Kenya is Africa’s leading tea producer and fourth in the world behind India, China and Sri Lanka. Black tea is Kenya’s leading agricultural foreign exchange earner.
The tea industry is divided between small farms and large estates. The small-scale sector, with more than 260,000 farmers, is controlled by the parastatal Kenya Tea Development Authority. The estates, consisting of 60–75 private companies, operate on their own factories.
In 2012, tea industry recorded a decrease of 2.2 per cent. Tea exports amounted to about Kshs 109 billion in 2011.
Tea is now the country’s leading foreign exchange earner with export earnings standing at about Kshs 110 billion up from Kshs33 billion in 2003, a 230 per cent increase. The output of tea contribute about 11 per cent of agriculture sector’s share of Gross Domestic Product (GDP).
The area under tea has also increased from 131,000 hectares in 2003 to 188,000 hectares while production has increased from 293,00 metric tons to 378,000 metric tons.
Smallholder tea production started in 1969 and produces more tea than large scale farmers. Kenya Tea Development Agency manages all smallholding tea factories and is the largest single tea producer in the world. The agency manages nearly 60 per cent of Kenya’s tea production.
The industry supports directly and indirectly approximately five million people making it one of the leading sources of livelihoods in Kenya.
KTDA manages a total of 65 tea processing factories located across all tea growing counties. These factories are owned by 54 Tea Factory Companies, whose shareholders are the more than 560,000 small scale tea farmers who are also the suppliers of leaf.
Kenya tea is free of pests and or diseases so the farms are not sprayed with any agrochemical except fertilizer application to replenish the soils nutrients.
Tea growing areas receives 12 hours of sunlight throughout the year and between 1200-1400 mm of rainfall spread throughout the year. This ensures that the supply of tea, both in quality and quantity, is consistent throughout the year.
There are about 50 varieties of tea in Kenya which are developed to suit the seven growing regions. With each new variety developed, chemical properties are enhanced making out tea associated to health attributes.
Over 90 percent of Kenya’s tea is handpicked. Only the finest top two leaves and a bud are used for tea production and this contributes to the excellent aroma in the tea cup. Kenya tea factories are certified with the internationally acclaimed standards (ISO22000; HACCP; Rain Forest Alliance, Fair Trade GMP). This has made Kenyan tea to be competitive in the world market.
But despite all the successes, Kenya’s tea industry also faces various challenges. These include: high cost of production, poor infrastructure, and low level of value addition and product diversification, inadequate research, and development and extension services.
Despite these challenges the tea industry has continued to post impressive results.
In 2010/2011 small-scale farmers received a total of Kshs 40.5 billion as payment popularly known as bonus compared to Kshs 38.2 billion earned in 2009/2010 financial year. In the previous year, the payout was Kshs25.4 billion.
The impressive earning is attributed to stable tea prices, favourable exchange rates, efficient management of factory processes and effective cost management through automation of field and factory operations.
Tea farmers are to however earn 10 per cent less per kilo of tea delivered to their factories in 2013 compared to 2011. This is despite the total earnings increasing to Sh 69 billion from Sh 61 billion the previous year. The income will reduce because of higher volumes of tea delivered to the 66 factories managed by the Kenya Tea Development Agency. Tea output is projected to drop by 10 per cent due to bad weather and the rising cost of inputs.
The political crisis in the key export markets of Egypt and Syria coupled with a stronger shilling and higher tea supply in the international market depressed tea prices last year. Farmers will earn a total of Sh35.6 billion as bonus at an average rate of Sh31.65 per kilo of green leaf compared to Sh33.9 the previous year.
Tea prices at the Mombasa auction dropped significantly in July, August and September because of huge supply in the international market. Locally, the exchange rates also contributed to lower prices. The rate stood at US $3.20 per kilo before dropping to $2.50 last year. The rate now stands $2.30 per kilo.
Coffee is Kenya’s third leading foreign exchange earner, after tourism and tea. In 2012, the volume of marketed coffee increased by 35 per cent while earnings contracted by 47 per cent owing to unfavourable international prices.
The value of coffee export has increased from Kshs 12 billion to Kshs 22 billion with production fluctuating between 40,000 and 50,000 tons.
Similar to the tea sector, coffee is produced on many small farms and a few large estates. All coffee is marketed through the parastatal Coffee Board of Kenya. The suspension of the economic provisions of the International Coffee Agreement in July 1989 disrupted markets temporarily, driving coffee prices to historic lows.