Address inherent challenges in the tea sector

Dr Machel Waikenda, writing in the Star newspaper on Monday January18, 2021, reminisces on the good days when his father would take him to tend to their tea farm. He goes on to write about the tea industry as he sees it, but unfortunately misleads readers on a number of issues about the Sh140 billion sector. The misinformation published in the article offers an opportunity to educate Kenyans on the workings of the industry and elucidate on its successes and challenges.

It is misleading for Waikenda to state that tea is sold at Sh80 per kg at the auction and farmers are paid Sh18. Farmers are paid in a two-stage model: Monthly, at a rate of Sh16 - Sh18 per kilo of leaf, in what is more of an advance pay, and a second payment, popularly known as ‘bonuses’. In the same edition of the paper, it was shown that on average KTDA-managed factories fetched $2.18 (Sh240) per kg made tea in the six months to December 2020. This is equivalent to Sh52 per kg green leaf.

KTDA-managed Kagwe Tea Factory in Gatundu South, where the writer’s family delivers its tea, paid Sh43.60 per kilo of green leaf last financial year. No KTDA-managed farmer is/was paid Sh18 per kg.

The false narrative that the auction price varies considerably from what the farmer is paid is driven by a lack of understanding that the price in auction is for made tea and the farmer is paid in green leaf. It takes approximately 4.5 kilogrammes of tea to get one kilogramme of made that is sold at the auction

Contrary to reports about farmers uprooting tea, KTDA-managed factories processed the highest-ever green leaf volumes last year, which stood at 1.4 billion kilogrammes, up 28 per cent from the previous year.

Data from the KNBS shows that smallholder tea farmers, including those delivering to KTDA-managed factories, have been increasing acreage under tea, which stood at 163,000 hectares (2019) up from 141,800 hectares (2018). Waikenda should provide data to support his assertion that farmers are uprooting tea in droves.

Further, money accrued from the sale of tea is paid to individual factories’ bank accounts within 14 days of the fall of the hammer at the auction.

KTDA operates in a highly regulated business environment where it enters into management contracts with farmer-owned factories to collect, process, package, transport to market, sell and pay back farmers, less costs of operation.

All these activities are overseen by boards of directors, elected by farmers themselves, both at the factory level and the KTDA level. The farmers own the factories directly and the factories are corporate shareholders of KTDA Holdings that in turn owns the KTDA Management Services Ltd that manages on contract the value chain on behalf of the farmers.

To therefore claim, that KTDA operates as a cartel, allows the operations of middlemen and abets tea hawking is not correct and undermines the work that KTDA does with farmers. To claim that KTDA controls inputs, making them expensive, is being dishonest. KTDA has all along enabled farmers to access inputs at competitive prices.

For example, KTDA procures fertiliser for farmers at lower than market prices, through an international open tender. In 2019, KTDA imported 95,000 tonnes of fertiliser, at an average price of Sh1,996 per 50kg bag, against a market price of Sh2,800, representing a 40 per cent reduction on the price per bag – a welcome saving.

With the enactment of the Tea Act, which has some welcome clauses like the formation of the Tea Board but unfortunately increases the number of levies charged on farmers, the discussion we should be having is how to empower farmers to produce tea that fetches better prices at the auction and to assist them secure more markets for their teas to cushion them against price volatility. How do we reduce the escalating costs of production that are a major pain point for all manufacturers in the country?

The discussion should revolve around the increasingly reducing landholding for smallholder farmers, with reports indicating that more than 70 per cent of tea farmers have less than half an acre of tea, yet research has shown that you require a hectare (2.5 acres) under tea to earn a living.

Are there alternative economic activities that citizens can engage in? It is clear that even with reduced earnings from tea, production and area under tea continues to grow – indicating farmers still have faith in tea.

Corporate communications manager, KTDA