In a move to address mounting concerns over the high production costs affecting the Kenyan tea industry and their impact on farmer livelihoods, the Tea Board of Kenya (TBK) is set to conduct a thorough audit of the entire tea value chain. Kenya’s tea sector has long been a global powerhouse, contributing significantly to the country’s economy and offering employment opportunities to millions. However, the escalating costs of production, encompassing labor, energy, factory maintenance, logistics, taxation, and other expenses, have cast a shadow over the industry’s future.
Economic Challenges:
The Tea Board of Kenya (TBK) has identified various factors contributing to the crisis, such as labor costs, energy expenses, factory maintenance, logistics, taxes, and general tea-making expenses. These elements collectively raise the cost of tea production in Kenya, making it less competitive on the global stage. The average cost of producing a kilogram of Kenyan tea stands at Sh130 (US$0.90), putting pressure on the industry’s sustainability.
Impact on Earnings:
Despite a 13.54% increase in Kenya’s earnings from tea exports, attributed to a weaker shilling against major international currencies, the average export price of tea has seen a 30% decline over the past eight years. This decline in tea prices has adversely affected farmers’ earnings. Furthermore, a significant portion of Kenyan tea is exported as blends, depriving it of its unique identity and the potential to command higher prices as a distinct origin tea.
Visibility Challenges:
TBK has also noted that Kenyan tea’s visibility remains low in the global market, as brand owners often package teas without clearly denoting their origin. This practice hinders consumer awareness of Kenya as a producer of premium-quality teas.
Value Addition:
Only about 5% of Kenyan tea undergoes value addition, primarily for the local market. The majority is exported in its raw form, resulting in lower returns for farmers. As production costs rise and profits shrink, TBK emphasizes the need for a comprehensive value chain audit to safeguard the incomes of smallholder tea farmers who heavily depend on the industry.
A Brighter Future:
Despite the challenges, the rise of specialty tea offers a glimmer of hope for Kenyan tea farmers. The market is poised for a significant transformation, with new investments in factory lines and incubation centers. TBK is planning to establish an incubation hub for specialty and value-added tea, aiming to enhance farmers’ earnings from this beloved beverage.
Additionally, the Kenya Tea Development Agency Management Services Limited (KTDA-MS), responsible for managing factories on behalf of smallholder farmers, is actively pursuing the value addition agenda. They are set to install processing units in 32 factories across the country, emphasizing product diversification through the installation of orthodox tea processing machinery alongside the existing black CTC lines.
The Tea Board of Kenya’s decision to conduct a comprehensive audit of the tea value chain is a vital step toward resolving the industry’s challenges. By objectively assessing costs at every stage of production, this initiative aims to protect the livelihoods of smallholder farmers and secure the future of the Kenyan tea sector. With renewed investments and a focus on value addition, the industry is poised for a revival that will benefit all stakeholders, from farmers to consumers, ensuring that Kenyan tea continues to thrive on the global stage.
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