The word competitiveness is one of the most frequently used words in economics and international trade, sometimes without a proper understanding of its deep meaning. In agriculture, competitiveness is sometimes used to refer to when a product has an absolute advantage over the other for being produced cheaply.
Countries can be competitive in many ways. For some certain products, price competition is a dominant factor, while others have non-price competitiveness, also known as quality competitiveness, as key. Generally speaking, countries that are rated as competitive are majorly the productive ones. Similarly, the more export-oriented a country is, the more likely it is to preserve its competitive position.
The competitiveness of Kenya’s tea industry is critical to the country’s economy. Tea remains one of Kenya’s largest agricultural export earners. Data from the Central Bank of Kenya shows that it has already raked in Sh80 billion in the first half of this year ahead of horticulture and coffee, which traded volumes worth Sh55 billion and Sh23 billion respectively during the same period.
A vibrant tea sector is itself a contributor to political, economic, and social stability by providing a livelihood for many rural dwellers, especially women. Kenya’s tea production stood at about 550,000 tonnes last year. Of this, the more than half a million small-scale tea farmers in the country contributed over 60 per, while the balance was from the large-scale owners and multinational companies.
The share of Kenya’s tea export is roughly 30 per cent of the international black tea trade, followed by Sri Lanka and India with 21 per cent and 15 per cent market share.
Despite Kenya holding nearly one-third of the black CTC tea market and enjoying relatively attractive prices in the recent past, the tea industry is still subject to volatility and long-term price pressures. What should be of concern is that since the mid-1990s, although Kenya’s tea dominates the international market, its tea has received relatively lower prices compared to other origins, particularly Sri Lanka.
The emergence of new entrants into global tea production and trade such as Vietnam, Rwanda and Malawi, which seem to enjoy a comparative advantage in factor conditions, means that Kenya is set to face stiffer price competition.
To become more competitive, Kenya’s tea industry must build on its historic strengths, develop its own brands, forge marketing alliances and move closer to the end-consumer in its target markets. These strategies will help to shield the industry from price volatility while creating value in the market.
Kenya’s tea industry must continue to devise strategies for repositioning itself in the world market. The strategies may be pursued through five initiatives. The first is to position the industry closer to the consumer. By proper branding of Kenya’s tea, its value will be captured by the consumers.
The second initiative should involve the forging of strategic alliances with tea marketers, brokers and auction players. Alliances built with these actors will help to boost demand for Kenya’s rich tea blends in target markets.
The third initiative will be to relaunch a re-discovery action of Kenya’s tea brands. This will help to market Kenya’s blends, both existing and new ones, directly to end-consumers through teahouses while building a market image for the teas.
To achieve this, the Tea Board of Kenya jointly with other key players like KTDA and EATTA will have to undertake consumer research, market development, provide efficient logistics, and streamline the import and export procedures to be efficient.
Developing the workforce in the industry is the fourth strategy that should be implemented if the first three initiatives are to be achieved. Developing the workforce will improve managerial, marketing, quality control, logistics, and other technical skills.
Lastly, restructuring public–private partnership arrangements is a strategic initiative that will go a long way in streamlining the activities from the farms to the shipping point and increasing private sector responsibility on research and promotion.
The government should put in resources as well as give incentives to the private sector to inject resources into the Tea Research Foundation of Kenya and the proposed joint one-stop value-addition facility.
These initiatives are important first steps in strengthening the long-term competitive position of Kenya’s tea industry. They will create additional value for customers in target markets, increase industry sales and profitability, and make growers, employees, and stakeholders less vulnerable to price volatility.
Former MP, Konoin
