Kenya: Tea – Brewing up a bitter cup

Kenya is the world’s largest exporter of tea and the crop earns the country a fair share of its foreign income but the industry is unhappy. Small-scale producers who form the backbone of the sector, are complaining about opaque price mechanisms, lower bonuses and other issues and threatening to quit growing the crop. Wanjohi Kabukuru reports.

Samson and his wife Lydiah Muriithi own a three-acre tea farm in Othaya, in Nyeri County. The couple are angry with the Kenya Tea Development Agency (KTDA) for unstable tea bonuses and what they say is bad management. The Muriithis are not alone. They are among more than 600,000 Kenyan smallholder tea farmers currently complaining of lower bonuses.

The storm raging in Kenya’s tea industry started in May when the Tea Board of Kenya (TBK), a state-owned parastatal that regulates the country’s tea sector, slammed the KTDA in its Kenya Tea Industry Status 2014 report.

The report accused the tea agency and its subsidiary, Chai Trading, of manipulating tea prices by scheming with influential brokers at the Mombasa Tea Auction. KTDA represents smallholder tea farmers who account for 65% of the Kenyan tea industry sector. Originally, KTDA was a state corporation; it was later transformed into a private company in 2000.

According to the TBK, the Kenyan PF1 tea variety, said to be of the highest grade and mostly produced by smallholder tea farmers, is sold at lower prices. For generations, smallholders have complained of getting a raw deal from their managers.

According to the TBK, Kenyan tea earned the eastern African nation some $1.3bn last year but smallholders claim that they are not getting their fair share of the revenues. Kenya exported 494.4m kilos of tea and by June this year it had exported some 249.7m kilos, which is higher than last year’s half-year exports which stood at 246.6m kilos.

Kenya’s main tea export markets are Egypt, Sudan, Afghanistan, Pakistan, UK and UAE. Emerging markets for Kenyan tea include Angola, Vietnam, Philippines, Azerbaijan, South Korea, Czech Republic, Myanmar and South Sudan.

The growing unhappiness in the industry seems confined to smallholders. There have been no complaints from the large-scale tea producers under their umbrella body the Kenya Tea Growers Association (KTGA).

“There is evidence that KTDA at times sells tea to Chai Trading at a lower price than the offered price. For example, where the offered price is $2.61 per kilo, the auction price is much lower at $2.05 per kilo, yet the destination of the market is not indicated”, says Tea Industry Status 2014.

“The current low prices at the auction are precipitated by some unorthodox practices by KTDA which controls over 65% of the volumes dealt with at the auction”, accuses the report. “This is done in collusion with major brokers, warehouses and traders. The perpetrators continually divert attention from the real issues by citing the ad valorem issue”.