Why Kenyan government must come to the rescue of tea industry

KERICHO, KENYA: Tea production has declined by 51,800 tonnes in the first eight months of this year, threatening Kenya’s leading foreign exchange earner.

In the last two weeks, tea in most estates has not been picked as workers downed their tools, further casting a grim shadow for the remaining few months to the close of the year.

Property worth millions of shillings in key tea growing areas have also been destroyed.

The period has also been marked by the impact of drought at the beginning of the year, which is closing with an industrial strike that has paralysed operations, threatening Kenya’s key foreign exchange earner.

“This strike has created a dangerous precedence of impunity where some participants have completely turned criminal, threatening the lives of other workers and property of their very own employers,” said Kenya Tea Growers Association (KTGA) Chief Executive Officer Apollo Kiarii.

“To date the accumulated loss arising from the strike across the entire industry is close to Sh400 million.”

Tea is Kenya’s biggest foreign exchange earner, making up 22 per cent of the value of exports, followed by cut flowers at 12 per cent and coffee at 4.3 per cent.

Its strike could cost the economy dearly, coming at a time when the shilling is facing pressure and public coffers suffering due to Kenya Revenue’s inability to meet its collections target.

Kenya also needs to offset its debt obligations and a weaker currency could affect loans priced in foreign currencies. According to Atlas Media, in 2015 Kenya exported tea worth Sh119 billion ($1.15 billion) mostly to Pakistan at 29 per cent of the volumes and Egypt at 22 per cent.

The fall in the production of the crop is likely to affect Kenya’s balance of trade, especially since the country imports way more than we export.

In the last five years, Kenyan exports have decreased at an annualised rate of -1.1 per cent, from Sh577 billion ($5.57 billion) in 2010 to Sh544 billion ($5.25 billion) in 2015.

During this period, Kenyan imports have increased at an annualised rate of 6.5 per cent, from Sh1.3 trillion ($12.7 billion) in 2010 to Sh1.8 trillion ($17.6 billion) in 2015. The perennial disruptions threaten to throw the industry into a tailspin since the strike in December last year saw protesting workers burn 70 acres of tea bushes at Kapsumbeiwa Tea Estate in Nandi County.

The estate belongs to Eastern Produce Kenya Ltd, one of the biggest multinational producers in Kenya. It has tea estates Kibabet, Kapsumbeiwa, Kipkoimet, Kepchomo, Chemomi, Savani, Sitoi, Kaboswa, Kipkeibon, Siret, Kaprachoge and Kibwari.

Single producer

It also has operations in Malawi operating as Eastern Produce Malawi Ltd (EPM). “The persistent and illegal strikes in the tea sector will paralyse tea production and adversely affect the Kenyan economy. Tea is the largest industrial earner of foreign exchange into the Kenyan economy and an enormous resource for government via tax revenues,” Mr Kiarii said.

“We risk collapsing the tea industry as witnessed recently in the South African tea industry,” he added.

Although industry players have warned that Kenya’s tea may lose its shine to competition, rivals such as Malawi whose mainstay is raw tobacco only exported Sh7.5 billion ($73 million) worth of tea in 2015 mostly to South Africa at 38 per cent and the United Kingdom at 24 per cent.

UK is Kenya’s third largest export destination at 13 per cent and in 2015, Kenya exported Sh16 billion ($155 million) worth of the crop, which was more than the total value of tea exported from Malawi.

EPK did not respond to our queries on how the strike has affected their operations, and whether it will influence their investment decisions.

Kenya is the largest tea exporter in the region but its top position is threatened by emerging producers.

The bone of contention has been whether the collective bargaining agreement will be honoured by the multinationals.

The Kenya Plantation and Agriculture Workers Union had its members awarded a 30 per cent pay hike which the tea growers rejected, moving to court to stop its implementation.

KTGA says with current demands, the cost of labour has overtaken inflation to unsustainable levels, adding that Kenya’s cost of labour and production in the tea industry remains among the highest globally.

“No industry would be able to sustain a 30 per cent wage increase together with a paid rest day and an additional wage demand for 60 per cent for 2016/2017,” Kiarii said.

During last year’s skirmishes, over 25,000 small scale tea farmers in Nandi County threatened to uproot their plantations and venture into real estate, citing high labour costs.

They protested that tea pickers were earning more money than those owning the crop. Farmers argue that of the Sh20 per kilo they receive from selling tea, close to Sh15 goes towards paying workers.On average, farmers get between Sh20-22 from the multinationals and Sh15 from KTDA.

The 18 multinationals depend on the small scale farmers for up to 50 per cent of their production. The farmers and the estates argue that the CBA will make it almost impossible to get anything meaningful from the cash crop.

In her ruling, Justice Lilian Njenga also awarded the workers a medical and sick allowance of Sh30,000 and baggage allowances of similar amount upon termination of employment.

Leave allowance

The workers would also be entitled one rest day with pay in every working week. They would also enjoy an annual leave allowance awarded at six per cent of their salaries.

KTGA members — James Finlays, George Williamson, Sotik Highlands, Nandi tea companies, Kapchorua, Kipkebe, Gakoe, Mogusii, Karirana, Kerumbe, Kamiti and Tea Research Institute went to the Court to Appeal the decision granting the CBA package to the pickers.

This year, the strike threat followed union meetings in Kericho, which Kiarii said was used to preasurise Central Organisation of Trade Unions (COTU) Secretary General Francis Atwoli to call for strike.

Mr Atwoli argued that the terms and conditions of services have remained constant for four years, despite the high cost of living and inflation. COTU has more than 100,000 members in tea growing zones in the Rift Valley region.

Mr Kiarii said COTU boss wants the growers to negotiate a new CBA yet the 2014 CBA had not been resolved.