Five ESG concerns in Kenya's tea industry
Luxembourg-registered impact fund, eco.business Fund, has just disbursed a USD10 million grant to Kenya’s Family Bank, the first bank to introduce paperless banking in Kenya, to on-lend to smallholder farmers[1]. The idea is for the grant to boost access to finance for sustainable agriculture, of which the tea smallholder farmers will be major beneficiaries.
Maximising impact here and for similar such projects is contingent on navigating the key sustainability issues identified by Kenyan tea industry stakeholders in our conversations on the ground. Smallholder farmers, plantation owners, members of civil society and public officials point to these five issues in particular.
Cartels are a dominant force in the supply chain when it comes to the tea auction, influencing price and potentially having an adverse effect on the quality of the tea. For instance, compromising the quality of tea by fusing both low and high-grade tea and selling to buyers at a high price.
Smallholder farmers are often paid late and on terms viewed as unfair. For example, instead of being paid once tea has been sold on the tea auction, officials “bank” the proceeds from the sale in a high interest account for a period of time. Once enough interest has accrued, a fraction of the interest earned is then given to farmers, as a tea bonus.
Regarding land, there is a growing issue around land title and maintenance for smallholder farms. Older generation tea farmers leave farms to children but challenges arise from their conflicting values (city versus rural life) and the maintenance of the land suffers.
Some smallholders are concerned about mechanisation. Some of the large estates may be supplanting the labour-intensive tea-picker model for mechanisation and climate smart investments allowing them to save (alongside other benefits), but at the expense of smallholder income.
Corruption risk is significant and plays out in different ways. For instance, the award of brokerage licences to entities led by individuals within influential circles and the circumvention of the regulated process of selling tea through the Mombasa auction in favour of direct selling.
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*Photo credit: Ornella Binni on Unsplash
[1] Kenya: Tea Farmers to Benefit From SHS1.1 Billion Grant Issued to Family Bank. (2022, April 5).