Kenya eyes Sh112bn in tea exports

PHOTO | JARED NYATAYA Kenyan tea exports are projected to earn the country Sh112 billion.

What you need to know:

  • According to the East African Tea Traders Association (EATTA), which manages the Mombasa Tea Auction — the largest black tea auction in the world — earnings are set to go up by at least Sh2 billion or Sh3 billion albeit on lower export volumes
  • There is a need for the country to diversify its export markets away from the traditional European countries by targeting Eastern Europe (Turkey), those in the Middle East — Kazakhstan, Uzbekistan, Syria, Iran, and Asian countries including China if it is to step up the earnings
  • This year, the country is projected to export 370 million kilogrammes, down from 377 million kilogrammes last year. In 2010, Kenya shipped 399 million kilogrammes

Kenya is set to earn Sh3 billion more in tea exports this year. This is a 2.8 percentage increase from the Sh109 billion the country earned from the sale of the crop abroad last year.

According to the East African Tea Traders Association (EATTA), which manages the Mombasa Tea Auction — the largest black tea auction in the world — earnings are set to go up by at least Sh2 billion or Sh3 billion albeit on lower export volumes.

“Earnings for every year have been better than previous ones. The income this year may be better by probably more than Sh2 billion or Sh3 billion from last year,” EATTA chairman Peter Kimanga told Smart Company.

He, however, said eurozone debt woes has not affected tea exports to the EU, because tea is much cheaper than other beverages.

“We haven’t felt the impact yet because tea is among the cheapest you can get. So, we haven’t felt any effect of the crisis,” Mr Kimanga said in the interview.

There is a need for the country to diversify its export markets away from the traditional European countries by targeting Eastern Europe (Turkey), those in the Middle East — Kazakhstan, Uzbekistan, Syria, Iran, and Asian countries including China if it is to step up the earnings.

Some of these countries have a high demand for tea but do not have a vibrant value-added sector as they import packed tea from countries like Sri Lanka.

“We are trying to do the same here. We are trying to pack tea for those markets. The issue is that if you pack tea in Kenya for export, you have to first pay VAT and claim it back after exporting, which can take four years to receive,” said Mr Kimanga.

This year, the country is projected to export 370 million kilogrammes, down from 377 million kilogrammes last year. In 2010, Kenya shipped 399 million kilogrammes.

The drought experienced last year is to blame for the drop in export volumes. Frost which hit tea farms this year is also expected to cut export volumes. The setting up of more factories in the tea producing areas has helped to mitigate the waste of green leaf.

In the first six months of this year, tea production dropped to 158 million kilogrammes compared to 178 million kilogrammes produced last year, according to the Tea Board of Kenya.

“This was due to adverse weather conditions experienced during the first four months of the year. Owing to lower production to-date, tea output for this year is expected to reach 360 million kilogrammes compared to 377 million kilogrammes recorded in 2011,” the board said in a statement.

Tea is Kenya’s leading foreign exchange earner.

A lobby group now wants the government to review the tax on the cash crop to safeguard the gains made in the tea sector. The group is demanding a review of the ad valorem levy, which the government introduced in January this year.

The new rule slapped a 1 per cent levy on the value of each kilogramme of tea exported, up from 46 cents. The lobby wants the levy to be reduced to 0.25 per cent.

At the moment, farmers pay the government an additional Sh800 million from the former Sh200 million, which could discourage them from producing more tea.