Thursday, September 8, 2011

The wider societal implications of the production process of tea in Kenya

Development on a global scale is affected by Southern producers in a global production chain. An analysis of the tea industry in Kenya will be used as a case in point, as it is one of the main sources of black tea exports (Talbot, 2002: 723). Tea is the second most consumed beverage in the world after water (Black Tea, The Most Consumed Tea, 2009). Therefore, the production process of tea is vital in understanding more about tea and the wider implications its production has on development, equality/inequality, poverty and the lives of people globally. Growing and producing tea provides a livelihood for millions of people around the world (Ethical Tea Partnership, 2009)

Globalisation has produced opportunities for enormous wealth for many (Giddens, 2006: 386). However, globalisation has been accompanied by more unemployment, poverty, social disintegration, oppressive working conditions and often resides in isolation, marginalisation and violence (Cohen & Kennedy, 2000: 137).

Global economic inequality is expanding; this is made clear by the following statistic derived from the UN Development Report (UNDP 1999): In 1997, twenty percent of the people in rich countries had seventy-four times the income of the poorest twenty percent (Giddens, 2006: 392).

The global division of labour is made possible through globalisation and is the splitting of the production process into specialised stages across the globe. Many stages in the life cycles of many products occur in different countries, and sometimes in many different countries. This interdependence has different consequences. One consequence is that changes in production and consumption of a product in one country may have environmental as well as other impacts in other countries. Another consequence is that the means of any one national government to realize the objectives of product policy are limited when a large number of market actors are outside the jurisdiction of that particular government (Von Moltke, 1998: 4).

A commodity chain is the linked sequences of processing stages that transform raw agricultural products into forms ready for final consumption (Talbot, 2002: 702). The amount of value added to the product at each stage of the chain, and who appropriates the profit from that stage is determined by the rules governing these transactions, and by their relations to transactions at the other stages. The commodity chain approach focuses on the global organisation of production, processing, and distribution of a commodity (Talbot, 2002: 703).

When studying product chains, the focus of Global Commodity Chain Analysis (GCCA) is on the actors who are directly or indirectly involved with the product in the various stages of its life cycle (Von Moltke, 1998: 4). The actors can be producers, consumers, traders, or government agencies to name but a few. The decisions that these actors make regarding the product are interdependent. The market where buyers and sellers meet is the central institution that connects the actors in a product chain. The structure of the market affects the outcomes of market processes to all actors operating on this market (Von Moltke, 1998: 5).

A product chain can be seen as a series of market processes. All actors in the product chain have an interest in the outcome of market processes. The outcome of market processes is dependent upon the structure of the market; hence, actors will be interested to bend the structure of the market in such a way that its outcome is maximized in terms of the actor’s personal objectives (Von Moltke, 1998: 5). In other words, actors struggle for market power. Market power and the strategies that different actors within the product chain use to acquire this power are central to the GCCA. Knowledge of the power relations within the chain is crucial in understanding the distribution of wealth along the chain and its governance structure (Von Moltke, 1998: 5). Global commodity chain analysis can tell us what the best options are to change the chain in a way that supports sustainable development (Von Moltke, 1998: 3).

The production chain for tea:

Plucked (Harvested) Tea Leaf -- Wither -- Crush -- Ferment -- Dry -- ‘Made’ Tea: 1) Packet Tea; 2) Tea Bags; 3) Instant Tea.


The four dimensions of commodity chains

1) Input-Output Structure
The Input-Output structure is a sequence of interrelated value-adding activities including product design and engineering, manufacturing, logistics, marketing and sales (ILO, 2009).

Tea is a large evergreen shrub. The part of the bush that is plucked is the tip of a new shoot that ideally consists of two leaves and a bud (Talbot, 2002: 712). After plucking, green tea (unfermented) is heated by steaming or roasting, and is then rolled or twisted, and then dried. Black tea on the other hand is first withered or partially dried after being harvested. Thereafter, it is cut or rolled to break up the leaf and expose more surfaces to air. The fermentation stage is an oxidation of the exposed surfaces of the leaf pieces, which helps to develop the colour and flavour of the tea (Talbot, 2002: 713).

The next stage is the drying of the tea to stop oxidation. Lastly, the particles are sorted by size. At this point, the ‘made’ tea is ready for consumption. Additional processing stages include packing the tea into tea bags, the production of instant tea, and the bottling of brewed tea. The production of black tea rather than that of green tea will be considered, as the majority of internationally traded tea is black fermented tea (Talbot, 2002: 713).

Tea must be processed shortly after plucking, right up to the point where it is ready to be consumed. Therefore, processing up to the point of ‘made’ tea is typically done near to the place where the tea is extracted (Ethical Tea Partnership, 2009). The cutting, tearing, and curling (CTC) processes are capital-intensive and require a large and continuous supply of freshly plucked tea to be done efficiently. This is why, until recently, tea has been mainly a plantation crop, and Transnational Corporations (TNCs) (Talbot, 2002: 713) have traditionally controlled the entire tea chain.

