AJAERD

Journal of Agricultural Economics and Rural Development

Vol. 4(2), pp. 416-422, May, 2018. © www.premierpublishers.org, ISSN: 2167-0477

Research Article

Productivity and Its Determinants in Smallholder Tea

Production in Kenya: Evidence from Bomet and Nyamira
Counties of Kenya
*Josiah M. Ateka1, Perez Onono2 and Martin Etyang3
1
Jomo Kenyatta University of Agriculture and Technology, Kenya
2
Department of Applied Economics, Kenyatta University, Kenya
3
Department of Economic Theory, Kenyatta University, kenya

The smallholder tea sub-sector makes an important contribution in the Kenyan economy.
Although subsector has enjoyed relative growth in terms of acreage, output and number of
growers, productivity has remained low. Industry trends show that there are wide differentials
between actual and potential yields, indicating underlying production inefficiencies and
considerable potential to improve the farmers’ income and livelihoods. This study used a semi–
log productivity regression model to investigate the determinants of productivity in smallholder
tea production in Kenya. The study used survey data of a random sample of 525 tea farming
households collected from two leading production regions in Kenya. The results show that
location specific heterogeneities, farm size, the intensity of family labor applied in tea farming,
access to extension through the farmer field schools, credit utilization and the tea marketing
arrangements have significant influence on tea productivity. In order to exploit the existing
potential, we recommend policies that focus on correcting imperfections in the agricultural labour
markets, consolidation of small tea farms, and expansion of credit and extension programs.
Additionally, the policy formulation and implementation process should take into account the
existent regional heterogeneities in the different tea growing areas of Kenya.

Key words: Tea, Productivity, semi-log regression model, labour markets imperfections

INTRODUCTION

Tea Production in Kenya
The agricultural sector is the backbone of Kenya’s
economy and a key source of livelihood for majority of the
Kenyan rural population (Republic of Kenya, 2010). The
sector directly accounts for about 26 per cent of Kenya’s
Gross Domestic Product (GDP) and another 27 percent
indirectly through linkages with manufacturing and other
service related sectors (Republic of Kenya, 2015). In
addition, the sector contributes about 65 per cent of
Kenya’s total exports and provides more than 70 percent
of the formal and informal employment in the rural areas
(KIPPRA, 2013). Analysis of Kenya’s economic statistics
shows that the agricultural sector has an important
influence on the performance of the overall economy
(Figure 1).
Productivity and Its Determinants in Smallholder Tea Production in Kenya: Evidence from Bomet and Nyamira Counties of Kenya
Within the agricultural sector, the tea industry makes a key
and significant contribution. The industry is a top foreign
exchange earner, with industry earning accounting for
about 5 percent and 26 percent of the country’s GDP and
foreign exchange earning respectively (Republic of Kenya,
2012). The sector directly and indirectly supports over 10
million farm families, making it one of the leading sources
of livelihood in the country (Republic of Kenya, 2014a).
Globally, the country is the leading exporter of black tea in
the world and accounts for 25 percent and 8 percent of
world tea exports and production respectively (Onduru et
al., 2012). According to the global industry statistics,
*Corresponding author: Josiah M. Ateka, Jomo Kenyatta
University of Agriculture and Technology, Kenya. E-mail:
jateka@jkuat.ac.ke
Ateka et al. 417

Agric (%)
14
GDP (%)
12
10
8
6
4
2
0
-2 1980 1984 1988 1992 1996 2000 2004 2008 2012
-4
-6

Figure 1: Economic and Agricultural Performances in Kenya

Source: Republic Kenya -Economic survey (various issues)

