibility assessments consisted a series of studies. First, hydrological analysis was carried out to assess how land management practices influence water quality, sedimentation levels and agricultural chemical yields, and to identify prioritized sub-basins for interventions (Gathenya 2007, p. 24). Likewise, a socioeconomic baseline study was conducted to assess the legal status of land tenure and local livelihoods, to identify alternative land use practices able to promote agricultural conservation, and to establish a PES business opportunity for buyers and sellers (Makenzi, Omollo & Mutinda 2007, p. 19). Cost-benefit analyses were also performed to assess opportunity cost[i], estimate the expected loss and gains of PES interventions, and to establish willingness to accept payment and to make payment on the part of sellers and buyers of ES respectively (Gamba, Owuor & Onyuma 2007, p. 24).

2a) Contract negotiation, signing and implementation

This process was initiated and supported by WWF and CARE Kenya and involved potential ES providers and beneficiaries in a series of mobilization and sensitization activities on the PES concept. Target hotspot parcels (degraded farms) were selected and mapped, and identified participating farmers were empowered through various trainings involving technical and managerial aspects (on soil and water conservation, livestock management and water quality monitoring). The culmination of this process was contract negotiation and signing between ES providers and beneficiaries facilitated by legal experts with payment organized annually as a public event (Figure 8).

Figure 8. Wanjohi WRUA (left) and Upper Turasha Kinja WRUA (centre and right) offi cials display their dummy cheques received from ES buyers during two annual events, 2010 and 2012 respectively (Photos: Nyongesa)

[i] The cost benefit analysis conducted during the feasibility study indicated $200 as opportunity cost/acre/farmer/year. As a voluntary PES scheme, the current payment is negotiated depending on available cash contributed annually by buyers of ES as incentive to sellers. Sellers are motivated as well by additional higher in-situ benefits.

2b) Monitoring and evaluation

Ongoing monitoring and evaluation is organized by the verification team (Figure 9) composed of the management committees of three WRUAs, supporting NGO representatives, and government agencies (WRMA, KFS, MoA and local administration[i]). Water quality and quantity flowing downstream into Lake Naivasha is monitored by trained upstream WRUA management personnel using turbidity meters and river gauges installed at specific points along rivers. Water samples are taken twice weekly and data is send to WRMA for compilation. Soil retention on farms is monitored by trained land owners using calibrated pegs (Figure 10).

Figure 9. Left: Margaret Mundia Wanjiru cutting conservation grass for livestock feed (Upper Turasha WRUA); Right: Section of verifi cation team on Joseph Njuguna’s (wearing cap-Wanjohi WRUA) farm before payment (Photos: Boniface Thiga 2012)

Figure 10. Left and centre: David Mbugua, Secretary (Upper Turasha WRUA) taking water sample for quality assessment; Right: Mr. Thuo on his potato farm (Wanjohi WRUA) with installed calibrated staff to monitor soil retention by grass strips on contours (Photos: WWF 2012); Inset: high yield potato harvest ready for market (Photo: Nyongesa 2012)

[i] Local government community leaders

3) Scale-up and exit strategy

The PES scheme initially started with 565 farmers in 2008 and ended up with 1,000 farmers in two upstream WRUAs in 2011 (Table 2). These farmers continue their conservation agricultural practices although the contract has ended. In 2011, NGO intermediaries began the second phase of interventions involving new farmers in both existing and new WRUAs with similar selection criteria. The NGOs handed over the PES project to the key stakeholders, the ES buyers and sellers, to be organized under the full management and control of the WRUAs. Government agencies continue with technical backstopping.

Methodology

This chapter is based on the results of a socioeconomic survey conducted at study sites between 2012 and 2013, covering the Upper Turasha and Wanjohi WRUAs. Existing literature was reviewed to collect secondary data. Primary data was collected from 200 sampled respondents from source lists of PES participating farmers. A team of research assistants administered semi-structured questionnaires through face to face interviews with respondents and key informants. A transect walk across PES farms and focus group discussions complemented primary data collection. Temporal series data was collected to assess whether or not there were any changes in farm productivity and income. Likewise, farmers’ perceptions on PES benefits for livelihoods and the environment, as well as their willingness to continue participating in the PES scheme, were evaluated. Farmers were asked to provide time series productivity changes for both crops and livestock enterprises on same land parcels before and after PES interventions. Productivity was computed in terms of changes in the marginal income of farmers before and after PES initiation, with 2008 and 2013 as base and current years respectively. Both qualitative and quantitative methodologies were applied to analyze data. Stata, a statistical software, and the Statistical Package for the Social Sciences (SPSS) software were utilized to manage and analyze data.

