[Column] Bob Koigi: Kenya’s Reality in Agribusiness and Value Addition
In recent years, the government through the Kenya Tea Development Authority (KTDA) that pays farmers for export of tea has been paying the farmers unprecedented bonuses. In fact in 2012, the Kenyan farmers received the highest bonus in the world in that period.
Tea is one of the leading foreign exchange earners for the country. So the pay-out was not only meant to incentivize farmers but to spur the industry into take off. But hold on to that thought. An American in a New York cafe pays $4 for a cup of tea made from a two-gram tea bag; if say the cafe sells 500 cups of tea, it will have sold a kilogram worth of tea, raking $2,000.
What is wrong with this scenario? This in effect means that a kilogram of tea in the US fetches approximately $2000. And considering that Kenya is the biggest exporter of black tea, chances are that the tea bag, albeit packaged by an American firm, originated from Kenya.
The question then would be, is there then any cause for celebration for the record $334million bonus payout that saw the best paid tea factories in the country dole out $0.50 for every kilo of tea leaves delivered to KTDA?
Plainly put, the Kenyan farmer is getting a raw deal for his toil for not embracing value addition that would otherwise fetch him more for every kilogram of tea sold at the international market.
From KTDA figures, its tea fetched a premium of $0.20 more for every kilogram sold at the weekly auction over those of competitors. It is estimated that with value addition, Kenyan tea could fetch as much as $6. The average net selling price for tea per kilogram was $3.2 per kg, up from $3.07 in the last financial year, representing a 12 percent increase.
It has been demonstrated that value addition could increase incomes six times, comparing results from investments in Sri Lanka. Now while we are on the return on tea value addition, think about all those fresh produces and perishables that the country is burning as we sell them raw.
Tissue culture bananas for example have enjoyed brisk uptake due to their big returns.
But with the overcrowding came a market glut which has left thousands of farmers with produces but no market. This, even as demand for crisps which are made from drying bananas soars.
Vanguard farmers facing a sweet potato glut in the country and with no market creatively came up with the idea of making sweet potato yoghurt, dubbed portaghurt, which is not only nutritional but has assisted them earn ten times more than they would have earned selling the raw sweet potatoes.
There have been a number of policy strategies spelt out in the country’s economic blueprint Vision 2030 which are meant to take Kenya to the mid-level economic status for encouraging value addition in the country.
But it is unfortunate that beyond these blue-prints, no deliberate initiatives have been made to step up value addition in the agricultural sector. The informal sector has equally been churning out products but is stuck at a medieval stage.
No country can claim to have a vibrant agricultural sector relying only on sale of raw products and Kenya is no exception. In order to take its rightful place as the giant of East Africa, Kenya needs to move from rhetoric to action, a stride at a time.
Multiple award winning Kenyan journalist Bob Koigi is Chief Editor East Africa at Africa Business Communities