Nairobi – 28 June 2017 (ACBF) – A new report, launched today in the Kenyan capital, Nairobi, recommends that the Kenyan government should quickly adopt two national policies – one for agriculture as a whole and another for the tea sub-sector - if the country is to optimize its earnings by overcoming the bottlenecks that have dogged the tea industry for decades.
The report, arising from a capacity needs assessment of the tea value chain in Kenya, will be jointly launched by the African Capacity Building Foundation (ACBF) and the Kenya Institute for Public Policy Research and Analysis (KIPPRA). It comes after a capacity needs assessment and analysis of Kenya’s tea industry.
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, strikingly, 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.
Tea growing in Kenya dates back more than a century, after its introduction from India by the British colonial government in 1903, though actual commercialisation started in 1924.
Since then, tea has played an important and increasing 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% of Kenya’s marketed agricultural production and contributed 25% of total export earnings. In addition, tea provides livelihoods to over 600,000 smallholders who contribute about 60% of tea production.
Last year, as in other years, tea was Kenya’s leading export commodity with earnings increasing from US$1.2 billion in 2015 to US$1.25 billion in 2016, followed by horticulture ($1.13 billion) and coffee ($210 million).
In terms of volumes, tea exports rose from 420.5 metric tonnes in 2015 to 480 metric tonnes in 2016, with key export destinations being Pakistan, Egypt, UK and Afghanistan.
Sadly, only 14% of tea exported from Kenya is value added. The rest - a good 86% - is sold in bulk form, leading to the loss of $12 per kilo of tea because of the low level of value addition.
As a result, though Kenya exports more tea than any other country in the world, it receives low earnings compared to other exporting countries. For instance, in 2013, Kenya exported 131 metric tonnes more than Sri Lanka but it earned $300 million less. This is because Sri Lanka has concentrated on niche marketing and product differentiation as opposed to Kenya’s bulk marketing approach.
Interestingly, despite its famed tourism industry, Kenya’s economy rests heavily on the agricultural sector, which accounted for 32.6% of GDP in 2016. In that sense, agriculture is king in Kenya, accounting for more than half of exports and 70% of total employment in the country, with the majority of the rural population engaged directly in farming or in off-farm activities.
As such, being a key driver of growth, the agricultural sector is central to the achievement of the country’s current development blueprint, Kenya Vision 2030.
Thus, aware of the dangers that agriculture’s weak integration with the other sectors of the economy poses to the country, the government of Kenya requested the ACBF to provide support to conduct a capacity needs assessment that would lead to the development of a programme to strengthen the agribusiness sector.
As part of the grant ACBF provided to KIPPRA , a capacity needs assessment was conducted in collaboration with relevant ministries and institutes in Kenya.
The assessment that began in March 2016 focused on the tea value chain because tea is not only a leading foreign exchange and household earner, it is also a big employment creator.
It reviewed existing national strategies, policies, practices, and challenges in relation to agribusiness, trade, and leadership, as well as the gaps in the capacity of the institutions implementing reforms in the tea value chain.
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.
The report shows that Kenya’s world market share has consistently increased from 6% in the 1970s to 26% in 2014, but domestic consumption has remained constant at about 5%.
In addition, Kenyan tea is not branded and there is limited marketing research. Therefore, there is need to develop a tea brand called “Kenya Tea” and market it in the domestic and international markets.
Unfortunately, the international buyers who buy Kenya’s tea from the Mombasa Tea Auction blend the tea abroad and brand it in their individual company names. This has reduced Kenya’s competitive advantage to the point where it is estimated that with the quality of tea in the country, branding could yield an additional 100 to 200 million dollars in GDP.
The report’s recommendations are far-reaching, including a call on the Kenyan government to fast track the adoption of a National Agricultural Policy and a National Tea Policy to provide guidelines that will ensure that the tea industry is sustainable and competitive. It also implores the country’s authorities to focus on addressing the human and institutional capacities identified.
The absence of the two policies means that the tea sub-sector operates without a clear strategic focus, resulting in piecemeal reform initiatives. According to the report, the process of the adoption of both policies has taken too long and concerted efforts are needed towards their finalisation.
-ENDS HERE-
For more information, please contact:
Abel Akara Ticha – Senior Communication Officer
The African Capacity Building Foundation
Harare, Zimbabwe
+263 7+263-4 304663, 304622, 332002, 332014; Ext. 279
Email: A.Ticha@acbf-pact.org
About the African Capacity Building Foundation
Established in 1991, ACBF builds human and institutional capacity for good governance and economic development in Africa. To date the Foundation has empowered people in governments, parliaments, civil society, private sector and higher education institutions in more than 45 countries and 6 regional economic communities. ACBF supports capacity development across Africa through mobilization and leveraging of resources for capacity development; grants, investments and fund management; knowledge services; promoting innovation in capacity development and capacity development advisory services. The establishment of ACBF was in response to the severity of Africa’s capacity needs, and the challenges of investing in indigenous human capital and institutions in Africa. ACBF interventions are premised on four principles: the centrality of capacity to the development process in Africa; the critical role of a partnership and demand-driven approach in tackling capacity challenges; African ownership and leadership in the capacity development process; and a systematic, sequenced and coordinated approach to the capacity development process that pays attention to capacity retention and utilization. For further information go to: www.acbf-pact.org