Kenya is among the four (4) leading producers; alongside Table 1: Smallholder Acreage and Production Trends (1962-
china, India and Sri Lanka, who collectively account for 2012)
over 75 percent of the global tea production (International Estates Smallholders
Area Made tea Producti- Area made tea Producti-
Tea Committee, 2013). YEAR
planted (kg) vity planted (kg) vity
(ha) Kg/ha (ha) Kg/ha
In Kenya, the tea industry structure is organized into three 1964 18,591 19,615,777 1,055 4,471 624,853 140
levels, namely: policy and regulation, production and trade 1968 21,329 26,359,730 1,236 12,233 3,402,760 278
1972 23,268 40,193,463 1,727 26,493 13,129,006 496
levels. The policy and regulatory aspects of the industry 1976 24,539 40,521,833 1,651 41,412 21,462,626 518
are managed by the Ministry of Agriculture, Livestock and 1980 25,850 55,913,349 2,163 50,691 33,980,009 670
Fisheries through the Agricultural and Food Authority 1984 26,873 63,463,679 2,362 56,499 52,708,241 933
(AFA) and the respective county governments. At the level 1988 29,109 79,337,869 2,726 57,693 84,692,559 1,468
1992 31,340 88,260,870 2,816 72,162 99,811,409 1,383
of production, the structure is characterized by a dual 1996 32,523 113,091,277 3,477 81,159 144,070,653 1,775
system comprising of the plantation and the smallholder 2000 35,313 90,739,810 2,570 85,083 145,546,258 1,711
tea subsectors (Ogise et al., 2008). The plantation 2004 48,754 132,056,462 2,709 87,954 192,552,108 2,189
subsector constitutes the large-scale tea estates and 2008 50,605 134,963,000 2,768 107,115 210,854,000 2,397
2012 65,732 150,982,000 2,959 124,985 218,580,000 1,771
controls about 40 percent of the industry production (TBK,
Source: KTDA Statistics (2013).
2013). The subsector operates alongside a dominant
smallholder production system which produces about 60 Despite its relative growth and its critical role in the national
percent of the industry production and comprises of over economy, productivity in the sector has remained low.
500,000 smallholder farmers. This study focused on Table 1, shows that growth in tea productivity in the
smallholder system which is reported to be the biggest smallholder subsector was characterized by a steady
smallholder schemes in the world (Kagira et al., 2012; increase in yields in the 1960s to the 1980s. This was
Onduru et al., 2012). however followed by stagnation and decline in the 1990s
through to the 2000s (Kamau, 2008); KTDA Statistics,
The Performance of the Smallholder Tea Subsector 2013). In addition to the yield trends, yields in the tea
industry vary widely marked by huge yield differentials
The smallholder tea sub-sector has enjoyed significant between the smallholder and the plantation tea
growth in terms of planted area and production since its subsectors. The mean annual yields achieved by the
inception in the early 1960s. As shown in Table 1, the smallholder subsector is 1785 kgs of processed tea per
acreage under tea expanded from 4,471 ha in 1962 to over hectare (kgs pt/ha) compared to 3038 kgs pt/ha for the
120,000 ha in 2012; while annual production rose from 0.6 estates and an industry production potential of 4745 kgs
million kg of made tea to over 218 million kg of made tea pt/ha for the predominant varieties (TBK, 2013). The
over the same period. The expansion of the subsector was productivity differentials imply existence of production
due to a number of favorable factors including the land challenges in the subsector as evidenced by rising
distribution policy in the early years of independence and concerns that reforms in the subsector have not
breakthrough in research leading to the release of high significantly improved the livelihood of tea farmers
yielding clones (Nyangito and Kimura 1999; Mwaura et al., (Republic of Kenya, 2007; Sanne van der Wal, 2008;
2005). Mbeche, 2012).
Productivity and Its Determinants in Smallholder Tea Production in Kenya: Evidence from Bomet and Nyamira Counties of Kenya
 J. Agric. Econ. Rural Devel. 418

