We recently stumbled across an interesting news article in Coastweek.com, a Kenyan based online newspaper. The article focused on a mobile network provider, Safricom, partnering with the Kenyan Tea Development Agency Ltd or KTDA, to change the way payments to smallholder tea farmers are handled. Specifically, the arrangement replaces all cash payments with M-PESA. If you haven’t heard of it, M-PESA is a branchless banking system developed by the global mobile network operator Vodaphone. In part, the your mobile network operator and retail outlets become your banking agents. The objective for KTDA is to improve security for employees at the factories who pay or delivered tea leaf as well as increase accountability and overall efficiency in payments and accounting. As it turns out this is but one step in helping support and increase profits for small tea farmers.
Smallholder Tea Plantations
Rather than write about M-PESA this article got us curious about the smallholder tea farmer system in Kenya and the relationship with KTDA. Smallholders, not large corporate plantations, as it turns out are a major source of tea produced in many countries. A 2012 review of smallholder tea farmer contributions by the United Nations Food and Agriculture Organization indicated that in countries like Sri Lanka, Kenya, China, and Vietnam smallholders produce the majority tea in these countries. This is opposed to countries like Indonesia and India where smallholders produce only about 20-25%.
Smallholder plantations, in theory provide a greater share of the profits to those at a local level, though the UN FAO Intergovernmental Group on Tea study suggests there are quite a number of opportunities for improvement. Smallholders typically have difficulties commanding top prices for a variety of reasons including the lack of knowledge or capability to implement environmental, pest management, or other best practices.
KTDA Ltd and Kenyan Smallholders
The Kenyan Tea Development Agency got its start back in 1964 as Kenya got its independence and it became legal for locals to produce tea themselves. At the time the KTDA was charged with helping develop the industry for smallholders vs the large multinational corporations who still own plantations and produce a large percentage of tea in the region (and globally).
More recently, in 2000, KTDA became KTDA Ltd, a private company which continues to develop the smallholder tea industry. This arrangement, is just one approach found globally to supporting smallholders. KTDA Ltd operates effectively as a management firm providing best practices for smallholders in many areas as well as providing services that help smallholders command a greater share of the income. These services include everything from guidance on plucking and fertilizing through operations of factories as well as financial, sales, and marketing support.
In effect, KTDA Ltd helps organize and unite all the smallholder members to be competitive with the large industry players by increasing the portion of revenue earned from higher levels in the value chain. This includes at the manufacture and global wholesale portion of the value chain. It does this by having over 50 subsidiary factory companies to which over 560,000 smallholders both sell raw leaf and own a share of the company and resulting profits after manufacture and sale at the Mombasa Tea Auction.
The Future for Smallholder Tea Farmers
The number of smallholders worldwide looks to continue to grow for some time to come. This happens for many reasons but often its due to large corporate plantation abandonment (and subsequent re-establishment in smallholder schemes) and the purposeful dismantling of large government owned tea plantations. As the smallholder population increases it will be interesting to see how various countries approach supporting farmers in the practices and ownership methods that can help them thrive.