Tea farmers: ignore the bloggers. Don’t uproot crop

By MUNGAI KIHANYA

The Sunday Nation

Nairobi,

06 October 2019

There was an outcry in tea-growing areas of the country after the Kenya Tea Development Agency (KTDA) released the schedule of final annual payments for the 2018/19 season – the so-called tea bonuses. Many commentators accused the agency of “eating farmers money”.

Indeed, there was even an online campaign asking farmers to uproot their crop. Unfortunately, the proponents of this move did not give any advice on what to do with the land after uprooting the tea! I do not think was a serious proposal. It was an expression of anger at KTDA.

The big question is whether the payments from KTDA are fair. We can get the answer by comparing the earnings of smallholder farmers to those of plantations.

There are four large tea plantation companies listed at the Nairobi Securities Exchange and their annual reports are public documents. These are Limuru Tea PLC, Kapchorua Tea PLC, Williamson Tea PLC, Sasini PLC, and Kakuzi PLC.

The last two grow other crops in addition to tea – Sasini grows coffee and Kakuzi has avocados and other fruits. Nevertheless, their annual reports give a breakdown of sales and profits from each produce.

With over 2,000 hectares (5,000 acres) under tea, Williamson Tea PLC has the largest plantation while Limuru Tea PLC has the smallest – just 282ha (700 acres).

The available audited reports of these companies have different dates but they all point towards the 2017/18 season. Williamson sold the largest quantity – over 14,000 tonnes (14 million kilograms) – from which it the turnover was about Sh3.4 billion.

Unfortunately, when all costs were accounted for, the final result was a loss of Sh200 million. Its sister company, Kapchorua Tea PLC was in a similar situation: sold 5,800 tonnes of tea for Sh1.4 billion but returned a loss of Sh152 million.

The other listed plantations reported profits from tea, with Sasini leading at Sh232M. This was generated from 10,600 tonnes that were sold for Sh2.2B.

These gross amounts are not of much help. The important figures for comparison purposes are shillings per kilogram. In addition, the profits are not helpful either because each farm has different cost structures.

For these reasons, I worked out only the sales revenue per per kilo for the plantations and compared these to the total annual KTDA payments for the same season.

Williamson and Kapchorua had the highest numbers – Sh243/kg and Sh241/kg respectively while Kakuzu and Limuru had the lowest (Sh42/kg and Sh34/kg). Sasini was on the higher end generating Sh207/kg.

In that season, KTDA sold 273,000 tonnes of tea from which it paid the member farmers a total of Sh62B (monthly payments plus final bonus). This works out to Sh227 per kilo on average. Thus, it turns out that KTDA is was doing quite well. Its payments were on the higher end of the spectrum.

With this results, I wouldn’t ask farmers to consider uprooting their tea!