From Subsidies To Value Addition- How Four Years Of Reforms Are Reshaping Kenya’s Tea Industry

Government policy interventions across the tea sector over the past four years have yielded substantial financial gains for growers, driven by reduced production costs, modernized processing facilities, expanded international markets, and enhanced value addition.

Data from the Tea Board of Kenya highlights significant structural improvements resulting from targeted state measures initiated since 2022. Over 650,000 smallholder tea farmers have benefited from the distribution of approximately 290,000 metric tonnes of subsidized fertilizer. Concurrently, KSh 850 million has been invested in upgrading machinery and processing equipment across 17 smallholder tea factories nationwide.

These measures have positively impacted both direct farmer payouts and national export revenue. Average green-leaf payments to farmers rose from approximately KSh 35 per kilogram in 2021 to KSh 64 in 2024, settling at KSh 56 per kilogram in 2025. Total tea export earnings increased from KSh 136.5 billion in 2021 to KSh 181.6 billion in 2024, reaching KSh 186.9 billion in 2025. Annual production figures also reflected growth, rising from 537 million kilograms in 2021 to 598 million kilograms in 2024, before recording 550 million kilograms in 2025. The government has set a target of raising green-leaf payments to at least KSh 100 per kilogram by 2027 through cost reductions and direct marketing strategies.

Regulatory and fiscal reforms implemented in 2026 further support the sector. The government eliminated Value Added Tax (VAT) on factory-sourced tea destined for local value addition, zero-rated import duties on specialized packaging materials, and disbursed a KSh 100 million grant to Ketepa to establish a shared value-addition facility. Complementary measures, including the newly operational Tea Registration and Licensing Regulations and the Tea Levy Regulations, have enhanced trade structures across key export destinations including Pakistan, Egypt, the United Arab Emirates, the United Kingdom, China, Saudi Arabia, Germany, and Malaysia.

Growers across key producing regions have acknowledged the financial relief brought about by improved payouts, while advocating for sustained oversight to safeguard earnings against rising operational costs. The next phase of sector reforms focuses on tightening factory governance, reducing grid energy overheads, expanding local blending capacities, and securing direct sales channels to maximize net returns for smallholders.