Tea farmers should reclaim the ‘bush-to-cup’ value chain

In Summary

• Whereas everyone has a right to be heard, two primary interests should drive the reform process in the tea industry.

• All other interests no matter how benign they appear are secondary. They cannot override the interests of farmers and the country at large.

Agriculture CS Peter Munya.
Agriculture CS Peter Munya.

The Crops (Tea Industry) Regulations 2020 recently published by the government constitute one of the boldest attempts so far at reforming the tea sub-sector.

The new rules provide a legal, policy and administrative framework to protect small-scale tea farmers from continued exploitation by middlemen and agents, and give them a bigger say in the lucrative tea value chain, which earned Kenya Ksh 117 billion in foreign exchange from producing 26 per cent of global tea exports last year.   

Over the years, smallholder tea farmers have been gradually marginalized yet they produce 60 percent of the world-famous high quality Kenyan tea.

As expected, vested interests are opposed to the proposed new order, with the Kenya Tea Development Agency (KTDA) terming the new regulations as ‘unconstitutional.’  

Whereas everyone has a right to be heard, two primary interests should drive the reform process in the tea industry.

First, the national interest given that tea production is a strategic economic asset generating 4 percent of the country’s GDP. The tea sub-sector is too valuable to be left in the hands of a few players in the market.

Second, the collective interest of 600,000 tea farmers and the over five million Kenyans whose livelihoods depend on tea farming must prevail. The smallholder tea value chain is of great economic significance, comprising 66 factories managed by KTDA, 600,000 producers and over 10,000 workers directly employed.

This value chain also supports a vast ecosystem of businesses supplying inputs like fertilizers, plant and machinery, vehicles and spare parts, fuel, firewood and other services.

All other interests no matter how benign they appear are secondary. They cannot override the interests of farmers and the country at large. We must now put the tea farmer back in the saddle by dismantling the exploitative system that favors KTDA, brokers and multinationals controlling the tea supply chain.

Tea farmers have been grappling with myriad other challenges like changing climate and weather, price fluctuations and rising cost of inputs.  

However, the underlying market imbalances pose an even bigger threat to the industry’s sustainability and need to be tackled. A write up in the Worldtea news website by one Peter Keen describes the predicament of small-scale tea farmer in Kenya.

“Kenya grows some superb teas that lose identity as the crop moves through the bush-to-cup logistics and ends up as a commodity ingredient in a tea bag blend. The value chain is marked by many disconnects: conflicting interests, resource gaps, climate volatility, financial structures and global market factors……” 

In short, the tea value chain in Kenya is broken and needs fixing. However, we cannot re-engineer the tea value chain without first dealing with the elephant in the room.

Agriculture cabinet secretary Peter Munya has accused KTDA of abusing its market power. This, in competition law, is a serious matter capable of attracting severe legal sanctions against a firm found to have abused its dominance in the market.

But KTDA should not take this badly. Instead, the agency should seize the moment and re-position itself by engaging farmers at the grassroots on this very issues. Rather than bury its head in the sand, KTDA should accept that the proposed tea regulations are addressing the long-term sustainability of Kenya’s tea industry.

A 2008 report by an NGO called Christian Partners Development Agency flagged marginalization of tea farmers as one of the biggest challenges facing the tea sub-sector. The report noted how small-scale tea farmers have not only been relegated in critical decision-making, but have also been subjected to earning lower returns than plantations and other big producers.   

Small-scale farmers, through the tea factories, form the bedrock of the tea industry. Unfortunately, factories are the weak link in the value chain due to toxic KTDA influence and interference in their operations, to the extent of micro-managing board meetings of the limited companies that own the factories.    

We must however give credit to KTDA which has no doubt invested significant resources over the years in improving the quality of tea and industry productivity. However, there is need to empower farmers and guarantee them better earnings.

The proposed new rules cover various aspects of the value chain including licensing and registration of growers, brokers, factories, transporters and marketers. These will ensure transparency in the industry by getting rid of unscrupulous elements preying on farmers yet they have not invested in the industry.

Everyone delivering green leaf to a factory shall have to be registered with that factory and cannot sell to anyone else other than the factory. This will eliminate ‘tea hawkers’ who have been blamed for creating confusion and distorting prices in the market.  

Also under the proposed new rules, all tea produced in Kenya will be sold exclusively through the Mombasa auction. This will curb parallel markets operated by tea cartels.

In addition, sale of tea by private deals known as Direct Sales Overseas will be outlawed, killing a lucrative window exploited by middlemen to enrich themselves at the expense of the farmer. Traders will be required to pay in full before taking delivery of all tea consignments purchased at the auction thus safeguarding farmers’ earnings.    

Tea factories shall henceforth be allowed to sell tea directly at the auction hence reducing the influence middlemen in the marketing chain. Once the tea is sold, all the money must be remitted directly to the factory account within fourteen days thus eliminating delays in paying farmers.

Within thirty days after receiving proceeds of tea sold at the auction, factories must pay farmers at least 50 per cent payment for green leaf delivered each month. The balance will be paid within the financial year.

The rules also streamline management contracts between KTDA and the tea factories. For example, management fees are capped at 2 percent thus removing exorbitant agency charges that have been used to fleece farmers of their hard earned cash.

These are just a few of the progressive rules whose overall effect, as the CS elaborated, is to provide regulatory remedies to a dysfunctional tea auction system, predatory behavior of KTDA and the low and unstable tea prices.  

Notably, the new rules give additional legal teeth to the Crops Act 2013. Section 3 of the Act recognizes the freedom of farmers to organize in a manner that gives them access to economies of scale.

The Act also provides a statutory framework for enhancing productivity and incomes of farmers and the rural population, while circumventing unnecessary regulatory bureaucracy in the crops sub-sector.  

Farmers should be vigilant against attempts to claw back on these gains by those who feel threatened by the new order. Thus economically empowered and unshackled from the vicious grip of agents and middlemen, tea farmers should demand a bigger voice in the governance of the industry.

It is time farmers reclaimed the tea industry. Colonial era instruments of exclusion cannot be sustained in this day and age to deny farmers the right to own and manage this strategic economic asset.   

Choto is a lawyer and public affairs analyst. Email: [email protected] Blog: kingorichoto.com