The Deputy President Rigathi Gachagua has been meeting tea stakeholders, including farmers, in Kericho county to discuss reforms in the subsector.
Tea reforms are part of the strategy of fulfilling the Kenya Kwanza agenda of uplifting the people at the bottom of the economic pyramid, including farmers in the tea, dairy and coffee subsectors.
While the reforms aim at putting money into farmers’ pockets, it is also a long-term strategy to reduce the soaring cost of living amid national and international factors such as drought and wars.
For instance, as drought reduces agricultural produce, importation of maize and other food commodities have become the temporal remedy for food security. Importation of maize depletes foreign currency, mostly the US Dollar, as the total tea harvest has declined due to low rainfall.
In 2022, Kenya produced 535,000 tonnes, down from 537,800 tonnes in 2021. On the flipside, tea earnings increased to Sh163.3 billion from Sh130.9 billion in the previous year. Tea, therefore, accounted for 20.9 per cent of the total earnings from domestic exports.
Amid meeting dollar demands, getting additional dollars for importation of food, oil and other goods has depleted dollar reserves, escalating the cost of living as the shilling is under pressure.
The tea market is expected to rise beyond $100 billion by 2031. Kenya is registering increased exports to traditional markets such as Pakistan, where consumption rose by 20.6 per cent in 2022.
The growing international market and the projected consumption spells good times ahead for the more than 650,000 tea farmers and more than six million other people who derive their livelihoods from tea.
President William Ruto has said the country, which exports as much as 95 per cent tea without value-addition, is giving a raw deal to struggling small-holder farmers. This is also reflected at the national level where the country is striving to stabilise foreign exchange. Tea contributes at least two per cent to GDP.
Challenges
The tea subsector is facing myriad challenges curtailing realisation of its full potential. Cartels have been sapping farmers’ returns for years.
Problems include the high cost of electricity and farm inputs, costly labour, poor infrastructure, little use of modern technology, competition from other beverages and the worsening effects of climate change.
For instance, according to the Kenya Tea Development Agency, the cost of electricity, firewood and labour accounts for 40 to 50 per cent of the total cost of production. The roads in most tea-growing regions require rehabilitation.
Government Interest
The Kenya Kwanza administration’s new approach reforms in the tea industry resonate with the Bottom-Up Economic Transformation Agenda to deliver a stronger economy providing farmers higher purchasing power.
The Kenya Kwanza Administration, in its execution of legal, policy and administrative reforms, must to address the challenges facing one of the strongest economic subsectors.
The high cost of electricity and labour have eaten into farmers’ profits every year. For example, for every kilogramme produced and based on top payment of Sh21, labour cost accounts for more than 50 per cent.
Besides sourcing for new markets and maintaining the existing ones, such as Egypt, Pakistan, the UK and United Arab Emirates among others, value addition for product diversification will create new possibilities in meeting specialised demands.
Further, under the African Continental, Free Trade Area, the Government needs to promote tea in the little-tapped African market of more than 1.3 billion people. This will cushion the farmer against global market instabilities.
Short-, mid- and long-term reforms in the tea subsector will not only increase the purchasing power of the farmer through increased earnings, but also help shield the Kenyan currency against fluctuation in value and help bring down the cost of living.
Political commentator