Apollo Kiarii, CEO Kenya Tea Growers Association talks tea to NBM’s Kevin Motaraki and lays bare the issues bedevilling the critical sector that is also Kenya’s leading foreign exchange earner
Is tea drinking the culture we would like to think it is, locally at least?
What is in your cup right now? (He tries to look diabolical and succeeds briefly and then lets out a hearty laugh upon seeing the look on my face. I jest. I was on coffee).
Tell us about the KTGA.
It is a BMO (Business Membership Organisation) that brings together commercial tea plantations and tea growers to address issues of common interest. It’s been in existence since 1931. Membership is open to people with at least five hectares of tea, or own a tea factory. It lobbies, advocates, represents and advises members, and negotiates terms and conditions for the employment of workers.
So what is happening now?
In the last two and a half years, we have been trying to negotiate with the Kenya Plantation and Agricultural Workers Union for a collective bargaining agreement on matters of remuneration and other terms and conditions of employment for workers in our member estates. This usually happens every two years, to either improve terms or stagnate them, depending on the prevailing economic situation. There has, however, been a stalemate because we have been unable to agree on terms. This is owing to the dwindling fortunes of tea, such that we are unable to meet the demands of the workers.
In 2013, our CBA with the workers union expired, and so we began the process of renegotiating. The process was largely successful – out of about 34 clauses, we agreed on about 25. Because we could not find a point of convergence on remaining ones, we decided to go for arbitration. Still, we could not agree. We registered an agreement to disagree and went to court in November 2014. Hearing of the dispute started in April 2016. Judgment was delivered on June 20 that, in our view, was oppressive of the KTGA. We wanted to compensate workers for inflationary adjustment, and not the 50% increment they sought – 25% in year of the agreement and 25% the next (2014 and 2015) – as this would adversely affect our operations.
How is that?
Over the last 10 years, the price of tea at the auction has gone down ten-fold; in the same period, the cost of production increased in similar magnitude. What we were telling the workers was that what they demanded wouldn’t be sustainable.
When that judgment came out, we appealed for a stay of the orders. The workers went on strike; they destroyed property and cost investors millions in lost crop and product. This went on for 12 days. It was then that government moved in and facilitated a return-to-work formula. The impact of the riots was enormous – workers lost wages, investors lost returns, government lost taxes… the economy suffered.
Is the current policy regime favourable to the current sectoral situation?
Tea is still the highest foreign exchange earner. Unfortunately though, there hasn’t been enough effort in terms of policy and incentives to rise up the sector from both levels of government.
On policy level, Parliament repealed the former Tea Act and instituted the Agriculture and Food Authority (AFA) Act, 2013, as well as the Crops Act. These are good laws, but we are at that formative stage where existing policies are really not aligned to the economic situation, Constitution and Devolution. We need to fast track the legislative process. The AFA Act is currently under review; the Agriculture Policy, the national tea policy and tea regulations are yet to be gazetted, and we are still dependent on the old regulations. Counties are developing their policies without an anchor law because most new agriculture policies are yet to be enacted.
On the other hand, industrial relations systems and mechanisms hitherto used to sort out industrial disputes are no longer functional and the rule of law is no longer adhered to especially by workers and their unions who in their quest to exercise their constitutional rights to picket have resorted to riots and wanton destruction of property.
Should the industry take some blame for slow progress?
We are often told that there must be concurrence between national government and the counties. The explanation given is that county governments, under the patronage of the Council of Governors, have their own ideas about how agriculture and affiliated sectors ought to be run, and that we must therefore give it time. According to the counties, agriculture is devolved; national government, on its part, says tea is an export crop, and strategically important for the country, which is why it needs to regulate and control policies touching on the industry.
While this tug of war continues, the industry continues to bear the brunt. And where we are blamed for dwindling revenue, the fact is that we don’t control prices at the auction. Besides, there is competition from other parts of the world.
Our policies are not friendly?
