Association puts in place sound mechanisms to help tea ( a major cash crop in the country) realize good returns both in the local and international markets
By George Gichuki
The tea sector plays a pivotal role in the socio-economic development of our country. The sector (both smallholder and commercial plantations) employs six hundred and fifty thousand Kenyans directly. It is also estimated that over four million Kenyans depend directly and indirectly on the key sector. Most importantly, tea is a major foreign exchange earner for our country. It generates hundreds of billions of Kenya shillings as foreign exchange year on year. For instance, both smallholder tea farmers and the commercial plantations earned Kshs. 135 billion as foreign exchange in 2016. Against this background, the need to support the growth of this key sector cannot be overemphasized.
The Kenya Tea Growers Association (KTGA), is a business member organization started in 1931 to look at the collective interests of farmers in the tea industry; especially the plantation subsector. According to its constitution, the membership is voluntary and is open to the commercial farmers with more than 100 acres of tea or the ones with factories producing more than 10,000 kilogrammes of tea monthly.
KTGA has a presence in five counties namely: Kiambu, Nyamira, Bomet, Kericho, Nandi Hills and Meru. The association has 18 members and it employs 26,000 people directly, and 60,000 indirectly. “ The major role of KTGA is to lobby and advocate for its members’ common interests, while its core objective is to enhance cordial industrial relations between itself (as the employer) and the employees,” says Mr. Apollo Kiarii, the association’s Chief Executive Officer ( CEO). It was registered as a trade union (under the Trade unions Act) before it was reviewed. Now it is under the Labour Institutions Act.
KTGA is affiliated to the Federation of Kenya Employers (FKE), the Kenya Private Sector Association (KEPSA), the Kenya Association of Manufacturers (KAM) and the East African Tea Growers Association (EATTA). In addition, its main office is in Kericho and it has regional branches in Nandi, Sotik and Limuru. Over the years, it has negotiated various collective bargaining agreements (CBAs) for workers in the tea industry through the Kenya Plantation and Agricultural workers union based in Nakuru. These CBAs are reviewed after every two years.
Of critical importance, KTGA represents its members in dispute resolution mechanisms through the Ministry of Labour and also in the Employment and Labour Relations court. “We also represent the interests of our members in respect to the new legislations being enacted in various county assemblies affecting the operations of our business,” says Mr. Kiarii. “Under the new constitution, agriculture is a devolved function and the counties where tea is grown have a lot of vested interest in the cash crop,” he emphasizes.
KTGA also works closely with the Kenya Tea Development Association (KTDA) in the issues of legislation, for example, the payment of CESS (a tax on the movement of agricultural produce), which is being introduced in some counties, after being abolished some years ago. “We are working closely with KTDA to ensure that the counties do not impose taxes that are punitive,” says the CEO. Most importantly, KTGA engages the national government (through the Ministry of Agriculture – AFA Tea Directorate) on policy issues affecting the industry. Examples in that regard include the development of the agriculture policy, the national tea policy and the tea regulations. KTGA also works closely with the Tea Research Institute.
Since 1931, KTGA has being playing a pivotal role in enhancing harmonious industrial relations by various CBAs. By so doing, the association has improved the rates of compensation and terms of employment of the workers in the tea industry. Consequently, it pays the highest amount of wages to its workers in the entire agricultural sector. In addition, KTGA has been able to stall some county governments from enacting prohibitive laws that adversely affect the tea industry.
Of critical importance, KTGA is a responsible corporate citizen. In that vein, it engages in various corporate social responsibility (CSR) initiatives. One of its key pillars in CSR is promoting education. Towards that end, it has established two secondary schools in Kericho (Kericho Tea Boys and the Moi Tea Girls) as well as a mixed primary school. Similarly in Nandi, KTGA has put up the Nandi Tea Academy and Taito Secondary School. “Our aim is to enable our workers and their families to improve their livelihood through education,” notes the CEO. These schools are managed by a board headed by KTGA while the government (through the Teachers Service Commission), provides the teachers.
The other CSR pillar is health. The Central Hospital (established by Unilever Tea) is a good example. Workers and their families in various commercial tea plantations are able to access medical treatment courtesy of the health facilities that have been put up by KTGA members as a way of giving back to the community.
“The communities that neighbour the plantations supply their tea leaves to the factories which are owned by our members and they also gain by being trained on crop husbandry, an extension of service given by our officers,” says Mr. Kiarii. “In addition, we procure fertilizers for them cost effectively, supply them with water, besides constructing roads for them so that they can access our factories with ease,” he adds.
By and large, the tea industry in the country is grappling with huge costs of labour, which unless addressed urgently, will make tea farming as a business unprofitable and unattractive. The country will therefore pay a huge cost if that happens due to a drop in foreign exchange and loss of jobs.