While the analysis of productivity has attracted a lot of Where Y is a vector of tea output per unit area and
interest in literature (Darku et al., 2013), its analysis in the Z, X and  are column vectors representing household,
context of the tea sector in Kenya has received limited
farm and institutional variables respectively. The semi-log
research attention in Kenya. Consequently, despite the
fact that the stagnation in productivity has elicited a lot of model was chosen because it fitted the data well.
concerns from stakeholders, there is lack of empirical
evidence to guide and support productivity enhancing
RESULTS AND DISCUSSIONS
reforms in Kenya’s tea sector. Studies that have analysed
productivity in the tea sector include (Kavoi et al., 2001;
Characterization of Smallholder Tea Production
Mwaura et al., 2005). There is however need to revisit the
subject, in light of the many changes and market reforms
that have taken place in the sector. This article analysed The results of the descriptive analysis presented in Table
2 show that the mean farm size was 1.3 acres. The
the determinants of productivity using representative data
average farm size under tea in the two counties was 1.6
set of 525 smallholder farmers drawn from Bomet and
and 1.2 acres for Bomet and Nyamira County,
Nyamira counties. Productivity was analyzed in terms of
respectively. The difference in the mean size of tea farms
harvested tea output per unit area; given that land is a very
constraining input in tea production. The paper between the two counties was statistically significant, an
demonstrates the existence of a potential to improve observation which is consistent with the demographic
structure across the two counties (Republic of Kenya,
productivity in the sector and provides answers to
2009).
questions on what factors hold back smallholders from
increasing their productivity. An understanding of the
drivers of productivity at the policy, household and farm- As shown in table 2, the average amount of fertilizer
level provides industry players with information to design applied was 4.6 bags of 50 kilogram fertilizer per acre,
compared to the recommended of 5 bags (TRFK, 2002).
programs that can help increase productivity in
The average annual labour utilized applied in tea
smallholder agricultural systems. The rest of the paper is
production in the overall sample was 163.9 man-days
organized into four (4) sections. Section 2 describes
compared to a mean of 136.2 man-days for Bomet County
methodology including the empirical models and data.
Section 3 presents the empirical results while Section 4 and 180.1 man-days for Nyamira County. The results
concludes with policy implications to spur growth in the tea show that while the smallholder farmers in Bomet County
used more fertilizer, those in Nyamira had higher levels of
sector in Kenya.
labour use. In terms of the structure of labour, the results
show that on average 58.2 percent of the labour used in
tea production was sourced from within the household
MATERIALS AND METHODS
while the remaining 41.8 percent was hired.
A cross sectional survey was conducted in Bomet and
The average age of tea bushes in the sample was 27
Nyamira counties of Kenya to establish the farm,
years. The age of the tea farm is important in tea
technological, socio economic and institutional
production since aging tea plantations are associated with
characteristics affecting productivity in the smallholder tea
sub sector in Kenya. The two counties are among the decline in tea productivity (Kamau, 2008). The difference
leading tea producing counties in Kenya (KTDA Statistics, in the age of tea farms in the two counties was statistically
significant (21.8 years for Bomet compared to 31.1 years
2013; TBK, 2013). In both counties, Multi stage random
for Nyamira County).
sampling strategies were applied resulting in a survey
sample of 525 smallholder tea farming households. The
Regarding the household demographic profile, the results
survey was conducted between December 2015 and
March 2016 and obtained data on land use, input use, showed that the average household had six members. The
various household characteristics, indicators for input and mean age of household head was 49.2 years and ranged
from 19 to 89 years. This implies that tea farmers are
market access, institutional arrangements and technology
relatively aged; an observation that is consistent with a
adoption. The selection of the variables was based on
preference by younger people to engage in non-farm
previous productivity studies and the theory of farm
enterprises (Ogundari et al., 2006; Kiprono, 2013). The
household decision-behavior in developing countries (de
Janvry et al., 1991).The information which was collected average age of the household head in Bomet was 45.3
was analysed using the semi–log productivity model years compared to 51.5 years in Nyamira. The difference
in the mean age of the farmers between Bomet and
specified as;
Nyamira was statistically significant implying therefore that
the farmers in Bomet were relatively younger than those in
 
LnY = f   Z, X,   (1) Nyamira County. The average annual household per
 i  capita expenditure was Ksh 42,658.
Productivity and Its Determinants in Smallholder Tea Production in Kenya: Evidence from Bomet and Nyamira Counties of Kenya
Ateka et al. 419

