Tea farmers stare at decreased earnings

PHOTO | FILE Workers load bags of tea onto factory conveyor belts. Good weather conditions have led to a glut in production, in turn leading to lower prices at international markets.  NATION MEDIA GROUP

In Summary

• High production costs may force companies to lay off workers and begin to use picking machines
• Tea dealers, market analysts and major plantations estimate that this year’s bonus could be lower by up to Sh2.4 billion. In 2013, for instance, Kenyan farmers produced 432 million kilos of green tea compared to 373 million kilos in 2012.

By MAZERA NDURYA
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By TOM MATOKE
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Tea farmers are facing the possibility of significantly lower prices that will translate into billions of shillings in bonus losses due to overproduction.

Tea dealers, market analysts and major plantations estimate that this year’s bonus could be lower by up to Sh2.4 billion. In 2013, for instance, Kenyan farmers produced 432 million kilos of green tea compared to 373 million kilos in 2012.

Nandi Tea Estates general manager Abdi Hussein says improved production impacted on traditional markets but says that the situation has been worsened by the one per cent tax levied in 2012, on the value of each kilo of tea exported, up from 46 cents previously.

“If you extend this levy to the buyer, it makes our tea much more expensive. In most cases, buyers set their prices so as to cushion themselves and to maintain their profit margins.

“Government needs to abolish the levy altogether as it disadvantages farmers or use the money they collect to cushion farmers by buying the tea from farmers at the right price and finding alternative markets for it,” he said.

But even as the tea companies grapple with the glut and the increased cost of production, they are meeting with representatives of the Kenya Plantation and Agricultural Workers Union to negotiate terms for workers’ pay increment.

But Mr Hussein contends that most major tea producers may be forced to take stricter measures, including laying off workers, by introducing tea-picking machines to cut costs.

Unlike a country like India that produces over one billion kilogrammes of tea annually and consumes most of it locally, Kenya sells over 90 per cent of its tea in international markets.

Small-scale tea farmers and marketing experts blame the Kenya Tea Development Agency for the glut, alleging the agency has hoarded tea for the past two years in hopes there would be a dry spell, during which the tea would fetch more. The same strategy worked to farmers advantage in the period 2011-2012 when there was a prolonged dry spell.