Kenya is the World’s Largest Black Tea Exporter, Yet Kenyan Tea Farmers Still Earn $0.15 Per Kilogram
Kenya is the world’s top exporters of black tea as of 2017 with a 23% share, followed by China (18%) and Sri Lanka (15%). Below is the complete list:
World’s top black tea exporting countries by share in 2017:
- Kenya: 23%
- China: 18%
- Sri Lanka: 14%
- India: 13%
- Vietnam: 4%
- Argentina: 4%
- Uganda: 3%
- Indonesia: 3%
- Malawi: 2%
- United Arab Emirates: 2% (Surprising, right? UAE poor climatic conditions mean that it does not produce tea. The UAE imports tea and repackages it for export.)
Tea is not only a top employer but also a top contributor to Kenya’s export earnings. 40% of tea is grown in large tea plantations that employs some 100, 000 workers while the rest is grown by over 600,000 small-scale farmers. Approximately 10% of Kenya’s population depend on tea for their livelihood. Additionally, black tea contributes 4% of Kenya’s GDP while black tea exports contribute 26% of Kenya’s export earnings.
Why are farmers being paid less, yet Kenya is a top exporter?
Kenyan tea farmers, just like other cash crop producers, are exploited by middlemen i.e. brokers. The middlemen buy the produce at low prices and sell it at higher prices at the market.
The many middle men operating in the value chain means that tea prices are susceptible to a number of events. One of the most notable one is the Mombasa Tea Auction Center, where brokers gather weekly to auction tea to international buyers. Surprisingly, the auction has a limit of eight million kilos a week. Due to heavy rains, tea production increased up to 9.5 million kilos early this year, but the auction limit led to a glut, which in turn affected the prices.
Many have urged the government to get rid of the center and replace it with a blending and packaging facility that exports finished products to the international market. The government recently gave the green-light for tea farmers, through their factories and organizations, to directly seek external markets for the cash crop without going through the middlemen at the Port of Mombasa.
Blockchain technology as a solution to increasing farmers’ earnings
Kenya has a lot of potential especially in its tea industry. The poor farmers’ earnings, however, disincentives them from tea farming to other cash crops. The future of the tea industry in Kenya lies in blockchain technology. Ethiopia is already exploring blockchain technology, by partnering with Input Output (IOHK), to track the supply chain for it’s main cash crop export — coffee.
The main challenge in the tea industry is the many middle-men involved in the value chain. Blockchain technology addresses this issue by connecting the relevant stakeholders in one platform i.e. producers, exporters, importers, packers, retailers, certifiers and banks. An increased transparency ensures that farmers get their true value for their hard-earned produce.
Blockchain solutions to the Kenyan tea industry include the following:
- Supply chain traceability: Tracing origins of tea is important to not only increase yield but also improve on marketing. Blockchain technology allows participants in the supply chain to trace and track tea from rural farmers to wholesale buyers. Unilever is currently running a pilot blockchain project in Malawi to track tea supply chain. The project involves partnering with banks and technology startups to track 10,000 tea farmers and maintain transparency on the supply chain so both the company and the consumer know the origins of their tea. The idea behind starting off this pilot project is to provide customer quality and premium products and to gain customer loyalty.
- Microfinancing and cryptocurrency payment: Payments can be done via cryptocurrencies as well as extending loans to farmers.
- Smart contracts and crop insurance: To protect farmers from unpredictable weather and commodity risks.
Kenya, just like most African countries, is an agricultural economy. As it transitions to a manufacturing economy, via agro-processing, Kenya needs to leverage technology to ensure that producers in the bottom of the value chain are not left behind. Blockchain technology directly connects farmers to markets, eliminating middlemen and as a result ensuring that small scale farmers gain the full value for their cash crop.