According to a brief by KTGA, on twentieth of June, 2016, in two cases between the commercial tea sector, the Kenya Plantation and Agricultural Workers’ Union (KPAWU), the Employment and Labour Relations Court (ELRC) passed judgments to significantly improve the terms and conditions for employees within KTGA companies and Unilever Tea Kenya Ltd respectively for the years 2014 and 2015. This has over time seen an astronomical increase in the wage rate, hence eroding the profits of these companies. “In as much as the tea industry recognizes the need for increases in the employee wages, these have to be realistic and they should take into account the sustainability of the tea industry in Kenya which should be based relativity within the national agricultural sector as a whole, rather than profit sharing as espoused in the said award,” notes Mr. Kiarii in the brief. “Labour costs within the commercial tea sector already represents 50 – 60% of the total cost of production and the ELRC ruling further increases the total cost of production by 9%,” he says more in the brief.
To make matters worse according to the brief, the tea producers in Kenya at the export market are price takers, dictated by the auction. Consequently, producers cannot simply increase their prices to accommodate wage inflation or any other increases on production costs. According to Mr. Kiarii, in South Africa, trade unions in the tea industry pushed hard for the wages of their members to be raised, and since the plantation owners could not sustain that, they ended up selling their land to real estate developers. “By all means, such an unfortunate scenario must be avoided in Kenya,” he points out. “As an association, we are managing excessive rise in our production costs by engaging in research and development so as to come up with clones that are high yielding and resistant to drought, besides using solar energy and automated machines,” he adds.
The brief concludes that given the high youth unemployment rate in the country, the tea industry must be allowed to thrive and investment encouraged. It emphasizes that the aspirations espoused within the country’s economic blueprint (Vision 2030), are founded upon a vibrant agricultural sector. Consequently, unlimited wage escalation will jeopardize that and ultimately undermine the capacity to achieve the goals espoused within Vision 2030. “The tea sector remains a key pillar of the Kenyan economy with significant contributions to our gross domestic product (GDP). The employment creation opportunities that exist within the sector both directly and indirectly remain a key ingredient to Kenya’s success within the region and thus the potential risk posed by escalating labour costs cannot go unchallenged,” Mr. Kiarii sums up the brief.
The Crops Act
The commencement of the Crops Act in 2013 resulted in the creation of the Agriculture and Food Authority (AFA). In that respect, all the regulatory institutions in the agriculture sector, which were before then operating independently (for instance the Coffee Board of Kenya and the Tea Board of Kenya), were merged into directorates under AFA. The same Act also collapsed all the agriculture research institutes in the country and placed them under the Kenya Agricultural and Livestock Research Organization (KARLO). “Instead of the Tea Research Foundation being aligned to the Tea Board of Kenya and the Principal Secretary in the Ministry Of Agriculture, it is now under KARLO and it has to wholly rely on government funding,” laments Mr. Kiarii. “Previously, it was collecting levies to conduct research from various stakeholders in the tea industry which was sustainable,” he adds. According to him, ten years down the line, the industry will start feeling the adverse effects of the KALRO Act since currently, research activities have been hampered by underfunding and bureaucracy. Stakeholders in the industry are therefore lobbying the government so that the Act can be amended accordingly.
Only five percent of the tea produced in Kenya is consumed locally. One of the reasons attributed to this is that locally consumed tea is charged Value Added Tax (VAT), hence driving up its price. On the contrary, the tea for the export market is exempted from VAT. In the supermarkets for example, tea imported from China and Sri Lanka is cheaper than the locally produced one. Consumers therefore opt for the cheaper option. “The government and its institutions such as Kenya Plant Health Inspectorate Services (KEPHIS), also levy various taxes to the tea industry which in my view should be harmonized so as not to unnecessarily drive up the price of the locally consumed tea,” observes Mr. Kiarii.
Further, according to Mr. Kiarii, the government of Kenya should engage in bilateral talks with countries that do not buy the Kenyan tea in a bid to secure new markets. Among the major countries where Kenya exports her tea are Pakistan, UAE, UK, Egypt, Yemen, Sudan, Russia, Afghanistan, Iran and USA. On the other hand, the emerging markets include Oman, Jordan, Japan, Djibouti, Hong Kong and Singapore.
Kenya tea is highly sought in the export market because of its high quality. “In order for our tea to fetch high prices in the export market, we should offer value addition rather than selling in bulk,” Mr. Kiarii advises. “The production of specialty tea such as purple tea and orthodox tea should be encouraged because it fetches high prices in the market and is also becoming a trend all over the world which will inadvertently increase consumption,” he adds.
Lastly, the recent ban on plastic bags in Kenya has adversely affected the tea industry. This is because the cash crop’s seedlings are grown in small polythene bags, which has been the practice over the years.“We now have to look for bio-degradable options which may be expensive but good for the environment in the long run,” he ends.