Business & Economy

Kenya’s tea industry moves toward strategic diversification

REDUCING a reliance on bulk black tea is a key objective for Kenya as it looks to boost revenue from one of its flagship agricultural sectors.

Kenya is the world’s leading exporter of black tea, which accounts for 95 percent of the country’s overall tea production, making it one of its main agricultural exports.

Tea exports generated earnings of $1.23bn in 2015, a 23 percent increase from the previous year. The jump in revenue was the result of higher prices due in large part to a weaker harvest, with 2015 crop yields at 399.2m kg, a 10 percent year-on-year decrease, according to data from the Agriculture, Fisheries and Food Authority (AFFA).

Prospects for 2016 are somewhat more muted, with overseas tea sales predicted to generate between $1.14bn and $1.19bn.

To ensure tea stays a major contributor to GDP and to boost segment earnings, the government is working to broaden the industry’s base, diversifying production away from a dependence solely on black tea.

In early March Samuel Ogola, technical services manager of the AFFA’s Tea Directorate, announced the government would unveil new guidelines for manufacturing specialty teas before the end of the second quarter.

‘The new guidelines will help increase the availability of planting material and manufacturing facilities, which are required to enable farmers [to] embrace the new tea varieties,’ the Oxford Business Group (OBG) quoted him as saying.

Under the new guidelines, smaller producers – those with less than 8 hectares (ha) of land under cultivation – will be permitted to grow a variety of new crops and more importantly, establish facilities to process their crops rather than sell in bulk, which is currently the case.

‘We want to increase tea industry earnings by encouraging farmers to embrace specialty tea varieties, such as white, purple and orthodox tea, which have a high value,’ Ogola said.

For its part, the industry has broadly welcomed plans to expand the production base.

‘Though take up of new varieties has been limited, with black tea continuing to dominate the market, there is a definite need to create product diversity,’ Peter Kimanga, director of Gold Crown Beverages, told OBG. ‘The government has done a good job of ensuring Kenyan tea is pesticide-free and “clean”, which is ideal for premium quality branding and in line with international preferences. This should be a key selling point.’

In addition to expanding the tea varieties produced, Kenyan producers are also looking to diversify their export markets.

At present, around 77 percent of the country’s output is sold to a handful of source markets – namely, Egypt, Pakistan, the UK, the UAE and Sudan, according to figures from the East Africa Tea Trading Auction (EATTA).

Looking ahead, Kenya aims to target high-growth markets, in particular China and Iran, which could offer greater market stability.

Kenya is the world’s leading exporter of black tea
Kenya is the world’s leading exporter of black tea

‘Bilateral trade agreements should be a focus for the tea industry, as the country needs to work to open up new markets and diversify export destinations,’ Edward Mudibo, managing director and chairman of the Agriculture Industries Network, told OBG.

Although diversification is likely to boost the sector’s sustainability and export income, Kenya’s tea industry still faces challenges.

Lower rainfall and more frequent drought conditions, as were experienced in 2015, have proven problematic for producers, and the risk of continued climate change may prolong those pressures.

While last year’s drought temporarily pushed tea prices up due to supply-side shortages, extended dry periods could see farmland degradation, increased pest infestation and long-term crop loss.

At present, only 20 percent of Kenya’s landmass is suitable for non-irrigated farming, with agriculture coming under pressure from growing urbanisation in regions where water is abundant.

With agriculture directly accounting for 24 percent of Kenya’s GDP and more than half of its export earnings, according to the Kenya Agricultural Research Institute, loss of farmland and a reduction in water resources could pose significant challenges to the tea industry in coming years.

The introduction of drought-resistant strains, such as the TRFK 306 variety, a strain of purple tea developed by the Kenya Tea Research Institute, is one response to the threat of global warming and lower rainfall in Kenya’s key tea-producing regions.

By developing and utilising strains that require less water, Kenya’s producers may not only be able to mitigate the effects of reduced rainfall, but also offset the loss of prime arable land to urban sprawl by cultivating land that was previously seen as unsuitable for tea production.

Reducing a reliance on bulk black tea is a key objective for Kenya as it looks to boost revenue from one of its flagship agricultural sectors.

Related Articles

Leave a Reply

Your email address will not be published.

Back to top button