Let market forces be, only creative solutions will end slump, forum told

Multinationals and other large tea growing companies say they have also been hit by the crisis. James Finlay (Kenya) Limited CEO Simeon Hutchinson, said multinationals were affected by the slump in global prices of tea as everyone else.

“We know it is the supply and demand dynamics that are affecting price,” Mr Hutchinson said.

“Don’t tinker with the market forces. Let’s instead look for innovative ways of getting out of the crisis, such as the futures market,” he added. “One of our biggest concerns is the uncertainty over land titles. This must be addressed urgently because it is affecting investment.”

Recently, the county assemblies of Kericho and Bomet passed motions for the compensation for unlawful and forceful acquisition of land by the British colonial government in 1918 to pave way for the tea plantations. This has increased uncertainty for tea firms operating in the area. Nyayo Tea Zone Development Corporation Chairman Mathew Iteere noted that a World Bank study has demonstrated how tea prices have been declining over the years.

“The solution is value addition. Dedicated lines of credit need to be established to encourage enterprises willing to go into tea value addition. Subsidies for fertiliser and farm inputs will give the sector a big boost. Road networks in tea growing areas need to be improved to reduce operational cost,” he said.

The crux of the matter in finding a long-term solution to the tea industry woes lies in policy formulation and policy review, as well as in legislation, Mr Iteere added.

Dr James Nyoro, Advisor to the Presidency on Food Security said the tea industry has withstood difficult times in the past.

“However, we see institutions in the sector not talking to each other. There is mistrust between the various institutions and the government. We need a comprehensive institutional framework to ensure the various institutions work in harmony,” he said.

He added: “As a country, we failed to plan strategically, long term, because as a leading producer and exporter, Kenya should be a price setter, not a price taker, as is the case today.”

He stressed the need for all stakeholders to sit together to develop a national tea policy document that outlines a long-term strategic vision for the tea sector, with strong planning and institutional frameworks.

Kisii Senator Chris Obure, who is former Minister for Agriculture, urged the government to abolish ad valorem tax immediately. “Abolish tea cess, like yesterday. Encourage local consumption of tea by removing VAT. Classify tea as food, not beverage, to avoid the tax and encourage value addition,” he said.

He claimed the Tea Board of Kenya (now Tea Directorate under AFFA) has failed in its marketing mandate. Other recommendations that were made at the Senate conference included a review of KTDA’s electoral system to avoid conflict of interest between the agency and factories; a multi-sectoral working group to be formed, within 90 days, bringing together the national and county governments, Parliament and other stakeholders to review and formulate new policy to further strengthen the sector.

Also, a National Tea Association is to be formed bringing together all stakeholders for the purpose of articulating industry issues. It will facilitate regular consultations among stakeholders and hold a national conference at least once a year.

“When the history of this country is written, this day will be remembered as one of the most important in the history of Kenya,” Senate Agriculture Committee chairman Kiraitu Murungi said in his closing remarks.

“We are here to build, not to destroy, the tea sector. It will be a sad day in Kenya when farmers come out dancing and uprooting their own tea – as coffee farmers did in the past when the industry collapsed,” he said.

Kiraitu said the Senate would work closely with county governments, the national government, the National Assembly and stakeholders with a view of strengthening the industry.