East African Business Week (Kampala)
Cedric Lumiti and John David
5 November 2007
Nairobi — The Kenya Tea Development Agency (KTDA) says it is bracing up for a predictable bleak future for the industry, globally.
Officials say they will merge tea processing plants across the country to increase output and cut on costs while encouraging joint ventures to enable farmers produce in large scale and get higher returns.
In so doing, KTDA reckons that building on strong acquisitions will mitigate the home industry against threats facing the industry globally, if the country is to remain a major exporter in the world market.
"We want to ensure that all the stake holders in the tea industry are taken on board if these challenges are to be surpassed. We need a strong local capacity and doubling of our marketing efforts globally to remain competitive," said KTDA managing director, Tiampati Ole Lerionka.
Currently, Kenya is ranked among the world's top five tea exporters, though local demand has remained on an all time low of less than 5%.
Among key challenges highlighted in Nairobi last week are the high tea production globally that has given rise to a surplus of more than 100 million kilogrammes per year.
This has impacted negatively on tea prices despite the huge production costs that are chocking the local tea farmers.
By last week, tea prices at the weekly East African tea auctions in Mombasa fell to Ksh119.30 (US$1.7) from Ksh134 ($2) per kilogramme.
The high world production surpluses are compounded by unfavourable exchange and interest rates with the local currency remaining bullish on the leading world currencies.
Kenyan tea exports have in the recent past had to contend with dwindling returns due to the currency situation.
Tiampati said the new set of initiatives will be to build strong acquisitions, merging some of the tea processing plants and encouraging joint ventures to enable farmers cultivate the crop on large scale to reap the benefits.
He spoke at a ceremony by the agency to release the second and last payment of the annual tea bonus to farmers where Sh7.8 billion ($11.1 million) was announced as the final payment.
The payment brings to Sh17.4 billion ($24.8 million) the total bonus payout this year after an initial Sh9.6 billion was paid out. These payments are made farmers on a monthly basis. Out of it, small-scale tea farmers will earn an average of Ksh21.35 ($31cents) per kilogramme, down from Ksh24.27 ($35 cents), last year.
The drop in payment was attributed to over production that brought down tea prices both locally and internationally.
It was revealed that farmers delivered a total of 915 kilogrammes of green leaf to factories against a total of 732 million kilogrammes delivered last year.
Tiampati announced that to mitigate the production costs associated with high fuel prices; the agency was in conjunction with tea factories purchasing more land to plant trees to ease use of wood fuel as opposed to petroleum and electricity.
Already, affiliate tea factories have secured over 200 acres of land in Nanyuki to be used to plant trees for factories. KTDA will also provide farmers with 2.1 million seedlings to encourage them practice agro-forestry. The agency has also acquired certified seeds from KEFRI as well as hybrid clones from South Africa in efforts that will critically reduce production costs.
"A tea factory requires at least 250 to 350 hectares of eucalyptus in order to be sustainable on wood fuel," said Tiampati.
These challenges unless addressed in time, could force the local tea industry to close down, as has been the case in South Africa and India.
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