Tea traders anticipate direct EU exports after Brexit

The world continued to react to the shock decision by British voters to exit the European Union amid questions over the impact it might have on the global economy.

Analysts say the effect of the unprecedented vote might be felt in many countries in the world and there are fears the decision could see a drop in volumes of tea that the UK imports from Kenya, due to anticipated decline of its re-export market to other nations.

The UK is a major re-exporter of tea and in 2014 it exported 17 per cent of the beverage it imported, with countries such as the Republic of Ireland, Germany, Poland and France being its major markets.

Experts expect the possible tightening of access to the EU market for Britain’s goods to hit its blended tea exports to these countries as they are now out of the common market, a move that could see UK cut down on volumes that they import from Kenya.

However, all this depends on whether Britain can negotiate an agreement that is not too restrictive in its new relationship with the EU.

East African Tea Traders Association Managing Director Edward Mudibo is optimistic, however, that the decline of re-export market by Britain to other countries could create a window of direct sales of Kenyan tea to the states where UK has been exporting.

“It is anticipated that with the hardening of trading terms between the United Kingdom and the European Union member states, we may see an increase in demand of tea from other countries that have been buying directly from Britain,” said Mr Mudibo.

“If the UK market of Kenyan tea declines there is an opportunity for the re-export markets to start buying directly from Kenya,” he added.

The UK voted to leave the EU after 40 years in the common market. 

Figures from the tea directorate indicate that exports to the United Kingdom, Egypt and Afghanistan grew substantially last year while the quantities purchased by Pakistan, which is the country’s leading buyer of black tea grew marginally.

The quantity of tea exported to the UK last year grew significantly by 17 per cent to 14.4 million kilogrammes from 12.3 million kilogrammes the previous year, consolidating the UK’s position as one of the major buyers of Kenyan tea.

WEAKENING TIES
Exports of tea to the UK are valued at $180 million annually and analysts have warned that Brexit could weaken trade ties between Britain and East African countries.

The value of Kenyan tea per kilogramme in the period under review also improved from an average of Sh219 to Sh277.

Kenya’s tea exports to Pakistan - the country’s leading market – registered a marginal growth with the volume of the export growing by meagre 0.6 per cent to 30.2 million kilogrammes from 30 million kilogrammes in the first quarter of last year.

During the 2014/15 financial year, exports to Pakistan grew by 10 per cent, accounting for more than a quarter of the total commodity that traded at the Mombasa auction.

Kenya is the world’s leading exporter of black tea, a crop that offers a livelihood to thousands of small-scale growers.

The country is trying to open up new markets such as China. 

Tea Directorate officials are currently in Russia for talks on how to boost export after sales to the country dropped by 10 per cent last year.

Russia is a major buyer of Kenyan tea but last year the volumes dropped to 25 million kilogrammes from 28 million kilos in 2014.

The official noted that the current low prices at the auction is as a result of the dependency on a few traditional markets that buy almost the same volumes annually.

Analysts have stated that the Brexit would weaken trade ties between the UK and African nations according to Brookings Institution.

“The renegotiation of trade agreements can be a lengthy process, which could cause a decrease in trade volumes between the UK and Africa. Indeed, a Brexit would prompt the United Kingdom to renegotiate over 100 trade agreements.”

Brookings adds that “Perhaps the biggest impact of the Brexit on Africa would be the end of British “outwardness”— the country’s concern with and responsiveness to global development issues.