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MPs and government to blame for tea sector woes

Wednesday October 16 2019

TEA

Tea picking at Kiangondu village in Tharaka-Nithi County on October 12, 2019. HOTO | ALEX NJERU | NATION MEDIA GROUP  

DUNSTAN NGUMO
By DUNSTAN NGUMO
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When things go wrong in any public sector in Kenya, those responsible start pointing accusing fingers and passing the buck.

This is happening in the tea sub-sector as a result of hue and cry from farmers due to low bonus payment this year.

The Sunday Nation of October 6, 2019, reported that Cabinet Secretaries Mwangi Kiunjuri (Agriculture) and Peter Munya (Trade) were under the scrutiny of MPs over the decline in earnings in tea and coffee sub-sectors, which are Central region's economic mainstay.

INCREASED EARNINGS

In his defence, Mr Munya hit back at the MPs and posed: "Did the MPs wake up yesterday to discover that there was a problem in tea and coffee sectors? Some of them have been in Parliament for two terms; what laws have they introduced to benefit tea and coffee farmers?"

In a way, Mr Munya is right. What laws have the legislators and the government put in place to ensure increased earnings for tea farmers?

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Both MPs and the government have failed the farmers. To start with, Kenya is awash with a host of recommendations in official reports and papers on how to best improve agriculture as well as promote the tea industry.

But the recommendations have never been implemented. They have been left to gather dust on office shelves while other countries use them to improve their agriculture.

FOREIGN EXCHANGE

We pride ourselves that agriculture is the mainstay of Kenya's economy and that tea is the highest foreign exchange earner yet we do not have a national agricultural policy and a tea policy in particular.

These two pieces of legislation are critical to give strategic direction to key sectors of our economy.

A paper titled Kenya's Tea Sector Needs New Policies to Boost Revenue by the Kenya Institute for Public Policy Research and Analysis (Kippra) and the African Capacity Building Foundation (ACBF) of June 2017, recommends that "the government should quickly adopt the two policies if the country is to optimise its earnings by overcoming the bottlenecks that have dogged the tea industry for decades".

To date, there is no evidence that Parliament has formulated the policies. The person who bears the biggest responsibility to fast-track these policies through Parliament is, admittedly, the Agriculture CS.

TEA BILL

MPs and senators cannot also shun this responsibility. We give credit to Senator Aaron Cheruiyot for the draft Tea Bill of 2018, but a national tea policy should precede the draft bill.

Secondly, the draft bill should be subjected to public participation, particularly tea stakeholders, before enactment.

Two government appointed task forces; one in 2007 and another in 2015, were mandated to look into challenges facing the tea sub-sector and map out a way forward, especially improving farmers’ earnings.

Among key recommendations of the teams was the enactment of an Agricultural Products Value Addition bill and establishment of a Tea Development and Value Addition Fund to drive investment in value addition and product diversification. It is a paradox that Kenya keeps talking about agribusiness and yet there is no law to provide for value addition of agricultural products.

VALUE ADDITION

It is worthwhile for Kenya to compare itself with Sri Lanka, the second highest (after Kenya) global exporter of black tea, to see the effect of value addition.

Only 14 per cent of Kenya’s tea exports are value-added while the rest, 86 per cent, are sold in bulk form. On its part, over 40 per cent of Sri Lanka’s tea exports are value-added.

As pointed out in the 2007 National Tea Task Force report; "Export of tea in bulk form denies the country employment as the tea is packaged elsewhere; loss of revenue as packaged tea fetches higher returns, and loss of identity of Kenya's world re-known quality tea."

While Ceylon Tea, Sri Lanka’s tea brand, is world famous, Kenya does not have its own tea brand on global tea shelves.

This denies the county the much needed revenue for its quality teas and better pay for farmers. The trend cannot be reversed without a relevant policy and legal framework.

EVALUATION

Other key recommendations of the two task forces — which have not been implemented to date — include the enactment of a national tea council as a central lobby for all tea stakeholders and a review of the governance structure of the tea industry.

The 2015 task force recommended to the government to prevail on tea management agencies "to increase the ratio of payment to farmers to a target minimum of 75 per cent of total earnings and ensure that total costs to the farmer do not exceed 25 per cent."

The Kenya Tea Development Agency (KTDA) has received a lot of bashing but there is another elephant in the room.

It is this elephant that has allowed KTDA to operate on its own terms in managing the small scale tea sub-sector.

For example, the 2015 task force report recommended an evaluation of governance structures in the tea sub-sector. This has not been done.

STRONG WATCHDOG

In its report, KTDA indicates that in the 2018/19 financial year it paid tea farmers 67 per cent of the total tea revenue.

The question is, why did they not pay an average of at least 75 per cent as recommended in the 2015 task force report? This is the true benchmark of their performance as a management agent, which is not influenced by global market forces.

In the absence of an effective regulator and a strong national tea lobby, as recommended in the 2007 task force report, there is no strong watchdog to oversee and check KTDA’s operations.

Had the government implemented recommendations of the two teams, current payments to tea farmers might not have plummeted to dismal levels.

Tough times call for tough measures. There is the hyped talk of over-supply of black teas in the global market leading to reduced earnings.

MARKETERS

The question is, what are marketers doing to improve payments to farmers? Merely predisposing themselves to the laws of supply and demand at global tea markets is not good enough for a credible management entity.

KTDA bears the cardinal responsibility to explain to farmers what they are doing to avoid a further fall in their earnings.

Why should tea farmers bear the brunt of salaries for KTDA management staff at the factory level while still paying a prescribed management fee?

This is a double charge to the farmers. What is KTDA doing to gauge the viability and profitability or otherwise of the multiple subsidiary companies under it, some of which may be contributing to further reductions of farmers’ earnings?

Today, global markets pay more for orthodox and other specialty teas than black CTC. Why hasn't KTDA ventured more aggressively into processing and marketing of these teas so as to generate more earnings for farmers?

Tea farmers are not entirely blameless for their predicament. Every trade has its own strong lobby to promote and protect stakeholders’ interests.

STRONG LOBBIES

Tea farmers need to form strong lobbies to fight for their interests. If they don't do so, nobody else will do it for them.

It was recommended in the reports that tea farmers establish a national tea lobby to protect and promote their interests.

This initiative is yet to be realised. True, there is the Kenya Union of Small Scale Tea Owners (Kussto) but it does not appear to cater for a wide cross-section of tea growers.

Finally, tea accounts for 40 per cent of Kenya's agricultural products, contributes 25 per cent of total export earnings, four per cent of GDP and provides livelihoods to about 10 per cent of the population.

If tea goes down the drain, a huge chunk of Kenya's economy will follow suit. Unless urgent measures are taken to institute necessary policies, tea earnings will not only continue to drop but the industry faces a gloomy future.

The author is a former chairman of the Tea Board of Kenya and a member of the 2015 National Tea Taskforce.