Table 2: Description of variables and summary Statistics

Total sample Bomet Nyamira
Variable Description (n = 525) (n=194 ) (n=331)
Mean SD Mean mean t test
Farm size Area under tea in (acres) 1.3 1.1 1.6 1.2 3.8
Fertilizer Quantity of 50 kgs fertilizer (bags /year) 4.6 3.8 5.8 3.9 5.8
Labor Quantity of labour used ( man-days/year) 163.9 138.5 136.2 180.1 3.5
Labor str The proportion of family labour used (%) 58.2 45.5 62.3 55.7 1.6
Age of farm Years since tea farm was established (years) 27.0 14.9 21.8 30.1 6.4
Householdsize Number of household members 6.3 2.8 6.0 6.5 1.8
Age of farmer The age of the household head (years) 49.2 14. 5 45.3 51.5 4.8
Percapita exp The percapita household spending (KES) 42658.0 32682.0 45602.3 40954.7 1.6
Output The quantity of green tea (kgs/ year) 3208.3 3019.8 5035.9 1820.0 14.0
Yield Tea output per acre (kgs/acre) 2745.9 2067.6 3907.9 2064.9 10.9
Distance Distance to the nearest market ( Kms) 2.90 2.73 2.84 2.93 0.39
Gender The gender of the household head (1= male) 0.84 0.87 0.83 1.16
Education The education level of the household head 0.45 0.55
0.47 44.4
(1=primary)
The education level of the household head 0.40 1.47
0.36 42.6
(1=secondary)
The education level of the household head 0.10 1.70
0.12 7.9
(1=tertiary)
The education level of the household head 0.05 0.25
0.05 5.1
(1=university)
Variety the type of tea cultivar planted (1=improved 0.60 0.69 0.55 3.06
tea)
Extension (FFS) This is participation in the farmer field school 0.82 0.55 0.51 0.84
(1= yes)
Market channel Household participation in alternative (non- 0.36 0.44 0.32 2.71
KTDA)tea market channels (1=yes)
Credit Receipt of credit (1=yes and 0 otherwise) 0.69 0.76 0.65 2.51

Table 2 further shows that the mean annual tea output was
3208.3 kgs of tea. The mean annual yield for the combined
sample was 2745.9 kgs per acre, compared to 3907.9 kgs
and 2064.9 kgs per acre for Bomet and Nyamira
respectively. The average distance from the farm to the
nearest market was 2.9 kilometers. As shown in Table 2,
most of the sampled households (84.2%) were headed by
males. Only about 16 percent of the surveyed households
were female headed. On education, the results show that
45.3 percent of household heads in the sample had
attained primary level education, 40.2 percent had
secondary level education and 9.6 percent had attained
college education. Only 5.0 percent of the sampled
household heads had university education. The results
imply that majority of the sample farmers had not attained
higher education in terms of college or university
education. The descriptive summaries further show that
60.0 percent of the sampled households had planted
improved tea varieties while the remaining 40.0 percent
had not. The proportion of households that had adopted
improved clonal varieties in Bomet County was 68.6
compared to 55.0 percent in Nyamira County.
Regarding the access to extension services, the results
show that the proportion of farmers who had participated
in the FFS extension systems was 52.8 percent. On the
marketing of tea, the study considered whether the
Productivity and Its Determinants in Smallholder Tea Production in Kenya: Evidence from Bomet and Nyamira Counties of Kenya
household exclusively sold its tea through the KTDA
managed factories or alternative market channels
(ATMCs). The ATMCs considered in the study included
the sale of tea through middlemen or the multinational and
private tea factories. The results show that the KTDA
channel was used by majority of the households and
accounted for nearly 63.6 percent of the sample. The
proportion of the surveyed households that sold tea
through the alternative markets channels was 36.4
percent. In terms of use of credit, the results revealed that
69.1 percent of the interviewed households had utilized
agricultural credit while the remaining 30.9 percent had
not. The proportion of households that had used credit in
Bomet was 75.8 percent compared to 65.3 percent in
Nyamira County.
The Determinants of Tea Productivity
This section discusses the results on the determinants of
productivity based on the semi–log productivity regression
model specified in equation 1. The model diagnostic tests
indicate that the selected covariates provide good estimate
of the estimated specification. For example, Breusch-
Pagan /Cook-Weisberg test for heteroskedasticity had
2 statistic of 3.68 (P=0.0551) which indicates absence
of heteroskedasticity. The results of the marginal effects of
the semi log model are presented in Table 3.
 J. Agric. Econ. Rural Devel. 420

