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Tea--brewing up a bitter cup.

Kenya is the world's largest exporter of tea and the crop earns the country a fair share of its foreign income but the industry is unhappy. Small-scale producers who form the backbone of the sector, are complaining about opaque price mechanisms, lower bonuses and other issues and threatening to quit growing the crop. Wanjohi Kabukuru reports.

Samson and his wife Lydiah Muriithi own a three-acre tea farm in Othaya, in Nyeri County. The couple are angry with the Kenya Tea Development Agency (KTDA) for unstable tea bonuses and what they say is bad management. The Muriithis are not alone. They are among more than 600,000 Kenyan smallholder tea farmers currently complaining of lower bonuses.

The storm raging in Kenya's tea industry started in May when the Tea Board of Kenya (TBK), a state-owned parastatal that regulates the country's tea sector, slammed the KTDA in its Kenya Tea Industry Status 2014 report.

The report accused the tea agency and its subsidiary, Chai Trading, of manipulating tea prices by scheming with influential brokers at the Mombasa Tea Auction. KTDA represents smallholder tea farmers who account for 65% of the Kenyan tea industry sector. Originally, KTDA was a state corporation; it was later transformed into a private company in 2000.

According to the TBK, the Kenyan PF1 tea variety, said to be of the highest grade and mostly produced by smallholder tea farmers, is sold at lower prices. For generations, smallholders have complained of getting a raw deal from their managers.

According to the TBK, Kenyan tea earned the eastern African nation some $1.3bn last year but smallholders claim that they are not getting their fair share of the revenues. Kenya exported 494.4m kilos of tea and by June this year it had exported some 249.7m kilos, which is higher than last year's half-year exports which stood at 246.6m kilos.

Kenya's main tea export markets are Egypt, Sudan, Afghanistan, Pakistan, UK and UAE. Emerging markets for Kenyan tea include Angola, Vietnam, Philippines, Azerbaijan, South Korea, Czech Republic, Myanmar and South Sudan.

The growing unhappiness in the industry seems confined to smallholders. There have been no complaints from the large-scale tea producers under their umbrella body the Kenya Tea Growers Association (KTGA).

"There is evidence that KTDA at times sells tea to Chai Trading at a lower price than the offered price. For example, where the offered price is $2.61 per kilo, the auction price is much lower at $2.05 per kilo, yet the destination of the market is not indicated", says Tea Industry Status 2014.

"The current low prices at the auction are precipitated by some unorthodox practices by KTDA which controls over 65% of the volumes dealt with at the auction", accuses the report. "This is done in collusion with major brokers, warehouses and traders. The perpetrators continually divert attention from the real issues by citing the ad valorem issue".

Over the last three years, KTDA has blamed several factors which it said had an impact on tea prices and general farmers' incomes. These ranged from climate change, smallholder farmers opting for alternatives to tea, political turmoil in Egypt--an important market--an ad valorem tax of 1% charged on exported tea in addition to other taxes, and a glut in the local market, as reasons for lower prices.

Last year KTDA had tried to shift the blame to the government's ad valorem tax imposed on all tea exports, saying that the levy was making Kenyan tea uncompetitive. However, the Agriculture Ministry has dismissed this as a sideshow by KTDA aimed at deflecting attention away from KTDA's "mismanagement" woes.

Confusion all around

Adding to the confusion in the tea sector is the fact that many smallholder farmers are unaware how the tea auction operates and this has helped fuel the misunderstanding that permeates the Kenyan tea sector.

Ever since TBK released its damaging report, many expected KTDA to come out strongly in self-defence and even pursue legal channels in the face of damning allegations of impropriety. A feeble denial is all that KTDA has offered so far. A failure by KTDA to cushion farmers during low seasons has only helped erode its public image.

The squabbling over tea prices is still simmering, with politicians planning meetings with tea stakeholders to find solutions. In September KTDA announced that total tea earnings had reduced to Kshs52.9 bn ($590.3111) down from $772,601 in 2013. The agency further announced that the bonus payments would not be the same and farmers around the Mount Kenya regions would receive higher bonuses than those from the Rift Valley.

In mid October, tea farmers in several tea-growing counties in the Rift Valley threatened to uproot their trees owing to the low payments. Some 31,000 small-scale tea farmers are now considering alternative land uses such as timber and real estate at the expense of tea growing.

Previously, KTDA has managed to weather farmers' complaints. This time around, however, the scenario is different and KTDA is increasingly being isolated. The agriculture cabinet secretary, Felix Kosgei, has also accused KTDA of mismanagement. Legislators from tea-growing regions in both parliament and senate have joined the farmers and demanded a complete makeover of KTDA.

But not only KTDA is facing a crisis of confidence; the East African Tea Trade Association (EATTA), which runs the Mombasa tea auction and sells tea from Uganda, Rwanda, Burundi, Malawi, Tanzania and Mozambique, is also accused of complicity in unfair tea prices. EATTA has been criticised for running an opaque auction. In September, the Ugandan Export Promotion Board said it was considering direct sales instead of the auction, whose profits are said to be 10 times lower than those of other emerging tea markets.
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Title Annotation:COUNTRYFILE: Kenya
Author:Kabukuru, Wanjohi
Publication:African Business
Geographic Code:6KENY
Date:Dec 1, 2014
Words:953
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