This ‘made’ tea has been the predominant form in international trade, whereas processing into tea bags or instant tea has been done mostly in consuming countries. Tea produced on an estate is given a ‘selling mark’, which identifies the estate and country where the tea was produced. Sacks or chests of tea that leave the estate will carry the selling mark. Thereafter, the tea is sold either to the tea packing company directly, or through an auction, or via an agent or broker. The tea packing company produces brands of tea that are sold to the retailer and to the consumer (Ethical Tea Partnership, 2009).

2) Chain geography
This refers to the spatial distribution or concentration of activities within and across locations. The geographical composition of global production networks results from a combination of local, regional, and transnational dynamics (ILO, 2009). In Kenya, tea is a major foreign exchange earner, and the main source for 17 to 20 percent of Kenya's total export revenue. Small-scale farmers grow more than 80 per cent of it, while the rest is grown by large-scale producers. Unlike small-scale farmers, large-scale growers are responsible for processing and marketing of their own crop. In Kenya alone, 314,875 farmers depend on tea growing as a livelihood (Global Tea – Kenya, 2009).

Since tea is an agricultural commodity, it can only be profitably grown in tropical or sub-tropical climates. Therefore, it is produced almost exclusively in peripheral or semi-peripheral areas of the world. While the commodities are ‘rooted’ in the tropics, most of their consumers are located outside the tropics. This determines the distinctive south-to-north trading pattern of this commodity and explains its persistence over time (Talbot, 2002: 705). Their commodity chains are a vital link between the north and the south.

The structures of these chains are important determinants of the tropical countries’ chances for development. A development strategy commonly used by southern countries is forward integration. They attempt to escape from their roles as suppliers of raw or semi-processed commodities, and to move into the more advanced processing stages of the chains. However, northern actors and the structures of these chains have prevented southern countries from succeeding at this strategy (Talbot, 2002: 702).

Control over the major consuming markets by transnational corporations (TNC’s) is a major reason why even the most successful attempts at forward integration have returned only limited benefits to the producing regions (Talbot, 2002: 702). One of the most important characteristics of tropical commodity chains is the central role of the ecology and the processing requirements of the specific crops in the determination of their structures (Talbot, 2002: 706).

3) Internal governance

Internal governance is a governance structure, or power relations that determine how economic surplus is distributed within the chain. The governance structure plays a key role not only in the distribution of value, but also, more particularly in the coordination of global production networks (ILO, 2009). To understand the ways that an international product chain can be changed in a way that reduces its impacts on the environment, it is essential to understand what the governance structure of the chain is like (Von Moltke, 1998: 4).

Development strategies can be viewed as efforts to reorganize the commodity chains, or to change their governance structures. Restructuring can involve the restructuring of production within one or more stages of the chain, changes in the geographic location of the stages, or changes in the ways in which the stages are linked to one another. Changes in the governance structures involve changing the rules governing the flows between stages, or changing the division of income and profit along the chain. All of these changes are the results of strategies pursued by the wide variety of actors located at the various stages along the chain, who use whatever political or economic means they have at their disposal in order to improve their positions (Talbot, 2002: 707).

In Kenya, state action was used to assert local control over the growing and initial processing of tea. The Kenyan state placed limits on the expansion of foreign owned plantations and promoted the growth of smallholder production. However, beyond gaining some local control over tea growing, the state took no further actions. It established an auction centre but did not actively pressure tea growers to use it. Most of Kenya’s tea continued to be sold through London until the closing of the London auction. The Kenyan state did not promote local processing beyond the ‘made’ tea stage, therefore there is no success in forward integration, which could result in increased prices for local producers in a global market (Talbot, 2002: 724).

Therefore, the initial focus of state development strategies was to gain local control over tea growing and over the tea auctions (Talbot, 2002: 726). The market alone will not deliver economic or social justice, substantive change requires concerted action by states and global institutions pushed by organised civil society to re-regulate trade and economic activity. Approximately sixty years ago, Polanyi stated that only the powerful institutions of the state could protect society against the perils inherent in a self-regulating market system (Jaffee, 2007: 35).

4) Institutional conditions
These are formed by the norms, values, and regulatory frameworks of the various communities within which firms operate. Specialised productive activities tend to be clustered in particular locations within countries that participate in global production networks (ILO, 2009). Long hours experienced in the agricultural sector often leads to backaches, and joint problems. On farms, handling of chemicals may also lead to skin allergies, headaches, and fainting (Jenkins, 2005: 609).

An assessment of the development implications of the production of tea in the South
Development at the level of social groups entails an increasing capacity to regulate both internal and external relationships (Walter, 1974). Poverty reduction, improved living standards, democracy, and greater access to services are some indicators of development.

The Kenyan labour force comprises of predominantly young females, with 60% of farm workers being women (Jenkins, 2005: 607). Through the ‘global assembly line’, many Third World women have become part of the international working class (Mittelman, 1995: 278). While this may seem positive at first as incomes and standards of living may be increased, this also affects the household and gender relations as women now have to balance two roles, that of reproductive labour, and now, productive labour.

