Established in 1998, EthioAgri-CEFT is a private company operating under MIDROC Ethiopia Investment Group and engaged in the production and processing of various agricultural crops. The company owns two of the three commercial tea plantations currently operating in Ethiopia: WushWush and Gumaro, in South Western part of the country. The company began exporting tea to the global market five years ago and introduced Ethiopia’s tea to international buyers. EBR sat down with Isayas Kebede, general manager, to learn more about the company’s efforts to penetrate the global tea market and the challenges it is facing.
EBR: What progress has been made since EthioAgri–CEFT acquired WushWush and Gumaro tea plantations?
Isayas: When the company bought the two plantations, operation stopped on both sites. Before the acquisition, a combined 1,800, hectares of land were cultivated. Excluding farm cost, we invested ETB296 million to restart operations, expand the cultivation efforts, modernize the farm management system, and replace old machinery.
Before 2011, our effort was limited to satisfying the domestic market. Now we’ve become the first Ethiopian company to step into the global tea market. We achieved this by increasing productivity at farm and factory levels. We also started working with big international companies like Unilever, FiLLi, and Global Tea and Commodities. EthioAgri – CEFT also has a membership at the weekly Mombasa auction.
How is the company performing when it comes to penetrating the global tea market?
Our total production in 2014 was 500,000 quintals of tea, which increased to 700,000 quintals in 2017. In 2014, we exported 408,300 kilograms of tea and generated USD700,000. The export value reached USD3.2 million in 2017.
However, for us, this is regarded as a failure instead of achievement because we know what could have been achieved. There is huge potential for tea cultivation in Ethiopia and a growing demand at the international market. The sector can also hire a significant number of people. For instance, close to 8,000 people are employed in our two plantations—half of the 15,000 people EthioAgri–CEFT employs in total.
How did you manage to expand the operations at the plantation into peripheral areas?
After we expanded the tea cultivation at Gumero to cover 1,000 hectares, there was no room to expand further. So we started working with farmers located in the surrounding areas. We arranged a mechanism that allows farmers to cultivate tea on their own land and sell it to the company. This is an important step for the sustainability of our operation, and for the country.
The soil in the farmlands surrounding the two plantations is highly acidic and unsuitable for any crop other than tea. So we supported 385 smallholder farmers around WushWush to cultivate tea on 337 hectares of land. At Gumero, 241 out-growers are cultivating tea on 159 hectares of land. These projects are not only cultivating tea, but also creating job opportunities, as tea farming is labour intensive.
How do you evaluate the acceptance of Ethiopia’s tea in the global market?
In the global market, there are various types of tea. Black, green, and orthodox teas dominate. However, new types like red and white tea are also entering the market. So far, our largest production is black tea. We satisfy 85Pct of the local demand for black tea, in addition to exporting it abroad. Although the company produces green tea, it is used to satisfy the local market only. As for orthodox tea, the company doesn’t produce this variety as of right now.
However, we are installing factories (with ETB26 million) to process green and orthodox teas. We will start exporting green and orthodox tea next year. Demand for green and orthodox teas is rising at the international market and both types have the potential to fetch premium prices.
We have enough tea plant seed varieties, which we have brought from different countries. All of our varieties enjoys international acceptance, which is the major aspect that increases our competitiveness. Our second competitive edge is the high altitude and the ideal temperature, which helps us produce the best quality tea. We also use the latest technology at our processing factories.
As a result, Ethiopia’s tea is gaining acceptance in countries like England, India, Pakistan and China. It is also enjoying good reception at the weekly Mombasa auction. Furthermore, we also have contracts with Unilever to supply 800 tons of tea per year and 300 tons with FiLLi.
What are the challenges of cultivating tea at farm level?
We spent nearly ETB69 million to develop the land currently farmed by out-growers in the surrounding areas. We hired skilled labour for them and deployed our own tractors and supplied fertilizer, seed and technology. It is hard to do all this for them and still buy the product from them. The farmer needs seeds, fertilizer and finance, which nobody is there to provide, except us. So, we are forced to direct our own financial resource towards this endeavour.
This clearly demonstrates the need to have a dedicated public institution that supports such activities from top to bottom. Of course, an authority was established few years ago. But, it doesn’t have branches at the lower level of administration.
What kinds of support do you get from the government?
Technically speaking, in Ethiopia there is no one that has more experience and knowledge in the area than EthioAgri–CEFT.
What are the factors that limit the company’s ability to expand its operation and engage in new endeavours?
The first is access to land. Although we submitted many land request proposals to Oromia and the Southern States to establish our own nucleus farm and then produce tea together with the surrounding farmers, there is limited response. Our plan was to establish processing factories nearby in order to process the harvested tea in a manner that saves time and reduces wastage. We could have seen at least half the successes Kenya has seen if we got a timely response from the government.
Why do you insist on working with farmers in the surrounding area instead of owning your own plantations?
It is not difficult to operate on our own. The main reason why we started working with farmers is because our land requests were not addressed on time. If our proposal got a response the first time we submitted, we would have at this point, had our third large-scale tea farm reach harvesting stage.
The second reason is climate change. Areas that are suitable for tea cultivation at this moment might suddenly be struck by drought and become unsuitable. As a result, we are forced to partner with surrounding farmers.
What are the challenges faced by the company in terms of infrastructure?
Power interruption is a big challenge. Activities like tea drying and fermenting are performed with the help of electricity. We also fire and steam when roasting the tea. But, because of power shortages and interruptions, we use generators most of the time. Cost wise, this has big impact on the company.
6th Year . February 16 – March 15 2018 . No.58