KTDAL - Building Sustainability through Inclusion
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Case Code: SUST023 Case Length: 18 pages Period: 1900-2016 Pub Date: 2016 Teaching Note: Available |
Price: Rs.600 Organization: Kenya Tea Development Agency Limited Industry: Tea Industry Countries: UK, Kenya and African Countries Themes: Inclusive Business Models, Sustainable Business Models |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Post-Independence Scenario
After Kenya gained independence in the year 1963, the Government of Kenya (GoK) under the leadership of Jomo Kenyatta (Kenyatta) , endeavoured to reform the agriculture sector. Kenyatta took a special interest in the development of the small tea sector. He decided to remove the tea sector from the purview of the SCDA and established the Kenya Tea Development Authority (KTDA) to which he entrusted the responsibility of developing the small tea farmer. In association with private players and multinational companies, KTDA established buying centres and processing factories near the small tea farms...
Origin of KTDAL
The 1990s saw a series of agitations in Kenya which resulted in political and economic uncertainty. The mismanagement of the Parastatals of different cash crops and the political interference in the framing of policies had an adverse effect on the agriculture sector. The government policies were regarded as anti-growth and this created uncertainty in the tea and coffee growing regions. A group of parlimantarians led by opposition party leader Mwai Kibaki formed an association called the Coffee and Tea Parliamentary Association (COTEPA), and demanded in parliament that these sectors be privatised and liberalised...
Business Model
To become a shareholder of KTDAL, the small tea farmers of Kenya had to register as suppliers of tea leaves at the Tea Factory Companies (TFCs). After registration, they became owners of the concerned TFC. As shareholders, the farmers provided the necessary funds in the form of deductions from the tea leaves supplied. On an average, each TFC needed an investment of around KSh 500 million . On this investment, each TFC generated significant revenues. For example, the total revenue generated by a TFC (Chebut Tea Factory Company Limited) for the year 2011-12 was approximately equivalent to KSh 2000 million...
Sustainability through Inclusion
The area of tea cultivation under KTDAL increased significantly over the years, going up to 126,000 hectares by the year 2013. The production of tea leaves was 1.1 million tons, having a value of $800 million (KSh 68,000 million (or) KSh 68 billion) . In order to meet the production demands, KTDAL established 20 TPUs in the 10 years since its inception. At the time of privatisation, there were 45 TPUs and by the year 2013, this number had gone up to 65. KTDAL brought about improvements in the production process by introducing Continuous Fermentation Units (CFUs) in all the factories...
Role Model
Under KTDAL, the capacity of the small tea farmer to produce and earn increased considerably. Out of Kenya's total tea production, 60% was contributed by the small tea sector. On an average, a farmer under the management services of KTDAL produced 2,000 kg of tea leaves, which was equivalent to 450 kg of packed tea....
Twist
KTDAL was in the process of building a sustainable model to overcome the challenges faced by tea farmers around the world such as rising costs combined with decreasing and fluctuating tea prices and uncertain climatic conditions by bulk ordering of fertilizers directly from the producer and developing climate resistant tea plants. But, some of the farmers felt that they were in for a challenging time going forward....
Exhibits
Exhibit I: KTDAL Supply Chain
Exhibit II: Structure of Supply Chain under KTDA
Exhibit III: Structure of Small Tea Sector after the Privatisation of KTDA
Exhibit IV: Operational Framework of Small Tea Sector under KTDAL
Exhibit V: Extension Services Offered by KTDAL
Exhibit VI: List of subsidiaries functioning under KTDAL
Exhibit VII: KTDAHL Shareholdings Structure
Exhibit VIII: Images of Sustainable Practices at KTDAL
Exhibit IX: The Policy Issues and Challenges facing Kenyan Parastatals
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