The results (Table 3) show that the coefficient for the insignificant dummies for gender of the household head.
county dummy which was included to capture the effects The finding is also at variance with Chirwa and Kydd,
of location specific heterogeneities was positive and (2006) who found no statistical evidence of gender
statistically significant. The results affirm our earlier differences in tea productivity in Malawi.
observation smallholder tea farmers in Bomet had higher
levels of productivity than the farmers in Nyamira. The Table 3 also shows that the coefficient of farm size was
result would be attributed to the differential access to negative and statistically significant at one percent. The
services and farm level characteristics such the age of the coefficient of the quadratic term which was introduced to
tea farms. In addition, an arrangement in Nyamira County examine whether the inverse productivity relationship
that limits tea plucking to five days per week (as opposed would persist at all levels of farm size was not statistically
six day in Bomet County) could also explain the significant at standard levels. The result contradicts Hong
performance disparities. This result therefore suggests and Yabe (2015) who found that farm size did not have
existence of region specific heterogeneities which should any important effect on TE in tea production in Vietnam.
not be ignored when formulating policies in the tea The finding is however consistent with the inverse
subsector. The observation is consistent with Kavoi et al., productivity relationship that is an empirical regularity in
(2001) and Kiprono (2013) who found performance agricultural economics literature.
disparities among smallholder tea farmers from the west of
the Rift Valley in Kenya were less efficient compared to While the adoption of high yielding crop cultivars is
smallholder farmers from the east of the Rift Valley. promoted as a key source of productivity growth in
agriculture, the coefficient of the tea variety was
Table 3: The marginal effects of the estimated semi– statistically insignificant. This suggests that the variety of
log productivity model tea is not an important determinant of tea productivity in
Dependent Variable: Ln Yield smallholder tea production in the study area. The result is
Z consistent with Kiprono (2013) who found that the tea
Variable Coefficient Std. error P value
value variety was not an important source of efficiency variation
Constant 7.315*** 0.235 31.1 0.000 in smallholder tea production in Kenya. A part from tea
County dummy 0.786*** 0.066 11.85 0.000
variety, the age of the tea farm was the other farm
Gender of household
head 0.189** 0.086 2.2 0.028
characteristic considered in the study. The economic
Farm size -0.217*** 0.081 -2.69 0.007 significance of age derives from the fact that peak yields
Square of farm size 0.003 0.014 0.18 0.859 for tea are obtained between ages of 25 to 40 years after
Variety of tea -0.039 0.062 -0.62 0.533 planting, followed by a decline to a level where the tea
Age of farm 0.006 0.009 0.67 0.501 gardens may become moribund (Kamau, 2008). The
Square of age of farm 0.000 0.000 -0.41 0.678 coefficient for the variable was however not statistically
Extension (FFS) 0.166*** 0.062 2.69 0.007 significant. The observation may be due to fact that
Distance to market -0.017 0.011 -1.51 0.131 Kenyan tea gardens are relatively young compared other
Per capita expenditure 0.000 0.000 1.09 0.278
countries such as Sri Lanka, India and Malawi which are
Age of farmer -0.004 0.003 -1.31 0.190
Household size 0.007 0.012 0.57 0.567
implementing tea replanting programs for their smallholder
Education (primary) -0.090 0.147 -0.61 0.541 farmers to replace moribund tea bushes.
Education (secondary) -0.149 0.144 -1.04 0.300
Education (college) -0.083 0.165 -0.51 0.614 The results of the productivity model (table 3) further reveal
Labor intensity 0.000*** 0.000 2.69 0.007 that the coefficient for the FFS extension was positive. The
Credit 0.168** 0.068 2.46 0.014 implication is farms households that had participated in the
Market channel 0.197*** 0.063 3.11 0.002 FFS program had higher tea productivity than the non-
The asterisks denotes significance (*** at 1%, ** at 5% and * participating farm households. The results are consistent
at 10 %) with Onduru et al., (2012) who found that participation in
FFS had a positive and significant influence on tea yields
The coefficient for gender of the household head was in Kenya. The attractiveness of FFS is associated with its
significant implying that the productivity of farms belonging use of participatory adult leaning approaches and
to households headed by males was higher than the emphasis on stronger linkages between research,
productivity of females headed households. The finding is extension and farmer experimentation (Mose et. al., 2016).
in consistent with Hong and Yabe (2015) who found that In the study, distance to markets was included as an
male headed households had higher levels of total factor indicator of market related transaction costs since an
productivity (technical efficiency) than the female headed increase in the distance to markets can act as an economic
