Tea is a very important commodity to Kenya as the leading foreign exchange earner and the leading export commodity. The tea industry is a source of livelihood for more than 5 million people (1/10th of the population) directly and indirectly.
With tea growing and manufacture being rural-based activities, the industry is the leading contributor to rural infrastructural development and well-being for rural communities.
According to The ITC Annual Bulletin of Statistics 2023, Kenya, with a planted area of about 276,000 hectares (682,010.9 acres), produced 535 million kilogrammes of tea in 2023 and is forecast to grow to about 600 million kilogrammes in the coming 10 years.
Only 42 million kilogrammes (about eight per cent) of this tea was consumed domestically, with the rest being exported or held in stocks awaiting exports. The country earned Sh138 billion (about $1.2 billion), followed closely by horticulture at $901 million, chemicals ($521 million), coffee ($301 million) and petroleum products ($77 million), accounting for 12 per cent of Kenya’s total foreign exchange earnings.
However, 21 per cent of all exports (diaspora remittances) hit $4.027 billion, closing in on exports, which brought in $5.77 billion).
Kenya was the third biggest producer of teas accounting for 8.3 per cent of global tea production, but also a net exporter as 84 per cent of the entire production was exported (with some 8 per cent stocks remaining unsold) making Kenya the biggest tea exporter accounting for 25 per cent of all teas exported outside producing countries.
But Kenya has over the years been getting the lowest tea export prices among the three leading tea exporting countries. As tea is sold primarily through the auction system (about 80 per cent) in the producer countries before export, upon which some value adding is undertaken ahead of exporting, Kenya has also been getting the lowest post-auction price increase at a mere two per cent compared to about 15 per cent and 37 per cent by India and Sri Lanka respectively.
Both India and Sri Lanka have been able to achieve better export prices because of higher levels of value addition right through the value chain. After the tea auction, both countries have been able to achieve a price increase of about 37 per cent in the case of Sri Lanka and 15 per cent in the case of India. This was while Kenya only managed a paltry two per cent.
This was made possible by very elaborate government-sponsored schemes in both countries, which run through the tea value chain from the farm through processing to packaging and marketing. The incentives are mainly made up of tax concessions, subsidies, soft loans, and support in export markets access.
Value addition is a common buzzword in Kenya that to many only implies packing, while it actually means much more. Actually, a lot of additional value can be built from specialty tea products and branding. More needs to be done to build capacity, capability and knowledge among the three categories of players in the Kenya tea value chain, namely producers, buyers and packers.
Most producers must come alive to the opportunities that abound in tea value-adding both at the farm and processing stages, away from the conventional farming and processing methods.
There is need to consider more incentives and facilitation from government to all the three key industry players (producers, buyers and packers). There are huge lessons to pick from the Indian and Sri Lankan cases where with the right government incentives in tax concessions, subsidies, soft loans and support in market access, Kenya would attain the right levels of value addition for export, thereby enjoying higher export prices.
More often than not, buyers cite high operational costs as their biggest hindrance. These include increased costs of packing materials, high taxes on machinery and packaging, poor infrastructure that leads to high transport costs, high cost of production, and expensive borrowing.
There is hope. Besides leveraging technology to cut costs, create super efficiency and build more value, some different approaches in our national tea enterprise are also needed to get out of the value stagnation.
Registration of some of the unique characteristics of teas from certain regions under Geographical Indications (GIs) could deliver tremendous value if followed with proper marketing of the same. Out of this, some Darjeeling teas have fetched as high as $40/kg when we the highest we ever fetch is $6/kg. Hello!
