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Analyzing the Tea Value Chain in Kenya

  Dec 2, 2016

The tea industry continues to experience a great value chain imbalance between the primary producers (farmers) and the other players in the value chain. Tea farmers rarely break even, despite the great social economic contribution to the development of the country.

Tea is the leading foreign exchange earner, contributing 25% of the total foreign exchange and 7% of the GDP. The industry famously known for its Black Tea (CTC), supports the livelihoods of over 5 million Kenyans and immensely contributes to rural development.

However, are the inputs given to the tea industry worthwhile to the Kenyan primary producer? Rosemary Owino, Head of Research Tea Directory – The Agriculture and Food Authority shared insights on the evolution of the tea value chain in Kenya with the participants of the Financing Agribusiness Value Chains Program at Strathmore Business School. These were her thoughts.

Evaluating the Tea Value Chain

95% of the tea produced locally is exported to 23 countries globally where Kenyan tea is blended and distributed. This makes compliance to international quality regulations a necessity for both small and large scale tea farmers. Given the attraction that tea has in the global market, its trading is often predisposed to sanctions which can only be lifted through diplomatic trade policy negotiations.

Private companies and scientific researchers need to support tea farmers by creating awareness for better farming techniques.  The tea value chain should begin with research development and then cascade to the tea growers, production and manufacturing processes, packaging and lastly, marketing and distributing. This is conducted through an action system for both direct exports and local consumption. The auction is used as the pricing benchmark for all tea sales within a week. Prices depend on tea quality and demand and supply forces. Selection and declaration of the highest bidder then follows.

Although most of the tea firms run on credit, lending money to farmers is risky as tea is a commodity whose prices oscillates regularly. Predisposing factors such as uncontrolled pests and diseases equally put constrain on the crop yields, increasing the risk variability.

How does the government reduce the gap between the industry players and the producers?

Protecting industry players through the issuing of regulatory quality licenses, does not only improve the product, but ensures that famers produce make the international export.

In 2015, the tea Industry earned the country Ksh. 125 Billion in export earnings and Ksh. 40 Billion in local sales. Recently, the industry has diversified its products to include: Orthodox teas, Purple and Green herbal teas.

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