Mombasa tea auction is systematically shortchanging region’s tea farmers

The recent Tea Industry Status Report 2014, covered by Sunday Nation on June 29, reveals how tea brokers in Kenya have been colluding to manipulate prices to the detriment of poor smallholder tea farmers.

According to the report, “The current low prices at the auction are precipitated by unorthodox practises by KTDA, which controls over 65 per cent of tea dealt in the auction. This is done through collusion with major brokers, warehouses and traders... selling tea outside auction venues to big marketers is also a common practise by the KTDA’s Chai Trading subsidiary.”

In fact, between July and September 2013, one kilo of processed tea was sold at Ksh243 ($2.8) while in same period in 2012 it sold at Ksh313 ($ 3.6). Tea prices have lately fallen to a shock low of $2 (Ksh172) per kg, a level last experienced in 2008 after the post-election violence.

A Japanese proverb states that, “If a man has no tea in him, he is incapable of understanding truth and beauty.” Tea statisticians and the taxmen of East African Community economies understand this beauty and truth.

As the world’s third largest tea producer after China and India, Kenya has over 4 million citizens involved in tea and tea related activities.

The year 2013 saw it earn foreign exchange worth Ksh114 billion with additional Ksh13 billion generated from domestic tea sales. Uganda too has sweet statistics on tea exports. In Rwanda, tea has become the country’s second biggest export earner, employing over 30,000 smallholder farmers and associates.

In Burundi, foreign exchange earned from tea rose from $22.2 million in 2011 to $26.3 million in 2012. Tanzania has grown tea since 1904 from the Usambara Mountains to the Southern Highlands, generating millions of direct and indirect jobs and earning the state scarce forex.

Across East Africa, tea has created millions of direct and indirect jobs for tea-pluckers, hotels and tea factory workers.

Global tea prices are set at the major national auctions especially Mombasa in Kenya, Colombo in Sri Lanka and Calcutta in India.

Kenya plays a leading role in auctioning East African tea brought from nine regional countries. However, if the Mombasa auction fails to reform, is faced by death threats from the Dubai Tea Trading Centre and internal attack by unethical brokers.

Some regional states are now exploring direct sales and other avenues due to the poor prices at the Mombasa auction. Brokers have forced poor tea farmers to work for the markets instead of making markets work for farmers.

They use abstract terms like “oversupply” and “global markets” to intimidate the illiterate and uninformed rural farmers. They tell farmers that in global markets there is stiff competition that has seen “your low quality” tea perform poorly.

They throw out farmer’s tea in buying centres saying that it must meet strict “global” market rules. They say violence in Egypt, Afghanistan and Pakistan has reduced the demand for tea as people no longer sit down to sip tea. But the fact is that these conflicts didn’t start this year but years ago and tea prices were never affected as such.

The governments of the region should eliminate unnecessary sector taxes like ad valorem levy. Statistics show that in 2009 Kenya exported more 15 per cent more tea by volume than Sri Lanka but earned 26 per cent less.

Regional heads of state must sit down and prioritise this to ensure value addition so our tea can compete with other international brands by eliminating oppressive import duty on packaging equipment.

Our high quality tea is sold and blended with low quality tea from other countries. As a result, East Africa’s tea fame ends at the auction. Countries without a single tea plant repackaging and sells our tea to others and back to us, earning more money and reputation name and creating more jobs.

CAFOD’s recent Think Small Report, based on research done in Cambodia, Kenya, Zambia and other states, highlights the plight of small-scale farmers and business.

It calls on governments and donors to correct spending biases that favour large establishments over small, and calls for more representation for small farmers and businesses in policy

EAC governments must carry out a complete audit of the tea auction process and publish the findings, and implement electronic trading that shows pre-auction, auction and post-auction figures.

Cheruiyot Collins is a Sotik tea farmer and Nairobi-based policy advocacy adviser for CAFOD International-Horn and East Africa. E-mail: [email protected]