Results

Perceived PES benefits to local socio-ecological conditions

Conservation agriculture and farming diversification efforts under the PES scheme have positively influenced socio-ecological conditions. Directly, over 90% of farmers perceived that soil fertility was improved through soil and water conservation interventions on their farms. This perception is related to revenue increment from crop and livestock enterprises under the PES scheme. Application of conservation agricultural technologies was perceived to increase crop productivity (Table 6). Most farmers (84%) qualitatively noted water quality improvement. Indirectly, a significant 54% of farmers perceived higher agricultural crop prices due to the improved quality of their produce under the sustainable conservation agriculture practices, while 57% perceived that the PES scheme influenced distribution of local human labour on agricultural farms.

Practicing conservation in the watershed increases the capacity of the landscape to buffer shocks. For example, rehabilitating the riparian areas reduces riverbank collapse, flooding to farming lands and landslides. Farmers perceived that their efforts through the PES scheme contributed to such buffering effects (70%). Perception on PES contribution to improved livelihoods was also highly significant (99%). Farmers enjoyed increased skills and knowledge gained from a series of trainings designed to improve their execution of the PES contract, in addition to other direct benefits (i.e. enhanced crop productivity, improved nutrition, increased farm commodity prices and payment from ES buyers). Further, on general livelihood enhancement, focus group discussions and key respondent interviews revealed that additional income supported families to cover household expenditures such as children’s school fees, medication and improved family leave conditions. The involvement of women in PES farming activities (Figures 9 and 11, left) improved gender parity and ensured efficient and effective equitable distribution of PES benefits.

Table 5. Farmers’ perception of benefits in joining PES scheme

Variable description	Statistic
(0=No; 1=Yes; 2=Don’t know)	No	Yes	Don’t know	Mean
*Direct benefits*
Improved soil fertility	2	198		0.99
Increased crop productivity	4	196		0.98
Better water quality	32	168		0.84
*Indirect benefits*
Better agricultural crop prices	93	107		0.54
Local labour distribution	53	114	33	0.57
Buffering capacity of watershed	60	140		0.70
Quality of livelihood	2	198		0.99
Valid N (Listwise)=200

Figure 11. Left: PES farmer nurtures her indigenous tree seedlings; Right: Farmer admires his Tamarillo crop ready for harvesting (Photo: WWF 2012).

Increases in estimated crop and livestock revenue

The estimated mean gross monthly revenue from farm and off-farm activities and revenues from the crops and livestock of PES participating farmers were compared for the years 2008 and 2013 (Table 7). The mean gross monthly income was increased by 60%. Meanwhile, the national average household income in Kenya at 3,440 KES (Kenya Shilling) equivalent per adult per month, a figure from data on household expenditure as a proxy for estimating income (Government of Kenya Central Bureau of Statistics 2009; Government of Kenya Central Bureau of Statistics 2013, p. 16), increased by 20% over a similar time period. A marginal increase in revenue was associated with an increase in productivity following improved soil fertility under the PES conservation interventions. Conservation farming practices enhance productivity and farmers’ income, contributing to improved well-being (Aerni & Neves 2013, p. 7).

Table 6. Household monthly revenue profile of farmers participating in PES schemes in 2008 and 2013

Statistic	Gross monthly revenue (KES)		Monthly crop revenue (KES)		Monthly livestock revenue (KES)
	2008	2013	2008	2013	2008	2013
Mean	6,891.96	11,011.48	5,046.54	8,379.98	3,532.43	6,618.03
Std. Dev	5,101.12	14,719.42	7,790.85	14,568.32	3,597.74	5,147.55
Range	500-42,167	1,000-194,000	0-100,000	0-180,000	0-31,000	0-35,000

1USD=100 KES (Kenya Shillings) at the time of survey; Average of 2 acres land size

Monthly crop revenue increased by 66% over the five-year period, while the mean income from livestock enterprises increased by 53% over the same period, from 2008 before PES to 2013 after PES was implemented. Revenue increase from crop and livestock is attributed to increased farm productivity and availability of fodder for livestock, which increased milk yields. Improved livestock, soil and water management skills acquired during PES trainings equally influenced the productivity increase (Figure 12).

