Kenya’s tea sector needs new policies to boost revenues

The Government should quickly adopt two national policies, namely the Agriculture Policy and another for the Tea subsector if the country is to improve its earnings.

The National Agricultural Policy and a National Tea Policy will be able to provide guidelines that will ensure that the tea industry is sustainable and competitive by overcoming the bottlenecks that have dogged the industry for decades.

A new report on Transforming Agribusiness, Trade and Leadership: A Capacity Needs Assessment of the Tea Value Chain in Kenya launched on Tuesday shows that although Kenya exports more tea than any other country in the world, it received low earnings compared to other exporting countries.

According to the report, the main concerns in tea marketing in Kenya include low domestic consumption, the dominance of a few multinational companies in the Mombasa Tea Auction (the largest in the world) who determine the prices, the limited number of export destinations, and the shrinking of current markets.

For instance, in 2013, Kenya exported 131 metric tons more than Sri Lanka but it earned Sh. 30 billion (USD300 million) less because Sri Lanka has concentrated on niche marketing and product differentiation as opposed to Kenya’s bulk marketing approach.

The report, launched by the African Capacity Building Foundation (ACBF) and the Kenya Institute for Public Policy Research and Analysis (KIPPRA) also shows that Kenya’s world market share has consistently increased from six percent in the 1970s to 26 percent in 2014, but domestic consumption has remained constant at about five percent.

Currently, Kenya is the third largest producer of tea in the world after India and China, but it is the largest global exporter in terms of volumes yet it (Kenya) earns less from tea than Sri Lanka, the second largest exporter, because of the bottlenecks hampering the progress and efficiency of Kenya’s tea industry.

Presenting the report in Nairobi, KIPPRA’s Policy Analyst, Nancy Laibuni, noted that Kenya has been over relying on a few markets which is partly due to low investments in promotion and marketing.

Besides, total exports to major markets have been declining except for Pakistan, Egypt and Russia. Kenya needs to focus on sustaining the current markets as it endeavors to access markets in the high consuming countries including Turkey, Morocco, Nigeria, and Ireland currently not covered, said Ms. Laibuni.

Between January and June this year, Laibuni said, exports to United Kingdom declined by 19 percent to Afghanistan and Kazakhstan-12 percent and to Yemen-four percent.

The Report noted that Kenya tea export market destinations are few indicating that an estimated 84 percent of tea goes to eight countries with Pakistan and Egypt taking half of the stated percentage.

The remaining 16 percent of the exports go to 67 other destinations while new market destinations for Kenyan tea include United Arab Emirates (UAE), West and Central Africa and Russia.

The narrow export base enhances vulnerability of Kenyan tea exports. For example, the drop in tea earnings in Kenya in 2003 was attributed to political instability in key markets such as Egypt and Sudan, Laibuni added.

She noted that Sri Lanka has concentrated on niche marketing and product differentiation as opposed to bulk marketing adopted in Kenya. Sri Lanka’s earning from branded teas was Shs.72 million (USD 0.72 million) which is 63 percent more than Kenya’s earning from branded teas.

Interim Director General of the Agricultural and Food Authority (AFA), Alfred Busolo, said a new shift in terms of understanding new preferences in the global market needs to be adopted.

The issue is no longer about volumes exported to various destinations but what market wants. It can be either quality or even taste, said Busolo.

Even though Kenya has been leading in the world market in terms of volumes, Busolo stated major activity value chain players’ needed to pursue value addition so that the country can graduate from exporting black tea to specialty teas.

On Tuesday during the signing of a Memorandum of Understanding between Export Processing Zone and the Agriculture and Food Authority tea directorate, Trade Principal Secretary, Dr. Chris Kiptoo, urged the tea value chain players to diversify their markets as part of cushioning the sector against market volatility and shocks that can easily shut out Kenya tea from the traditional markets.

Kiptoo emphasized the need for trade actors to employ new strategies aimed at opening up new markets by carrying out more market surveys, research, trade missions and buyer /seller meetings.

The new deal partnership was to enable Small and Medium Enterprise (SMEs) to export tea directly thus offering multinationals competition in the global market.

Tea has played an important role in Kenya’s socio-economic development. It is the leading industrial crop in terms of its contribution to GDP.

In 2016, tea accounted for 40 percent of Kenya’s marketed agricultural production and contributed 25 percent of total export earnings. In addition, tea provides livelihoods to over 600,000 smallholders who contribute about 60 percent of tea production.

Source: Kenya News Agency