This archive report was first published on 8 October 2019.
Tea factories in Murang’a County have been a shining star in the tea industry, despite global challenges. According to recent data, these factories earned a total of 12.3 billion shillings from tea sales for the year ended June 2019.
This impressive performance comes at a time when most tea-producing countries are experiencing increased production, while import markets face political and economic challenges. The global tea market is currently experiencing a surplus of 200 million kilos, with production standing at 5.8 billion kilos and demand at 5.6 billion kilos.
During the year, the factories in Murang’a County processed 181 million kgs of green leaf into 43.85 million kilos of made black tea, which was sold at an average price of US$ 2.59 compared to US$3.14 realized the previous year, representing an 18% drop.
Kenya’s key export destinations for the black CTC tea type processed in Kenya include Pakistan, Egypt, UK, and UAE, and Sudan. These countries have experienced significant currency devaluation due to political and economic challenges, with Sudan, Pakistan, and Egypt registering 70%, 50%, and 20% respectively, and the UK registering 20%.
Tea being a commodity traded in US Dollars, the currency devaluation reduces the purchasing power of the consuming population. The resumption of economic sanctions by the United States of America on Iran has also cut off a substantial market for Kenyan teas.
Due to these factors, tea factory companies in Murang’a County earned Ksh12.33 billion compared to Sh14.49 billion earned in 2018, representing a 17.5 percent drop. Out of the Ksh 8.6 billion revenue, farmers have already received Sh2.74 billion as initial payment, and the remaining Sh5.89 billion will be paid to the farmers at the end of this month.
Notably, Murang’a County earned the highest revenues of all the 16 tea-growing counties last and this year.
“During the 2016/17 and 2017/2018 financial years, the current Murang’a tea leadership, elected by the farmers, oversaw these high earnings. In fact, factories in Murang’a County earned the highest compared to others, we urge the political fraternity and other interested parties not to politicize tea business but understand the dynamics driving the sector,” said Erustus Gakuya, Zone two Board Member.
Challenges facing the industry include high costs of energy, which tea factories in Murang’a County are addressing by investing in small hydropower stations (SHPs) to deliver affordable and reliable power supply to factories.
Metumi SHP, set to be commissioned, will provide 5.6 MW, reducing the cost of power for the factories. To cushion farmers against fluctuating tea prices, factories in Murang’a are diversifying into the manufacture of orthodox tea, reducing reliance on Black CTC tea.
The strategy is aimed at diversifying markets for tea farmers. Kiru is the pioneer tea factory to roll out the manufacture of orthodox tea, with other factories scheduled to produce the tea. The main markets for orthodox teas are Russia, Germany, USA, Dubai, Taiwan, Turkey, Iran, The Czech Republic, Kazakhstan, and Canada.
Kenya is the leading exporter of black CTC teas in the world, accounting for about 23 percent of global exports, with KTDA accounting for about 13 percent.
Meanwhile, 209 smallholder tea farmers have been cleared to vie for directorship positions in tea factories managed by the Kenya Tea Development Agency (KTDA) Management Services (MS) across the country.
The elections, which will be held in 109 electoral areas, are scheduled to take place in November this year in line with the Tea Factory Companies’ Articles of Association and Company Law.
