Tea trouble: Why I blame the Government of Kenya

Tea is back in the news.

This time, Senators have also joined the bandwagon to throw missiles at KTDA, EATTA and the Auction. This 'noise' will obviously escalate with a recent study conducted by Delloite, which in my view, doled out recommendations that will be fatal to Kenya's tea industry.

My take: the biggest let-down has been the Government's little understanding of the tea industry.

It (the Government) chooses to think with the heart, thus, 'crying' with the farmers, rather than acting on the numerous task force reports that have identified areas of intervention to return the industry back to profitability.

Tea production has grown by over 2,000 per cent in the last 50 years, our focus should be on creating new markets for this ever increasing volume, not wasting fortunes hunting for loopholes in a marketing system started in 1956.

Our tea policies should be benchmarked against tea success stories like India or Sri Lanka.

KTDA is a household name in some of Kenya's key markets like Pakistan and Afghanistan. Buyers from these countries pay a premium simply because the teas carry the KTDA logo.

While Kenya produces one of the best teas in the world, there has been a disconnect between the Government and the tea stakeholders.

Rather than looking inwardly, to find out how best Kenya tea can be marketed, the Government will always choose to consult agencies with little or no knowledge on tea.

Me thinks EATTA will be the best placed to provide such guidance, and happily at no cost.

Fact: Buyers can ship non-Kenya teas faster than those grown in Kenya, courtesy of our Government policies on discriminative levies.

And if you are exporting to Pakistan, one of our major markets, it takes even longer than shipping the Rwanda or Burundi teas which are today fetching better prices than teas from Kenya.

While all agree that value added exports are a sure way to expand our market portfolio thereby increasing prices, government polices literally cripple it.

Why should packers be subjected to the circus of paying and claiming back the 16 per cent VAT for teas that are meant for export?

These VAT refunds take years to come if they ever do; yet, the Kenyan packers are expected to compete with packers from India who get export compensations from their value added tea exports!

If VAT cannot be zero-rated, then the Tea Act should be amended to allow packers to access teas through the zero-rated tea auction, or better still, zero rate VAT on the 26 million kilograms consumed locally in order to stimulate value addition of the 400 million kilograms being exported in bulk.

Of the nine countries' trading their teas in Mombasa, only Kenya teas are subjected to the one per cent advalorem levy, why should the Government blame stakeholders when it has applied a discriminatory tax on its own farmers and exempted those from outside Kenya?

Kenya has a golden opportunity of making Mombasa a beverage (not just tea) value addition hub, but must move with speed. The success of the Dubai Tea Trade Centre (DTTC) will largely depend on our speed in creating this important hub.

Mombasa auction is what commerce calls a mirror market; local dynamics have negligible impact on prices. What we see is a mirror reflection of what will be happening in the consuming countries, throwing stones at KTDA, EATTA or intimating that an E auction can guarantee better returns' is akin to imagining that your image will improve if you play around with the mirror.