Over 700,000 smallholder tea farmers are staring at a third year of dipping second payments as the subsector reels from the effects of the Covid-19 pandemic that depressed key export markets.
The 69 smallholder tea factories in Mt Kenya, Central Rift Valley, Western and Kisii regions are in the process of an annual ritual of declaring second payment rates that farmers popularly refer to as "bonus".
And it is not looking rosy. Of about 20 factories that had released their rates by yesterday, none had reached the Sh30 per kilo mark.
The factories declare the rates after approval by their respective directors.
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Many directors, speaking on condition of anonymity, said they expected the top factory to declare under Sh35 per kilo and just under Sh10 for the lowest-earning farmers.
As of yesterday, Tombe factory in Kisii had declared a payout of Sh9.30, the lowest so far, while Gacharage in Murang'a had declared the highest rate at Sh30 per kilo.
A combination of favourable weather that had led to a bumper harvest and the international economic recession brought about by the Covid-19 pandemic have wreaked havoc on farmers' earnings this year.
Last year, the Kenya Tea Development Agency (KTDA), which manages the factories on behalf of the farmers, blamed turbulence in the main export markets, including Pakistan, Sudan and United Kingdom, for the low payments.
It said Pakistan had devalued its currency after a trade row with India while Sudan's economy had suffered badly after the overthrow of long-serving leader Omar Al-Bashir in April 2019 followed by long-term political instability.
It added that the value of the Sterling pound was then also badly hit by impending exit from the European Union (EU), jolting another important market for Kenya’s tea.
This year, KTDA chair Peter Kanyago has blamed the low bonus payment on over production of tea in the country.
“The tea volumes produced in the country were high and based on the market forces, the oversupply led to a decrease in prices,” Kanyago said.
He however said the prices at the Mombasa Tea Auction had improved tremendously and this means the 2020/21 payments would likely be higher.
Alfred Njagi, the KTDA managing services head, said increased produce due to favourable weather will somehow lessen the pain for farmers.
Njagi said the farmers had grown harvest by 29 per cent for the year to stand at 1.45 billion kilos compared to 1.13 billion kilos last year.
Of the factories that had announced their rates by yesterday, Gacharage in Murang’a and Mataara in Kiambu counties were leading with Sh30 and Sh29, respectively.
The worst payments
Last year, Gacharage paid its farmers Sh37.10 per kilo and in 2018 it paid Sh47.60. Mataara was at Sh31.30 last year, declining from Sh42.50 paid in 2018.
In Kirinyaga County, Kangaita farmers will be paid Sh26.35 per kilo as compared to Sh36.05 the previous year.
Kimunye Tea Factory Board approved the payment of Sh26.20 while Thumaita will pay Sh25.50, both significant reductions from last year.
Gacharage factory chair Paul Kagema said the payments are so far the worst in the Kenya tea market in a trend that is repeated after every five years.
At Nduti factory, farmers said their directors were clueless and unable to steer the sector to profitability.
Peter Karanja said the board should resign as the growers expected not less than Sh30 per kilo as bonus even with the depressed market.
“The growers feel betrayed because we know our produce continues to be used to blend other products in the international market,” Karanja said.
Insiders at the KTDA said they expected all the factories to show a consistent decline curve compared to the last two years, adding that the export market problems have hit all their marks equally.
Critics of Kenya’s smallholder tea model claim it had failed to take advantage of value-addition to ensure maximum benefits for farmers through the best prices. They say almost 100 per cent of Kenyan tea is exported in bulk and buyers then use it to blend teas of poorer quality from other markets before selling them for a premium.
In Kenya, half a kilo of a blend of packed tea costs Sh250 at the factory gate while average prices at the Mombasa Tea Auction remains below US$3 (Sh300) per kilo.
While Kenya is the largest global exporter of black tea, it is only the third largest producer behind China and India, which consume most of their produce and rank behind in exports.
The KTDA is currently under considerable pressure from Agriculture Cabinet Secretary Peter Munya to reform its systems and announcement of low bonuses is likely to hit the agency hard.
Munya has proposed a raft of regulations and an amendment of the Crops (Tea) Act to force buyers to value add 40 per cent of their Kenyan tea purchases before exports.
He has also proposed to weaken the KTDA stranglehold of the subsector, ban private treaty sales and reduce bureaucracy.
Last week, the CS said the government was even mulling reverting the KTDA to a parastatal 20 years after it was placed in management of tea farmers, saying the agency was currently under "heartless cartels".
Kanyago however asked farmers to avoid politics surrounding the sector.
“Farmers have been happy with the tea bonus system for over 60 years, this sector is stable and we are calling for dialogue on the tea reforms, and not politics,” he said.
[Additional Reporting by Boniface Gikandi]