No, they are not; not at the moment. They need some panel-beating and realignment to suit political and constitutional realities. This has to happen even in terms of marketing and branding. Look, our tea is very good; it is known all over the world. But you cannot go to Europe and find a packet of tea branded ‘Made in Kenya’. Why? Because our marketing strategy is haphazard – the ministries of Trade and Agriculture have their own ideas, and the tea directorate has got its own. There is no coordination. This is sad because our tea is so good that it is used to blend teas from other parts of the world. At the end of the day, the farmer offloads the tea at the auction, but there is no value addition.
In some places, (small-scale) farmers have been uprooting tea bushes…
And I can’t blame them; the industry is not in a very good place. We have the potential to do better, but we don’t seem to know what to do. Uprooting tea (and coffee) bushes used to be illegal but that changed with liberalisation of the sector and structural adjustment changes instituted in the early nineties.
So, government has not been exactly helpful in terms of policy, what now?
There is a lot of focus on other sectors such as tourism. This is not to say that those other industries should have to suffer our fate out of neglect, but they don’t fetch as much for the country as tea does. Why can’t some of that energy and zeal be channelled to us? We are not asking for the funds that have been advanced to other industries; all we want is a fair playing ground in terms of opportunities. The tea we sell is also our representation out there.
How much competition do you get locally? You represent plantation owners… you are big, no?
The KTGA controls about 40% of the tea market, but the market is one. We all offload our tea at the auction in Mombasa. Competition only comes in, in regard to how we manage our plantations and factories (efficiency) such that we are able to make a little bit more than someone who is not efficient.
Will the industry go back to where it was?
If we don’t rethink our policies as a matter of urgency, our niche in the world market will be compromised. Other countries have become so efficient in production and processing that if we lost that spot, it would be difficult to regain it. When countries like Sri Lanka and Pakistan do their marketing and branding, they show a harmony we are yet to grasp. Their production is near optimum. Everything they do is aimed at bringing down costs.
Yes, what is up with that?
Government supports the idea that we should limit use of machines because we ‘must maintain jobs’, and attain the level of employment anticipated in Vision 2030. And we understand that, because we also don’t want to send people into inflation. But right now, our cost of labour is about 60% of total revenue. And it is increasing. How are we expected to manage that?
What should be done about the dissonance that exists between the national and county governments?
Through the years, we have thrived on the policy of non-interference. Remember, coffee industry disintegrated because players allowed government to interfere. Same is true of pyrethrum, cotton, cashew nuts and sisal. Whereas our former Constitution was not very permissive, we were not subject to the different levels of government there are now. At policy level, we had representation in the tea board, and every part of the entire value chain was represented. Policies would be made that addressed the needs of all concerned.
The current situation is that Tea Research Foundation is now a department in the Kenya Agriculture and Livestock Research Organisation (Kalro). Now, the head of the tea research department reports to the Director-General of Kalro, who reports to the PS Agriculture, who in turn reports to the CS. Initially, the tea board used to have a representative from the tea research institute. There were also representatives from KTGA and KTDA, who would discuss and report straight to the PS. Today, minutes have to go through someone, who may not understand the gravity of what has been discussed, for onward transmission to the PS, then the CS.
There seems to be a big disconnect in representation.
True. The Board of AFA has 17 members, half of which are government officials. The sector – representing all crops in the country, are supposed to make up the other half. If say tea, sisal, pyrethrum, coffee, cotton and food crops each demand a position, there are many others who will not get representation. When it comes to tea, we have to decide whether the representative will come from plantations, small holders or independent producers. And so we feel left out. When there is just one person talking about tea in a board of 17, that person has very limited chances of properly articulating issues in the industry.
Elsewhere, the counties are developing policies and setting up boards within the counties, and the same scenario is playing out. we need a national dialogue on this.
Do Kenyans drink enough tea?
We consume only 5% of total production. This translates into 21.6 million kilos of the 432 million produced in 2014. To a large extent, government is to blame. Tea sold at factory gates attracts value-added tax; the one that goes to the auction does not. Thus the tea we consume locally is more expensive than that which goes out – reason why there is a lot of foreign tea in the market – they get rebates in other countries, and paying duty at the port does not compromise their pricing.