LETTERS: Why small-scale tea farmers are a frustrated lot

In a recent post on Twitter, Senior Counsel Paul Muite observed that tea was the number two foreign exchange earner for Kenya in 2017 with diaspora remittances taking the top position. However, Mr Muite wondered if the government cared much about small-scale tea farmers. “Are farmers getting a fair return, and if not, why not,” he posed.

Mr. Muite’s concerns are not new. They have been on the lips and minds of many people for many years now. No doubt, the concerns are weighty and should form part of our national debate.

First, this is a top foreign exchange earner, bringing in billions worth of foreign currency every year. Secondly, an estimated four million people derive their livelihoods directly or indirectly from tea, across the value chain.

Third, Kenyans are poor tea drinkers of tea consuming a paltry two to four per cent of what we produce. This makes us heavily dependent on export markets with the resultant negative consequences whenever there is political instability or economic downturn in the export markets.

One of the enduring paradoxes of the industry is that 60 per cent, or thereabouts, of the total production and exports is by small holder tea farmers numbering almost 600,000. Between them, they produced a total of 1.18 billion kilograms of green leaf during the 2017/2018 financial year earning a total of Sh85.74 billion. This, looked at from a global perspective, is a lot of money. One wishes that was just what it is – lots of money for everyone and everyone’s happy. But a critical look at the numbers is a little unsettling.Some 70 per cent of the farmers have, on average, just 0.5 acres under tea. For a crop whose economic feasibility depends a lot on economies of scale, 0.5 acres can hardly be described as viable in business terms.

With such small acreage, these farmers can hardly get a good return on their investment. 0.5 acres has an approximate carrying capacity of 1,700 bushes. Going by the recommended plucking standards which are responsible for Kenya’s leadership in quality teas, the farmer can produce 1700 kilogrammes a year.

Now, let us look at the finances. Different factories earn different amounts per kilo of tea at the auction. But let us work with an average of Sh50 per kilo of green leaf. That gives us a figure of Sh85,000 exclusive of factory expenses per year. This translates to just over Sh7000 a month or Sh236 a day. These are the facts, right here.

This leads me to a fundamental question. How can the more than 400,000 small-scale farmers who have 0.5 acres and below gain financial independence, unless of course they have other significant sources of income? Assuming tea business is the main, or the only occupation, we are here dealing with farmers who work hard, tending to their crop, all year round, and at the end of it all, can only manage a return on investment of Sh236 a day.

The issue of sub division of land is a time bomb waiting to explode. As population grows and demand for economic opportunities increase, aging farmers subdivide their tea farms to their children as inheritance. The resulting portions are often too small to make economic sense to the new owners.

The problem of subdivision, however, is not limited to tea. It affects the entire agricultural sector and if it is not comprehensively addressed we face the prospect of the sector collapsing altogether. As it is now, the people who make money in the maize sector, for instance, are the brokers, who purchase the maize at throwaway prices only to sell it at a huge profit. It is more profitable to be a broker than to be a farmer.

It is easy to see where Mr. Muite and many other people who follow events in the industry are coming from. Is someone exploiting farmers? The answer is an emphatic no. This is one of the most professionally managed industries in Kenya. I doubt there would be any business to talk of if there was even a little mediocrity in the management of the giant industry.

Unfortunately, and understandably so, many of the farmers are also heavily indebted, thanks to easy access to credit from a plethora of financial institutions over the last few years. There are cases where some farmers earn almost nothing when the second (final payment) is released with their entire earnings going to repaying the debts.

The Kenya Tea Development Agency (KTDA), the managing agency for the 54 tea factory companies, has often borne the brunt of the resulting discontent despite its best efforts to give farmers the highest possible return on their investment through a range of measures and investments.

It is notable that although Kenyan small -scale tea farmers are some of the best paid in the world in terms of net returns per kilo of green leaf, with farmers earning up to 75 per cent of the gross revenues, this good pay does not translate into economic wellbeing largely due to limited economies of scale.

Can majority small-scale tea farmers break out of the financial cul-de-sac and gain financial independence? The answer is yes. Farmer field schools, financial literacy programs, farmers diversifying to other economic activities besides tea, automation of the business and efforts to lower costs of production are already yielding results. But it will be unrealistic to expect majority of the farmers to become millionaires with such minimal holdings. A few will but majority will just earn enough to survive.

Fred Gori via email.