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Kenyan tea shunned at Mombasa auction

BUSINESS
By Benard Sanga | October 22nd 2013

By Benard Sanga

Kenya: The future of Kenyan tea sector looks bleak following a move by Asian buyers to give the local commodity a wide berth at the Mombasa Tea Auction.

Importers from Asia now say Kenya’s tea is expensive compared to teas from other East African countries owing to a new levy introduced last year.

According to traders at the auction, buyers from Pakistan recently directed their suppliers at the auction to buy tea from Rwanda and Burundi which they claim is cheaper.

 “We have reports that traders at the auction have been directed by one of the main Kenyan tea buyers in Pakistan to actually stop buying our tea. The trader has told them to buy other teas offered at the auction with similar qualities from other countries,” said East Africa Tea Trade Association Marketing Manager Brian Ngwiri. The entity runs the auction in Mombasa.

Last year, the Government introduced a one per cent Ad Valorem levy on the total custom value of the tea at the point of sale leading to an increase of the price of Kenyan tea.

Before the new charge that was gazetted in January came into effect, tea farmers paid a levy of 46 cent per kilo of tea sold at auction.

But Tea Board of Kenya (TBK) has in the past defended the move, saying it expects to generate up to Sh1 billion annually from the sector due to the levy up from between Sh300 million and Sh400 million it was collecting in the past.

The body also says part of the levy would go to market development programmes and value addition as well as research and development of infrastructure in the industry.

The tea industry last year generated Sh109 billion in foreign exchange earnings.

278 million kgs

Recent statistics from TBK indicate that Kenya’s tea output between January and August stood at 278 million kilogrammes up from 214.4 million kilogrammes in 2012 due to good weather.

The glut has suppressed prices at the auction, with the commodity trading at $2.67 a kilo compared to $3.17 it sold last year. Rwandan tea is currently selling at $2.59 compared to the same period last years when it traded at $2.84. Efficiency at the port and negative market sentiments from buyers of Kenya tea at the Mombasa auction has led to the latter’s price stability.

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