Opinion

Transforming Kenya's Tea Industry: Strategic Partnerships and Reforms

Published May 17, 2024
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The collaboration between Kenya, Lipton Teas and Infusions, and Browns Investments aims to elevate Kenya's tea industry through a KES 1 billion investment in community projects and initiatives like Lipton’s Tea Academy and a new fertilizer plant. This partnership, alongside government reforms, seeks to increase value-added tea exports from 5% to 50% by 2027, boosting export value to over USD 1.85 billion and benefiting smallholder farmers. Efforts include restoring key markets and leveraging trade frameworks like AfCFTA and ECOWAS. Despite immediate challenges, such as rising production costs and declining quality, these initiatives are expected to yield significant long-term benefits, positioning Kenyan tea for continued global success.

The collaboration between Kenya, Lipton Teas and Infusions, and Browns Investments PLC is poised to elevate Kenya's tea industry, promising increased earnings for tea farmers and enhanced global recognition for Kenyan tea as a premium product. With an initial investment of KES 1 billion in community projects through establishing a Community Endowment Trust Fund, the partnership aims to bolster the sector’s capacity and uplift local communities.

Key Players and Current Initiatives

Lipton Teas and Infusions, a private company based in Rotterdam, Netherlands, known for producing tea and herbal drinks, is spearheading initiatives such as Lipton’s Tea Academy. This academy will train farmers on global best practices, enabling them to maximize the value of their crops. Additionally, a state-of-the-art tea-specific fertilizer plant will be established to support tea cultivation in Kenya further.

Browns Investments, part of Sri Lanka's leading conglomerate, the Browns Group, brings its expertise in various sectors, including leisure, agriculture, plantations, construction, and real estate, to the partnership. Together, these entities aim to revolutionize Kenya's tea industry and position it as a key player in the global market.

Figure 1: A Tea Farm in Kenya

Source: Tea Board of Kenya

The Kenyan government anticipates that Kenyan tea will continue to attract global attention due to its top quality. This sentiment was echoed during a meeting at State House in Nairobi, where representatives from the two firms, along with Sri Lanka High Commissioner Veluppillai Kananathan, discussed the collaborative efforts.

The initiative is expected to have a significant impact on Kenyan tea exports, with the industry already achieving record-high export earnings of KES 180.57 billion (USD 1.24 billion) in 2023. This marked increase in earnings, up from KES 138.09 billion (USD 940 million) in 2022, underscores the potential of the Kenyan tea sector. The Tea Board of Kenya's performance highlights for 2023 revealed a 16% year-on-year (YoY) increase in total tea export volume, reaching 522.92 million kilograms (kg), further signaling the industry's growth trajectory.

Figure 2: Kenyan Tea Exports (2021-2023)

Source: Tea Board of Kenya

Reform and Strategic Goals

With the support of strategic partnerships and investments, Kenya's tea industry is poised for continued success on the global stage. Additionally, the Kenyan government remains committed to implementing crucial reforms to enhance returns for tea growers. These reforms address several challenges within the tea industry, including the rising cost of production, declining tea quality, limited value addition, product diversification, and depressed prices. One of the key targets of the reforms is to significantly increase the level of value-added tea exports. According to statements made by Kenya’s deputy president, the goal is to boost the percentage of value-added tea exports from 5% in 2023 to 50% by 2027. This increase is projected to elevate the value of tea exports from USD 1.24 billion in 2023 to over USD 1.85 billion by 2027, subsequently enhancing the earnings of smallholder tea farmers. The deputy president also highlighted the government's strategy to restore and expand key markets for Kenyan tea. This includes re-engaging with traditional markets such as Russia and expanding into new markets like China, Iran, Saudi Arabia, and Turkey. These efforts are part of a broader strategy to correct the trade imbalance that currently disfavors Kenya in these markets.

According to the Kenyan Ministry of Agriculture and Livestock Development, the government's plans also include fostering product diversification and value addition. The ministry is in the process of establishing an incubation center focused on high-value specialty teas. This center aims to involve youth in the manufacturing of specialty tea products, thereby enabling them to participate in the lucrative niche market for these products.

Challenges and Solutions

However, Kenyan tea traders remain wary of these initiatives. In an interview Tridge conducted with Christine Simon, a Kenyan tea exporter from Buy Kenyan Tea, she stated, "There are potential limitations and challenges. Broader economic and geopolitical factors could influence the outcomes, including market volatility and international trade policies. Regulatory clearances are still pending, which could delay the implementation of these initiatives. Even though the collaboration holds promise for enhancing trade and sustainability in the tea industry, I think its success will hinge on overcoming regulatory, operational, and market challenges and, more importantly, the genuine involvement of local communities in decision-making processes."

Simon's concerns highlight that while the future appears promising, significant hurdles need to be addressed. These include navigating the complexities of international trade policies, securing necessary regulatory approvals, and ensuring that local communities are actively involved in developing and implementing these initiatives. Without overcoming these challenges, the full potential of the government's initiatives and private sector collaborations may not be realized.

Kenyan tea traders must also leverage the opportunities provided by the African Continental Free Trade Area (AfCFTA) and the Economic Commission for West African States (ECOWAS). These frameworks offer preferential negotiated tariffs that can enhance trade with the 15 member countries of ECOWAS.

According to the Tea Board of Kenya, while there has been an increase in tea exports to traditional markets compared to 2022, exports to the United Arab Emirates (UAE), Russia, and Sudan declined. The government's reform initiatives and market expansion strategies aim to address these discrepancies and bolster the overall performance of the Kenyan tea industry.

Kenyan Tea Industry Outlook

Overall, the future looks promising for the Kenyan tea industry. Several government initiatives are expected to boost export sales in the coming years. These initiatives include comprehensive reforms to address production costs, quality improvement, increased value addition, and product diversification. Additionally, efforts to restore and expand key markets, along with leveraging trade frameworks like AfCFTA and ECOWAS, will likely further enhance export potential.

However, investments in community projects, such as those planned through the collaboration between Kenya, Lipton Teas and Infusions, and Browns Investments, will likely take some time to yield tangible results. While these initiatives are crucial for long-term growth and sustainability, their impact may not be fully evident in 2024. It is anticipated that the positive outcomes of these investments will begin to take shape in about two to three years as community projects mature and their benefits start to manifest.

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