It also poses a challenge to existing relations under patriarchy, which typically sees the man’s role as productive labourer. This may threaten familial relations and may in some cases lead to violence. Another negative factor of employment in the tea industry in Kenya is that there is instability in employment and fluctuations in earnings. Casual and seasonal workers particularly suffer a lack of income security (Jenkins, 2005: 608). Empirical studies show that the employment of women and undocumented workers are often used as strategies to segment the agricultural workforce and enhance employer control (Collins, 1993: 60).

Global integration provides a win-lose outcome on many dimensions (Kaplinsky, 2005: 235). With deepening globalisation, distribution has become more unequal, and living standards have declined. In many cases, morbidity has grown, while life expectancy has fallen dramatically.

Developed countries have had an uneven and continual decline in their global share of employment, production output and trade (Hassler, 2003: 513). The intensity of global competition prevents low-income, predominantly agricultural economies in sub-Saharan Africa from entering global markets (Kaplinsky, 2005: 239). With the proliferation of enterprises producing similar crops in the same region, firms must frequently struggle to maintain their position in global markets (Collins, 1993: 59).

Falling prices have become a systemic feature of modern globalised production systems (Kaplinsky, 2005: 232). Global production networks are making growing use of low-income production platforms, concentration is growing in the buying of global products, and price pressures are becoming intense. Effective production is only one part of the story of global production networks; the other is the role played by global buyers, and this too was analysed as a factor determining the distribution of rewards in the current era of globalisation (Kaplinsky, 2005: 234). There has been an increasing tendency for the prices of all manufactures to fall in recent years, but this fall has been more dramatic for low-income economies.

Farmers who depend on export commodities for their livelihood have long been at the mercy of price fluctuations beyond their control (Jaffee, 2007: 41). For most of the past century, real prices for all primary commodities have been falling steadily. Observers describe this phenomenon as a global commodity price crisis (Jaffee, 2007: 48). While falling prices affects growers of all sizes, small producers are hit the hardest because they cannot make up for lower incomes by increasing production. This deepening poverty may heighten pre-existing social tensions and inequalities in the countryside, and may lead to social upheaval in several regions (Jaffee, 2007: 52).

Global sourcing is at a cost to the environment, directly through global transport, and indirectly, through the link between increased energy consumption and global warming. Increased carbon emissions also results in global warming which has a disproportionately negative impact on poor people and low-income economies (Kaplinsky, 2005: 252).

Increasingly, policy agendas are being formed in low-income countries as a consequence of external influences. In some cases, the policy agenda is directly dictated by international financial institutions like the World Bank, IMF and the WTO, often backed by pressure from large donor countries such as the USA. The Washington Consensus strips governments of the responsibility for and capability of influencing either the allocation of resources to promote and influence growth or the distribution of income (Kaplinsky, 2005: 240)

There are dangers of disengaging from the global economy and turning inwards into a single economy. Few low-income countries have an adequately large market to allow for the capturing of the economies of scope and scale that characterise modern production systems (Kaplinsky, 2005: 248). Neo-liberal policies partially imposed by the IMF obliges Third World countries to reduce the role of the state in regulating the economy and encourages countries to let market forces of demand and supply control the economy (Jaffee, 2007: 51).

Fair trade can be defined as ‘a system of trade that allows marginalised producers in developing regions to gain access to developed markets’. Markets in the rich countries have been closed to Southern Producers because of rigged rules and double standards (Jaffee, 2007: 27). Thus, the fair trade market was created so that the conventional market would become more equitable (Jaffee, 2007: 30).

The World Trade Organisation (WTO) has called on all governments to implement proactive policy initiatives and negotiate trade agreements to enhance the growth of the Fair Trade system (Jaffee, 2007: 32). Fair Trade principles include a fair price, fair labour conditions, direct trade, democratic and transparent organisations, community development, and environmental sustainability. Fair trade provides various social benefits, and the fair trade label guarantees fair price, quality products, care for the environment, and community impact (Fair Trade Certified, 2009). Fair trade has the potential to shield producers against the worst economic effects of price crises (Jaffee, 2007: 56).

Developments in environmental awareness in the North can lead to opportunities and challenges for Southern producers. The opportunities are caused by the increased demand for environmentally superior products. Southern producers might be able to benefit from these opportunities. The challenges are caused by the increasing incidence of environmental measures that affect markets into which Southern producers are currently selling. An environmentally superior product is not only defined by the characteristics of the product itself, but more and more also by the way it is produced (Von Moltke, 1998: 24).

The growth of horticulture exports has generated employment and income opportunities in Kenya and that a significant share of these have benefited poor households. The overall outcomes of globalisation for workers in Kenya appear to be negative with declining earnings for unskilled workers, increased inequality, and greater use of flexible employment practices. As we have seen, the impacts of globalisation as well as the development impacts for a Southern producer are highly dependent on the context. One cannot state that Southern producers always gain or lose from the global division of labour. However, it can be stated that farm workers are usually exposed to long hours of work, and poor working conditions.

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