In trying to explain the realities of any economic sector, it is often useful to start with an analysis of the key statistics relating to that sector.
For the tea sub-sector, this means that you must delve into the latest statistics provided by the International Tea Committee (ITC), and other equally reputable sources of data.
According to the ITC Annual Bulletin of Statistics 2023, by end of 2022, Kenya had 276,258 hectares under tea with 163,200 hectares being under smallholder farmers. This worked to about 59% of the tea planted area in Kenya.
In the recently published Kenya Tea Industry Performance Highlights For 2023 by the Tea Board of Kenya, out of the 570 million kgs of tea produced, 278 million kgs were produced by smallholder farmers, which is 49% of the entire national production.
The planted acreage is unlikely to have changed much between 2022 and 2023, suggesting a lower productivity among smallholders as compared to the plantations.
But one should hasten to say that the Kenyan tea productivity compare favorably with its peers. According to the ITC Bulletin of Statistics 2023, Kenya’s annual average tea productivity was 2,007 kgs/Ha between 2020 and 2022, comparing to India (2,095 kg/ha), Sri Lanka (1,037 kg/ha), Indonesia (1,116 kg) and China (946 kg/ha).
The higher productivity realized by the plantations could be attributed to plucking modalities (a business model of not strictly adhering to 2 leaves and a bud) and availability of in-house research and resources to replant with more productive and higher quality tea bushes. They also enjoy higher levels of efficiency in logistics, as well as higher financial and infrastructural capacities.
The Tea Act 2020 defines a “small scale tea grower” as a grower cultivating tea in a parcel of land of less than ten acres.
While Kenya is the leading exporter of black CTC tea, with total export earnings growing over the years, the cost of production has been ballooning eating into the smallholder farmers earnings. Prices at the market have also been declining or just stagnated in dollar terms with 2023 suffering a decline to USD$2.24/kg from US$2.49/kg in 2022.
Past Kenya tea industry performance reports by Tea Board of Kenya reveal continuous planted area growth of about 4% annually among the smallholders with a 6.6% annual production growth. This growth is projected to continue especially with ongoing policy initiatives aimed at raising productivity among the smallholders, including subsidized fertilizer, improved extension services and replacing old bushes with more productive ones.
The flip side of this growth in output is some increased downward pressure on market prices (due to glutting) unless value addition and marketing are scaled up.
According to the Tea Taskforce 2021 Final Report, on average, one hectare among smallholders fetches KSh.467,630 in the East of Rift and KSh.249,594 in the West. Expenditures average 48% (of total revenues), leaving net margins of KSh.257,500 (55%) and KSh.86,936 (35%) in the East and West, respectively. Gross margins vary significantly from one county to another, a high of 69% in Kirinyaga, dropping down to 42% in Trans-Nzoia.
Labor and fertilizer constitute the highest cost components, accounting for 80% and 13% respectively. This partly justifies the need for a policy intervention in lowering labor costs such as adoption of alternative technologies like machine plucking.
It also explains why ongoing fertilizer subsidies impact on cost of production has been minimal. If machine plucking is adopted there is a likely drop in quality that some experts have argued to be insignificant if appropriate processing systems are employed. My own view and recommendation is to insist on manual plucking only when there is an assured market for the likely premium quality tea from such plucking with assured commensurate high prices.
We owe it to the smallholder tea farmers to explore all possible ways to help them to generate better incomes.
Kenya has a reputation as a hub for technological innovation. Some of these innovators should turn their attention to this crucial challenge, as it’s about time we leveraged on technology to improve the incomes of the tea farmer.