We are building the Tanzanian tea sector in partnership with the Wood Foundation Africa, government bodies and the private sector. The Chai Project aims to expand tea cultivation, increase productivity, improve quality and boost returns to smallholders.
Tea is a high impact sector in Tanzania. It is the fourth largest export crop and more than 30,000 smallholder farmers collectively produce a third of the country’s output. It is harvested all year round and provides a regular, dependable source of income, lowering farmers’ vulnerability to extreme weather shocks.
However, the sector faces significant challenges. Research has identified a clear downward cycle within smallholder tea production – factories are not getting enough green leaf throughput to operate efficiently and keep variable factory costs low, so they are only able to offer low prices to farmers.
For farmers, these low prices mean they are unable or unwilling to invest in raising the productivity of their tea crop (for example by applying fertiliser), so Tanzania’s average yields are 40% less than Kenya’s and green-leaf throughput remains low.
This downward spiral leaves Tanzanian farmers among the lowest paid in the region. Furthermore, they take a smaller share of the sector’s earnings, receiving just 27% of the sale price in 2009 compared with the 51% received by Kenyan smallholders who benefit from greater ownership of factories.
Breaking the downward spiral and turning it positive through innovative service delivery models could have a catalytic impact on the sector, kickstarting its transformation. Providing fertilisers on credit and quality extension services could rapidly raise yields, and a 50% increase in yields would double smallholder profits. Higher farmer returns would likely encourage more investment, further raising yields, increasing factory throughput and providing the opportunity to improve quality.
In September 2009 Gatsby and the Wood Foundation Africa launched a joint programme - the Chai Project - aimed at transforming the sector.
An audit of all existing and potential tea growing areas set out the opportunities for increasing output, productivity and quality and confirmed how returns to smallholders could be increased through increased yields, higher quality, and even the development of factories that source the majority of their supply from smallholders.
To realise this potential, Chai has:
Chai has placed three matching grants with private factories to tackle specific local constraints through measures such as planting new bushes, providing fertiliser and offering extension services. With one factory the yields of 12,000 farmers increased by 21% over three years due to a mechanisation project.
Chai is working with a farmers’ association representing 15,000 smallholders to strengthen its advocacy and organisational skills to better represent its members.
Chai has also worked with the Tea Board of Tanzania to introduce a new market-based pricing mechanism for all 30,000 smallholder farmers, and with the Tanzania Smallholder Tea Development Agency to pilot a land titling project.
Impact so far
Since the start of the project:
- Average smallholder share of made tea prices has risen from 27% to 33%, resulting in an additional US$2 million in farmer revenues per year
- Total smallholder production has increased from 9.4 million kg in 2009 to 10.7 million kg in 2013
- Average smallholder green leaf revenues per hectare are up from US$413 in 2010 to US$720 in 2013
Chai will continue its approach of facilitating strategic partnerships between industry actors. This may include supporting the development of smallholder-friendly greenfield investments in the Southern Highlands.
Rwandan Tea Sector
We have expanded our partnership with the Wood Foundation Africa in tea sector development from Tanzania to Rwanda. The Imbarutso Project is working with government, factories and farmers to bolster the sector’s competitiveness and ensure that smallholders benefit from its growth.