Building a tea enterprise

Rogers Siima, General Manager of Mpanga Growers Tea Factory in kabarole, entered the tea industry as a management trainee at Rwenzori Highlands Tea Company – currently Macleod Russel – about 16 years ago. A graduate of Agricultural Engineering , six years later he was the head of Mpanga Growers Tea Factory. Siima told The Independent that growing a successful, farmer-owned enterprise out of the former state-owned parastatal, had been an exciting journey, and he was ready for the challenges ahead.

What has been your experience of the trends in the tea sector over the past 10 years?

It has evolved. We have seen harvesting change from hand-plucking to shear and machine-plucking. Estates are reporting increased yields. Production has risen from about 20 million to 59 million kgs of made tea in 2010, according to the Uganda Tea Association (UTA), hence increased earnings. It is interesting to monitor Uganda tea prices as they entirely depend on Kenya’s production – when it’s low, Ugandan prices sky-rocket, and vice versa. Market penetration is still a challenge for Ugandan tea as it is exported as Kenyan tea through the Mombasa Tea Auction. But we have come a long way. Ten years ago there was very little tea on the local market. Now we are branding our own.

What is Mpanga Growers’ share of the Uganda tea market?

Uganda is earning about US$ 100 Million a year. Mpanga Growers Tea Factory Ltd is close to US$ 4 million. Our market performance at international and local levels has improved greatly. But we continue to compete for both the market and raw materials. We are adhering to international standards through partnerships such as Fair-Trade Labeling Organization, Food Safety Management Systems and Rain Forest Alliance.

How does Mpanga Growers now compare to what it was in 1995 when government sold the estate to the farmers?

We have more than doubled production. We installed modern machinery, expanded the tea estate, implemented international standards, launched Mpanga tea on the local market and trained our staff.

What challenges do you face?

High input costs especially fertilizers, herbicides, energy. Lack of tea research makes it hard to keep up with fickle market requirements. The tea industry lacks an authority to control its operations. Marketing Uganda tea on the international market is impossible as long as it is branded as Kenyan from Mombasa on-wards.

What management and strategic changes have made it possible to succeed?

We have a strong bond between the owners (i.e. tea farmers) and company management. We have also developed strategic relationships with reputable organizations such Fair Trade, British Council and United States African Development Foundation that have helped us nurture strong systems that emphasize transparency and accountability.

Current economic difficulties are partly blamed on drought over the past year or so. Has Mpanga Growers been affected by this?

The drought is not the sole cause. Economic difficulties are still affecting us, even during this harvesting time. The first part of the year, crop production was low but prices were not bad and the cost of inputs was reasonable. But foreign exchange effects have made inputs more expensive. We are considering hedging in future.

The International Centre for Tropical Agriculture (CIAT) recently predicted that tea production for Kenya and Uganda will drop over the next few years due to climatic changes. How will you mitigate this?

We are implementing a climate change project with Cafe’ direct to encourage tree planting and encouraging our shareholder farmers to plant trees and minimize deforestation. We will obtain carbon credits (and economic returns) for farmers with natural forests surviving on their own lands. We are also promoting energy-saving stoves and bio-digesters. We will soon be Rainforest Alliance-certified.

Has the EAC common market made it easier for you to export?

Not so far. But UTA is involved and we hope this will improve.

Is it true that agricultural enterprises are benefitting from the current economic crisis, especially through exchange rate benefits?

No, there is no benefit as received income is spent on higher costs. The cost of production per kilo of tea has risen from less than a dollar to USD 1.45.

What advice do you have for managers of agriculture-exporting enterprises?

Observe international standards, put sound management systems in place, and study your market constantly.
– Article from the independent link: http://www.independent.co.ug/business/business-news/4666-building-a-tea-enterprise