Figure 12. Left: Famers display hay they prepared after training; Right: Farmer feeds his dairy cattle (Photo: Nyongesa 2012)

Willingness to continue implementing PES practices

Overall, 97% of farmers were willing to continue implementing PES practices irrespective of the type of PES practice (Table 8). Riparian land is important due to its proximity to water sources. It provides ES, especially food, during the dry season and buffers water sources from siltation during the rainy season. This study confirmed a 39% farmer willingness to rehabilitate degraded riparian land to provide ES for livelihood sustenance. Related studies (Rafuse 2013, p. 5) have shown riparian land to be vital for provision of ES and significant in maintaining water quality.

Agroforestry and grass strips were highly favoured by participating farmers (above 90%). Agroforestry trees and grass ensure food security, and sources of fodder and firewood for households. Moreover, grass strips have an important role in soil and water conservation. Adopting this practice directly contributes to supporting services such as nutrient cycling and soil formation, while tree-based farming systems support the buffering functions of the watershed as regulating services.

Table 7. Willingness to continue implementing PES practices

Variable description	Statistic
(0=No; 1=Yes)	Mean	Std. Error
Willingness to continue implementing all PES practices	0.970	.013
Specific PES interventions
Rehabilitation and maintenance of riparian zones	0.390	.035
Grass strips	0.950	.015
Terracing	0.150	.025
Contour cropping	0.320	.033
Agroforestry	0.960	.014
Improved certified seed varieties	0.620	.034
Fallowing	0.370	.034
Crop rotation	0.530	.035
Reduction in agrochemical use	0.700	.032
Valid N =200

The lower number (15%) of farmers willing to implement terracing is attributed to different reasons. For instance, the high physical labour demanded for mapping and digging terraces discourages the female gender and elderly farmers due to the drudgery. Contour cropping was favoured by 32%. Though it requires high skill and is preceded by marking out contours on the farm, the technology retains soil on farms and controls soil erosion.

Certified seed for crop varieties increases resistance to pests and disease and yields higher for improved food security. This explains the high number of farmers (62%) willing to continue planting improved seeds. Willingness for fallowing correlates with small land parcels (average of 2 acres) per household. Concern that fallowing on small land parcels would reduce farm produce and significantly affect food security influenced the low willingness (37%) for fallowing. Crop rotation was preferred to reduce pest and disease prevalence associated with climatic changes. Crop rotation improves soil structure and soil fertility, which attracted a 53% willingness to implement. Willingness to reduce agrochemicals (70%) implies the need to avoid cost for inorganic agrochemicals and the significance of this approach in the reduction of environmental pollution in ecosystems.

The farmers’ willingness to continue implementing PES practices signifies the acceptance of the PES scheme and its positive influence on the environment and household livelihoods. High willingness to restore ecological functions is an indicator that PES can work in the agriculture sector where ES are under threat and the opportunity costs for alternatives practices are not very high (FAO 2011, p. 26).

Discussion and lessons learned

Socio-ecological production landscapes provide abundant ES that support human socioeconomic and cultural development and are habitats for biodiversity conservation. Despite the significant potential of SEPLs to improve social well-being, human development needs and economic pressures threaten ecosystems and biodiversity sustainability. Payment and co-investment for ES have been recognized as an incentive-based intervention that can serve as an alternative policy to sustain socio-ecological production landscapes for ES provision and enhanced local livelihoods. The Naivasha PES is a hybridized approach, combining compensation to the upstream ES managers for the opportunities foregone and a collaborative co-investment PES model with private sector beneficiaries of ES in the landscape.

In this chapter, we characterize the perceived and actual livelihood benefits for smallholder farmers that are implementing PES conservation agriculture on their lands, and carrying out conservation activities collaboratively on public lands (such as riparian and surrounding natural forests), with incentives under the payment and co-investment for ES programme in Lake Naivasha. We found that if similar programmes were to be replicated, most farmers would be willing to join in while maintaining their practices voluntarily.

