By Dan Bolton
A bounty of tea has not benefitted industrious Kenyan growers. Prices declined 18.6% as revenue through June declined to $7.1 billion (Ksh69.7 billion) compared with $8.8 billion (Kh85.7 billion) the previous year.
Kenya is once again experiencing the downside of ideal weather conditions and growing efficiencies in production. The nation’s tea growers, virtually all cultivating small tracts of land, have honed their skills in recent years to better cope with harsh weather and expensive inputs.
Smallholders now produce 90% of Kenya’s tea but multinationals, where production costs average $1.90 per kilogram have also suffered. Workers expressed concern that this year’s annual bonus payment of Sh8.9 billion ($85.8 million) is down from Sh11.2 billion ($108 million) last year, resulting in bonus payments to growers of only 11 shillings per kilogram, of green leaf.
Smallholders protested the decline, threatening to tear out tea bushes in Kissii and Muranga counties and filing lawsuits to force the Kenya Tea Development Agency (KTDA) to reduce factory costs.
According to KTDA, “The cause of low bonus payment should be blamed on the international market, and not be attributed to factories. In the past four years, the same directors have presided over better bonus payments.”
Globally, there is currently a 200 million kilogram surplus as tea production reached 5.85 billion kilograms in 2018. Africa produces about 12.2% of the world’s tea, approximately 717 million kilograms in 2018. Kenya exports totaled 654 million kilograms of that total.
Tea prices during the first six months of the year averaged a mere $2 per kilogram of tea for the five East African countries that sell at the Mombasa auction, according to reports in The East African. In July exports reached a recent low of $1.76 per kilogram, compared to $2.98 in July 2017. Currency devaluation and slack demand due to sanctions placed on Iran also contributed. Inflation in nearby Sudan, for example, has increased to 70% dampening demand.
To complicate matters, Rwanda growers earned an average $2.68 per kilogram of tea this year, followed by Kenya at $2.59, Burundi at $2.21 per kilogram, Tanzania $1.36 and Uganda $1.21.