Discussion Paper No. 230 of 2020 on Assessing the Employment Creation Potential of the Tea Sector in Kenya

Abstract

The objective of this study is to map the tea value chain in Kenya, identify constraints that hinder the growth of the tea sector, determine employment creation potential of the tea sector, and finally determine sectoral skill gaps and occupational skill gaps. This is with the aim to contribute to finding potential areas to exploit in addressing the high level of unemployment especially among the youth in Kenya. The study found the tea value chain as made up of three major segments: production, processing and marketing. Some of the constraints identified along the value chain include the following: At the production node, there is low productivity among smallholder farmers due to low access to extension services, low fertilizer application, and other field management practices. At the processing node, factories face high energy costs, high labour costs, limited value addition, and limited product diversification. At the marketing level, Kenya faces a narrow export destination and relies heavily on exports to Pakistan and Egypt, thus exposing tea exporters to external shocks due to price fluctuations. Also, there is limited local consumption of made tea in the Kenyan market, on average 95 per cent of processed tea is exported. On employment creation potential in the tea sector, the study found that a 1 per cent change in output resulted to an increase in employment by 0.11 per cent, holding all other factors constant. On skills analysis, it was found that there was a skills surplus at all the skills levels of the tea sector, specifically a surplus of about 1.4 million for those with no education, 2.2 million for primary education, and 0.8 million for secondary education.