Tea time in Kenya


When it comes to global agriculture, you can taste a hint of the African continent’s powerhouse potential in every sip of tea. Kenya is the world’s largest producer of black tea; through its port city of Mombasa flow Kenya’s and almost all the rest of East Africa’s tea. Mombasa’s vast dominance of worldwide tea exports puts it on par with the New York City Mercantile Exchange, Chicago’s Board of Trade, or London’s Metal Exchange. It’s a place where global benchmark prices are set. Kenya’s resilience as a global market for tea is reflected in the fact that even in today’s global recession Kenya’s tea growers were able to capture record revenue for their crops.

The Kenya Tea Development Agency (KTDA) has announced a major increase in farmers’ earnings, reaching an unprecedented Ksh25.4 billion for the 2008-2009 financial year up from Ksh19.7 billion for the previous year, which represents a 28 per cent growth in earnings. (read the press release from KTDA)

KTDA is one of the three major tea producers in Kenya, along with James Finlay and Unilever. KTDA is unique in that it is a grower-controlled company representing over half a million small-scale growers throughout Kenya. Its board of directors consists mostly of regional representative growers.

According to the press release, KTDA managing director Lerionka Tiampati attributes record earnings to efficient factory processes, improved auction prices caused by limited supplies because of prolonged drought, and favorable exchange rates. Due to the drought, production fell by as much as 30 per cent; so while it’s true that less tea was sold by volume, KTDA’s 500,000-plus growers still received record compensation. It’s also true that competition from multinational companies did nothing to stop these small-scale growers from doing better in a drought year than in any year before.

Also in the release, KTDA says it disburses about 70 percent of earnings to growers. With that remaining 30 percent, KTDA works to build physical and commercial infrastructure for its affiliated growers. They’ve invested in securing reliable power suppliers for growers’ factories, and even started their own non-depository microfinance institution – all at the behest of their growers.

All of these things KTDA has done, could not have been accomplished alone. KTDA is one of over 630 dues-paying members of the Kenya Association of Manufacturers (KAM). Over the past two years, KAM experienced annual membership growth of fifteen percent, reflecting the value of a business association whose policy advocacy and member services provide widespread benefits to firms as large as all of KTDA, or as small as KTDA’s individual growers.

CIPE partners with KAM and similar organizations worldwide to help advocate for market institutions grounded in local realities. KTDA’s success has as much to do with its internal workings as with its surrounding market institutions – including the legal protections and regulations underlying Mombasa’s annual tea auction. While it’s difficult to measure impact when it comes to building these surrounding institutions, you can get a hint of what it tastes like in every sip of tea.