Business feature By Leo Odera Omolo
Tea is increasingly becoming an important cash crop in East Africa fetching millions of shillings in the much scarce foreign exchange for the region’s economies.
Kenya and Uganda are the largest producer of made tea in the region, while Tanzania and Malawi follows.
The experts and key players, however’ have of late been sending out disturbing signals that tea industry in Kenya might collapse following revelation that the country has been buying tea from India in order to meet its export obligations.
A drastic fall in production occasioned by post-election violence, poor rainfall and poor payment for farmers has forced the country to turn to India for the crop to meet its export obligations to key markets in Egypt, Britain and Pakistan
Players within the critical sector say the significant increase in prices at the Mombasa weekly tea auction due to falling production has forced some exporters to buy from India where prices are relatively low.
“While production has declined, exporters have worsened the situation by buying tea from India instead of the Mombasa auction ,”said an industry player. The assertion was corroborated by a Kenya Tea Board (KTB) official who requested for his anonymity
In the neighboring Uganda tea exports are projected to drop by 30 per cent this year compared with the previous year due to bad weather an official has revealed.
The acting Executive Director of the Uganda Tea Association (UTA) George William Ssekitoleko was recently quoted as saying that going by export figures so far received up to the end of September, this year’s performance will be lower than that of the previous year.
By September 30, 2008 he said a total of 28, 181 tones of tea were exported compared with 28,898 tones during the same period of 2007.
He said his association has produced a total output for 2008 of 46,000 tones but will not be attained due to dropout in most tea growing regions of the country.
In 2007, a total of 44,912 tones of tea was produced out of which 43,636 tones was exported.
Uganda ’s tea export shot up from 30,400 tones in 2002 to 36,669 tones in 2004. they dropped in 2005 to 36,534 tones and rose slightly to 30,584 tones before jumping to 43,636 tones in 2007.
In the 1980’s tea was the third highest foreign exchange earner after coffee and cotton. It has since been overtaken by non traditional exports such as maize, fish and fish products.
Tea export by value rose from USD 31.2 million in 2002 to USD 38.3 million in 2003. this figure dropped to USD 37.2 million and in 2004 USD 34.2 million in 2005 before shooting up to USD 50.8 million in 2006.
The Uganda Tea Association has 13 active member factories that export their tea through Mombasa Tea Auction.
However there are five tea factories which are not members of UTA because their tea is not of exportable quality. The tea produced by these factories is sold locally and other quantities sold in other neighboring countries within the region.
About 5% of Uganda’s export tea is sold under the fair trade system where small scale farmers are paid a premium price by countries abroad.
Some members of the UTA are also planning to venture into organic tea production. Such tea fetches an extra 30% in price . however the higher price is offset by low yields as a result of not using artificial fertilizers.
Mr. Esekitoleko said the processed tea at the Mombasa tea auction was an average USD. 2.10 per kg as at Sept 30,2008 the average during the same period the previous
In 2007, the average price of tea was USD. 1.36 per kg
The official said Ugandan tea export continued to register good quality at the Mombasa tea auction . however Kenya tea still fetches 5 to 10 per cent more in price because of the superior facility.
Uganda’s three biggest tea exporters include James Finlay, formerly Ruwenzori Highlands, Ruwenzori commodities of Mukwano group of Companies and Toro and Mtyang Tea Company.
Currently tea is grown on 24,000 hectares around the country, but there is potential for expanding this to 200,000 in areas where the weather is conducive to tea production. However the area has failed to attract more investors and UTA is calling on investors to come with funds and invest in tea production individually or as a joint venture.
The investment is initially big since in addition to the tea plantation, there must be a factory to process the tea, said a stake holder.
Meanwhile small scaletea growers in Uganda have secured on UDS 8 million interest, tree loan from the Danish International Development Agency (DANIDA) to purchase tee processing machines.
The machines are expected to boost the sectors processing capacity. Small scale farmers have recently scaled up harvest volumes, but most of this is going to waste due to limited processing capacity.
THE Uganda government for its part is to invest USHS2.8 billion (USD 1.5 million) to to build a two line processing plant. Tea processing plants. It will also finance the construction of a third line at Igara. &n bsp; .
Tea farmers in Bugenyi district to increase capacity to 55,000kg of green leaf on a day to 25,000kg. the of green leaf a day to 75,000kg. The surge in production is a result of an earlier government intonation to revamp the collapsed industry. It has also trained farmers and suppliers with free high yielding tea clones developed in Kericho – Kenya.
Currently however the farmers are paying for the seedlings while the government pays Ush. 11 million (USD 6,000) in royalties for low variety to be supplied in Kericho – Kenya
The small scale tea sector in Uganda produces about eight million kilos of made tea representing about 20 per cent of the company’s total made TEA production.
World tea production have stayed around 2.6 billion kg for the past four years of which 11% comes from Kenya, Tanzania, Uganda and Malawi. India is the world’s largest tea producer.
ENDS
Leooderaomolo@yahoo.com
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Date: Tue, 6 Jan 2009 06:55:24 -0800 [08:55:24 AM CST]
From: Leo Odera Omolo
Subject: KENYA’S TEA SECTOR FACES COLLAPSE FOLLOWING CLAIM ITS BUYING FROM INDIA AS UGANDA’S EXPORTS HIT BY BAD WEATHER