Determinants of second payout differentials of green tea leaves among Kenya tea development agency managed factories in zone 9, Kenya

Abstract

Tea growers in KTDA Zone 9 have been complaining with regards to green leaves payout differential received at the end of every year with majority blaming the factories for under payment. They also receive low payouts, poor extension services, limited market channels, limited credit facilities all of which are blamed on low green leaves payout. Therefore there was need to establish the determinants of second payout differentials of green tea leaves among Kenya Tea Development Agency Managed Factories in Zone 9, Kenya and specifically determine the effect of quality of green tea leaves; production cost; factory certification; and international market forces on green tea leaves payout differential. Research philosophy which guided the study was Positivists. A cross sectional research design was used in this study and was guided by three theories namely; new trade theory, theory of diminishing utility and theory of competitive advantage. The study was carried out in Zone 9 factories located in Bomet County, Kenya and targeted 86 respondents who were 56 factory management staff, 19 directors and 11 zone 9 senior management staff. Census sampling method was used to sample all the 86 respondents. Primary data was collected using a structured and unstructured questionnaire which was the main data collection instrument. The research instrument was pretested using 16 employees of KTDA Zone 8 managed factories and the results was analyzed using Cronbach Alpha where a coefficient of 0.827 was achieved meaning that the instrument was reliable. Content validity of the research instrument was actualized by having marketing expert and the research supervisor scrutinizes the instrument and their comments included in the final data collection instrument. Data was statistically analyzed, with the aid of Statistical Package for Social Sciences software (SPSS) version 23, where descriptive and inferential statistics was generated. Descriptive statistics were expressed inform of frequencies and percentages while inferential statistics were expressed in form of regression coefficient. The determinants for green tea leaves had a joint significant effect on second payout differential as shown by R value of 0.845. The R squared of 0.814 shows that the independent variables accounted for 81.4% of the variance on second payout while 18.6% are explained by other variables outside the study. There was a strong positive relationship between quality of green tea leaves and second payout since it had a Pearson Correlation of (r=0.540, p = 0.001), cost of production had a positive relationship (r =0.415, p = 0.001), factory certification had a positive relationship with second payout (r=0.328, P < 0.001); while international market forces had a positive (r=0.329, P < 0.002). The study recommends that green tea leaves delivered to KTDA Zone 9 should be of deep, dark green color with a glossy damp appearance; the tea need to be grown in the recommended soil areas and processed by Fair Trade Certified Factories. The made tea need to taste good; be of good flavor as well as tea leave being of bright leaves with equally sizes and of needle-like shaped. There is need for the KTDA managed factories to explore on other alternative sources of power for instance hydro power which is relatively cheaper. There is need also to procure their firewood land to reduce on the high rising cost of firewood fuel. Outsource transport services which are usually costly to the factories to maintain will go a long way in ensuring that KTDA managed factories reduce on tea production cost hence increase of payout to farmers.