Tea Value Chain Analysis - East African Tea Trade Association (EATTA)

In 2015, Kenya produced 400,000 metric tonnes of made tea from a total of 1.6 billion kilogrammes of green leaf picked resulting in KShs. 118 billion in export earnings. Tea is Kenya's largest export earner. Sixty percent of all Kenyan tea is produced by smallholder farmers on plots of 1.5 acres or less. In 2015, KShs. 43.25 billion was paid to farmers.

EATTA has been arguing that the tea sector is subjected to 35 different levies, taxes and licence fees among them the ad valorem levy on the sale price at the Mombasa tea auction. All these taxes, levies and fees make Kenya’s tea uncompetitive.

EATTA has been lobbying for the removal of these taxes and has particularly focussed its advocacy on the removal of ad valorem levy on tea. This was successfully removed through the Finance Act 2016.

In August 2015, in response to tea farmer’s demands, the President appointed a Tea Industry Taskforce to look into the sustainability of the tea industry with the view to improving returns to tea farmers. The Taskforce finalised and published the  Taskforce Report on the Tea Industry in April 2016. Among the recommendations in the report is the need to undertake a value chain analysis of the tea sector. The study will need to analyse how costs and payments are distributed across the value chain.

The Issue

EATTA sought to undertake this analysis to establish the best way to maximize value for the various players (especially the tea farmers/producers) and examine proposals to make the industry more competitive, sustainable and profitable. This analysis will form a basis to engage the government with policy proposals.

Expected Outcome

Available evidence suggests that the tea farmers finances the tea value chain (by waiting for sale proceeds to be realised before being paid) and is the final ‘price taker’ at the end of the value chain. The value chain analysis will investigate the accuracy of this contention and reveal the actual incomes earned by the various actors in the tea value chain and when they are paid. The report will form the basis of proposals to be made by EATTA for reforms in the tea sector.