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Oct 15, 2019

Industry Steps in to Help Malawi Tea Estate Innovate for the Future

The Satemwa Estate in the Shire Highlights of Malawi stands at a crossroads. As a family run estate, the orderly rows of green tea bushes with Mount Mulanje standing proud in the distance have changed little since the Kay family founded the estate in 1923.

However, the serene scene masks a period of flux for this third-generation estate and the wider tea industry in Malawi. The industry is facing multiple challenges with potentially significant impacts on those who depend on the estate for their livelihoods.

The impacts of climate change on the tea harvest are beginning to reveal themselves and deforestation places enormous pressure on the crop. Satemwa recorded their first ever winter rains failure in 2012, followed by further failures in 2015 and 2017. The investments made in more resilient tea bushes today only pay back in 2030 so it is imperative to be agile and innovate to ensure survival. For Satemwa, that means diversification.

Satemwa Managing Director Alexander Kay explains: “To survive, we have to diversify into tourism and higher value products. There is no further land we can acquire so the opportunities now are for vertical growth – high value products, irrigation, new plants. Tourism is good for business as it allows us to sell packaged products directly including speciality teas and green tea.”

Satemwa Estate (Photo credit: Andy Hall, Ethical Tea Partnership)

Green tea presented an interesting opportunity for Satemwa. Historically, Malawi estates only produce black tea, but demand has been slowing. Green tea by contrast is growth market but European tea companies can struggle to meet the demand from Southeast Asian countries alone because pesticide usage is typically high. They need a supplier that is almost pesticide free to meet the European and North American market standards. As Malawi enjoys a drier climate, pesticide use is lower, making it an attractive new prospective source.

But innovation means investment and risk. Fortunately for Satemwa help was at hand through the Malawi Tea 2020 programme, a multi-stakeholder partnership which aims to improve the competitiveness and sustainability of the Malawian industry. The Ethical Tea Partnership (ETP), one of the driving forces behind the programme, brought together two of its members, German tea company OTG and tea specialists Van Rees to assist Satemwa and the opportunity presented.

Stefan Feldbusch is Head of Buying at OTG: “We were looking for a supplier of green tea to replace some of what we buy from China. Satemwa was Certified and was already a reliable partner in black tea – and like us, it is also a family business so a connection was there too”.

While black tea and green tea are derived from the same tea bush, diversifying into green tea carries risk as significant investment in new machinery is necessary. It was important therefore that OTG was able to provide a stable contract to Satemwa for the ongoing supply of green tea.

“We confirmed that we were able to pay more for green than black tea“ says Stefan Feldbusch. “We also committed ourselves to a one-year contract and higher prices so there is security for Satemwa. This money can be invested in the machinery needed to produce green tea.”

Paying a fair price for tea is part of OTG’s commitment to Malawi Tea 2020. It was here that OTG teamed up with fellow Malawi Tea 2020 partner, Dutch trading house Van Rees, to negotiate the contract with Satemwa.

Jan Bas van Veelen is General Manager, Malawi for Van Rees. He explains why a tripartite agreement between the producer, the buyer and the tea company is necessary to ensure a reliable supply chain.  

“Green tea commands a higher price, particularly from countries like Malawi where pesticide usage is low. Speciality tea is risky for estates as people don’t buy it by the container load, so this kind of risk-sharing makes the production of green tea possible.”

OTG’s early support of Satemwa’s entry into green tea was vital, as Alexander explains.

“It took a while to learn how to produce green tea. If there hadn’t been demand for it from OTG, we wouldn’t have had the confidence to do it. We sent the first batch to Van Rees. They backed us and we were given a contract which de-risked the venture.”

The result is a mild, non-astringent green tea that now constitutes up to 10% of Satemwa’s volume per year. It is more costly to produce than black tea as it uses more energy – a scarce resource in Malawi – but it receives a premium.

The Kay family is supporting 1,700 permanent workers on the Satemwa Estate in an area of chronic unemployment. Alexander Kay is looking forward to new methods and initiatives that can sustain the whole estate.

“The biggest impact we can have is to be a responsible employer and put money in people’s bank accounts. We need to be responsible fair payers. The thing I’m most proud of is we are still standing. We have stood the test of time.”

Author Sarah Roberts is the Executive Director of the Ethical Tea Partnershp.

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