South Africa's tea industry challenges and business strategies : a case study of Ntingwe Tea Estate.

Abstract

The South African tea producing industry has been in decline since 2000 due to a host of industry factors such as significant increases in production costs occasioned by a regulated labour market, unfavourable international tea prices, removal of tariffs and increased competition from African tea producing countries. This culminated in closure of most of the tea estates leaving a few estates in precarious financial positions and operating on a stringent budget, funded mainly through government grants. The study focuses on issues affecting Ntingwe Tea Estate specifically and the tea industry in South Africa in general, in an attempt to find solutions to the challenges and to establish sustainable business strategies for the industry. Further, the study seeks to assist the tea industry stakeholders to gain knowledge and insight about the challenges experienced locally and globally and to understand the business strategies that have been pursued successfully in other tea growing countries and explore those that will steer the local tea industry into sustainability. The study also highlights policy initiatives which if implemented will assist in steering the industry into sustainability. A combination of qualitative and quantitative analysis was used in order to identify the specific challenges affecting South Africa’s tea industry. Forty participants purposively chosen for their knowledge, experience and information about the tea industry in general and with Ntingwe Tea Estate in particular made up the sample. Qualitative data was collected using an open-ended questionnaire, yielding a response rate of 50%. High production costs labour, low skills and labour productivity levels, lack of technical support, removal of tariffs, competition from low cost producing countries, exchange rate fluctuations and pending land claims were identified as key challenges of the tea industry in South Africa. The re-imposition of tariffs, changes in minimum wage determination, preferential procurement, development of the small-holder sector and government support in development of a national brand and a buy local tea campaign were identified as the policy initiatives to steer the tea industry. Business strategies to be considered for implementation by Ntingwe Tea Estate included focus on production of specialty quality tea, development of a unique originality brand, development of a small-scale sector, introduction of cost saving technology and creating partnerships with established tea producing companies and an emphasis on ethical production and organic certified teas.