STiR coffee and tea magazine

50 STiR coffee and tea / Issue 6, 2017 (December / January) Private leaf factories expand production The diversion of green leaf to private tea processing companies in recent years has reduced the crushing capacity of KTDA fac- tories across the country where private tea buyers are active. Critics of private tea business argue the diversion of green leaf to private tea processing factories will reduce the volumes delivered to KTDA and lead to the Agency's factories to oper- ate below optimum processing quantities. Underutilization of factory personnel and delays in machinery upgrades and repairs for lack of adequate earnings from factory sales are a recipe for excessively high production costs. Last year 56% of Kenya's tea production was by smallholder growers. Large scale producers and multinational companies produce an estimated 44% of the country's 430 million kilos. Bisieri, 63, said: "One of the incentives to sell our tea to mid- dlemen who later sell to private tea processing factories is the instant cash that we get to help us take care of day to day needs." "In addition, when you pluck more than two leaves and a bud, the KTDA factory will not accept your green leaf so we find it better to sell to private buyers," she said. The amount she receives is sometimes less than what KTDA offers "but I do not have to struggle to get my tea weighed, col- lected, and sold since the middlemen have lesser demands and do not always insist on two leaves and a bud as does KTDA." The RAO farm in Nyamira County, also in western Kenya, is one of the companies that buy tea from smallholder tea growers for delivery to private tea processing factories in neighboring Kericho and Bomet counties, where most of Kenya's tea is grown. Clifford Ogonyo of RAO farm said "we have been buying tea from small tea growers for more than 15 years. There are several arrangements with tea farmers who supply us with green leaf." Since RAO farm does not have a processing factory of its own, the tea it buys is sold to private tea processing factories such as Mogeni in Nyamira, Sasini, and Sotik Tea. "Although KTDA argues we are involved in tea hawking that is not entirely true. Some of the private tea buyers have actually leased land from farmers who had abandoned tea farm- ing because of the challenges they had with the agency," he said. "Private tea buyers have ensured that tea production by small scale tea growers continues despite the poor pay and dif- ficulties they have been facing," said Ogonyo. Kenya licenses 39 private large-scale tea producers and pro- cessors including James Finlay, Nandi Tea Estates, Tinderet Tea Estates, Kipkebe Ltd, Kapchorua Tea, Kaisugu Ltd, Mogusii Farmers, Kerumbe Farm, Karirana Ltd, and Gakoe Tea Estates among others. In addition, an estimated 8% of the tea produced in Kenya comes from independent growers who do not belong to either KTDA or the Kenya Tea Growers Association (KTGA). "We can buy tea directly from a farmer and pay on the spot. Sometimes we lease land from these farmers so that the tea har- vested is sold to us and we pay the farmers on a monthly ba- sis," explained Ogonyo. The RAO farm does not pay farmers KTDA's annual bonus. This year KTDA paid a bonus of at least 30% to the more than 560,000 small scale farmers. Bonus payments totaled $756 million in two installments in 2017, up from $597 million for the previous year. Despite the increase in overall payment, the second installment, which comes at the end of the year, dropped to $405 million from the $424 million in 2016. The bonus is based on production which is estimated at 976.3 million kilograms compared to the 1.235 billion kilograms sold during the previous production period. According to the Kenya Institute for Public Policy Research and Analysis (KIPPRA), the country's bonus payments have not matched those of the competition in the global market because the East African nation specializes in selling the tea produce in bulk instead of boosting its value before export. KIPPRA esti- mates that only 14% of the Kenya tea exports are "value added" which costs the country estimated $12 per a kilogram of tea. Locally produced tea is found in village markets but domes- tic consumption is minimal. Kenya exports 95% of its tea. "Despite Kenya being the leading exporter of tea in terms of volumes, the country receives low earnings compared to other exporting countries due to low value addition," said KIPPRA in its 2017 analysis 'Transforming Agribusiness, Trade and Leader- ship: A Capacity Needs Assessment of the Tea Value Chain in Kenya'. The analysis cites the payments for 2013 when "Kenya exported 131 metric tonnes more than Sri Lanka but it earned $0.3 billion less." "This is because Sri Lanka has concentrated on niche mar- keting and product differentiation as opposed to bulk marketing adopted in Kenya," said KIPPRA. The study further observed that "Sri Lanka's earning from branded teas was $720,000 which is 63% more than Kenya's earning from branded teas.

• Cover