Our lessons from the PES design in Naivasha show that feasibility studies are an important preliminary stage in PES design. These studies provide baseline information, including information on ecological problems in the watershed that affect the socioeconomic and cultural benefits of the programme. Designing PES is a challenge during the initiation stage. Mobilization and sensitization of identified stakeholders on the PES concept and early engagement of key actors through voluntary participation ensure the sustainability of the PES scheme. Knowledge on ecosystem linkages to sustainable livelihoods, such as restoration of degraded landscapes, builds the capacity of local communities to embrace PES farm practices.

Willingness to participate in PES is a key attribute in PES design. This study has shown a high willingness of farmers to implement PES practices as an indicator for adoption and sustainability of the conservation practices. An increase in productivity as an in-situ benefit was a significant factor influencing the adoption of PES practices, more so than the actual PES payment. Increased productivity enhances additional income and technical farm skills and knowledge, and is more rewarding in the long-run. These in-situ incentives have a direct impact on a rural community’s well-being, and thus farmers are motivated to adopt practices that will conserve ecosystems to sustain their livelihoods.

Non-PES farmers can implement conservation activities without enrolling in the PES scheme. Though this contributes to conservation and livelihoods on scale, it is a challenge as the PES concept is lost in the long run. Involving more stakeholder “buyers” or co-investors of ES would sustain PES over time, but remains a challenge. Moreover, institutionalizing PES as a legal policy tool would strengthen its recognition as an instrument to enhance socioeconomic and cultural development and create markets for ecosystem based value chains at the local community and national levels.

Payment or incentive modalities for sellers of ecosystem services need to be efficient, fair and equitable. The PES Naivasha scheme adopted a first-year flat rate payment of USD 17 to USD 30 (as of reporting time in 2017) annually for all PES farmers through a voucher system negotiated between ES buyers and sellers and depending on the available buyers’ contributions. However, distribution of benefits that satisfies the expectations of farmers remains a challenge. The incentive modality needs to involve reinvestment back into livelihood capital for sustainability, and thus we extended our concept beyond payment to integrate a co-investment policy for ES stewardship. When emphasizing the aim to enhance the livelihoods of local communities and support marginalized people, PES can be envisioned as “a joint and voluntary investment between smallholder ES providers and commercial investors as beneficiaries in co-investment and binding agreement under different degrees of conditionality for the provision of ES” (Leimona et al. 2015, p. 16-28). Consistently, these findings corroborate with other studies in Africa (Namirembe et al. 2014, p. 89-97).

Conclusion

As a SEPL, the Lake Naivasha watershed in Kenya provides an immense amount of services. It is a source of provisions, and provides regulating, cultural and supporting services. Upstream and downstream communities in the watershed depend on the landscape for their socio-economic and cultural well-being. Managing the production landscape sustains the provision of ES and thus creates the mutual interaction between people’s livelihoods and biodiversity conservation. However, increasing demand for ES has raised concerns of ecosystem degradation in the landscape, necessitating the need to promote mitigation mechanisms that restore and conserve degraded ecosystems to sustain local community livelihoods.

This chapter indicates that PES is a major natural resources-related policy driver for local smallholders to restore their farming landscape and cultural wisdom in providing ecosystem services. The payment and co-investment for ES scheme provides perceived and actual benefits for the smallholders by engaging diverse stakeholders including the most important ones—the downstream ES beneficiaries—in joint investment towards a healthy watershed. Upstream benefits include improved livelihoods from increased farm productivity, increased income (in-situ from PES interventions and ex-situ from downstream incentives), enhanced skills and knowledge and improved social welfare. Downstream communities benefit from increased water quality and quantity flow which sustains their commercial horticulture investments and biodiversity. Findings show that farmers have endorsed the PES scheme and adopted conservation agricultural technologies to improve farm productivity, soil fertility, livelihoods, water quality and quantity and to support mitigation of climate change. Results further reveal the farmers’ willingness to continue participating in the PES scheme. This willingness confirms the benefits farmers are getting compared to the foregone farm activities practiced before PES was introduced. In summary, the mutual upstream-downstream co-investment in watershed conservation contributes to ecosystem service provisions and agro-biodiversity conservation, and more importantly, the livelihoods of the people including their income, food, skills and knowledge.

Acknowledgement

This study would not have been possible without the support of key stakeholders’ involvement. The authors would like to thank the three WRUAs management committees and WWF for providing information during data collection. We are grateful to enumerators who assisted in primary data collection and particularly indebted to farmers who participated in the study as respondents.

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