households. The finding is however inconsistent with disincentive to the farmers. However, the estimated
Quisumbing (1996), whose survey on differences in coefficient for distance to nearest market was not
technical efficiency between male and female farmers in statistically significant. This might be explained by the
agricultural production found that six in seven studies had recent improvements in road infrastructure in the country
Productivity and Its Determinants in Smallholder Tea Production in Kenya: Evidence from Bomet and Nyamira Counties of Kenya
and the emergence of motorbikes as a popular mode of
transport in rural areas. The improved access to market as
a result of these developments would have diminished the
influence of distance to markets as a variable explaining
productivity growth in tea farming. The other variables
whose coefficients were insignificant were the household
per capita expenditure, age and education of the
household head and household size.
The coefficient of labour intensity was positive and
significant at 1 percent implying that an increase in the
labour applied in tea production per unit area is associated
with an increase in productivity. The finding implies that
hired labour is an imperfect substitute for family labour and
hence presence of imperfections in the labour markets.
The result also affirms field observations made during the
survey that labour use is an important variable in tea
production. Studies that have underscored the significance
of labour constraints in tea farming include Owuor (2001)
and Owuor et al., (2005). The significance of labour in tea
farming derives from the view that when labour access
constraints are binding, farmers may fail to carry out the
required tea husbandry practices at the optimum time. This
is more prevalent during the rainy season when the tea
yields are at their peak.
Table 3 shows that the coefficient of credit was positive
and significant implying that credit access in key
determinant of productivity among smallholder farmers in
the study area. Equally, the coefficient of market channel
was positive and statistically significant at one percent.
The value of the coefficient was 0.197; which implies that
the productivity of farm households that sold tea through
the alternative (non-KTDA) tea market channels was
higher than the productivity of the non-participants. The
result may be explained by the fact that the ATMCs are
characterized by immediate payments of the tea proceeds
to the farmers which allows them to achieve timely
performance of tea husbandry activities. The alternative
channels also offer more flexible and efficient systems of
tea collection. The results therefore provide evidence that
the marketing arrangements are important drivers of
productivity growth within the smallholder tea subsector in
Kenya. The finding of this study regarding the impact of
ATMC participation is consistent with Chirwa and Kydd
(2006) who found that the type of market channel through
which farmers sold their green leaf was important in
explaining variations in tea productivity in Malawi.
Specifically, it was found that the smallholder farmers who
had contractual arrangements with the commercial estates
had higher productivity than those contracted by the
reformed state enterprise factory. The finding is however
inconsistent with Yoshiko (2011) who found that
smallholder tea farmers who were contracted by state
owned enterprise (the equivalent of KTDA before
liberalization) had higher efficiency levels than the farmers
who were not contracted.
Productivity and Its Determinants in Smallholder Tea Production in Kenya: Evidence from Bomet and Nyamira Counties of Kenya
CONCLUSIONS AND POLICY IMPLICATIONS
This article applied a semi–log productivity regression
model to investigate the determinants of smallholder tea
productivity in the western highlands of Kenya. Findings of
the study reveal that farm level characteristics as well the
institutional variables including marketing arrangements
and access to credit and extension and are important
determinants of productivity in smallholder tea production
in Kenya. To exploit the existing productivity potential, we
recommend policies that would correct existing agricultural
labour market imperfections and promote adoption of
labour saving technologies, consolidation of the
management of the small tea farms in order to benefit from
the scale economies, expansion of the FFS extension and
access to agricultural credit. In addition, the tea sector
policies should account for the locational heterogeneities
in the different tea growing counties through sufficient local
level stakeholder participation during policy formulation.
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Accepted 11 April 2018
Citation: Ateka JM, Onono P, Etyang M (2018).
Productivity and Its Determinants in Smallholder Tea
Production in Kenya: Evidence from Bomet and Nyamira
Counties of Kenya. Journal of Agricultural Economics and
Rural Development, 4(2): 416-422.
Copyright: © 2018 Ateka et al. This is an open-access
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