A bitter cup of tea for DP Gachagua conference

Kenya’s tea sector is facing multiple headwinds. A decline in prices, constrained export markets and local political clashes are threatening the country’s leading export. This comes ahead of the much publicized tea conference set to be graced by Deputy President Rigathi Gachagua.

A new report by the Tea Board of Kenya (TBK) shows that the average monthly auction price for tea at the Mombasa auction stood at $2.39 (Kes334.6) per kg in April. This was lower than the $2.53 (Kes354.2) for the same period of 2022. Prices in January and February averaged $2.32 (Kes324.8) per kilo.

In April, sales at the tea auction also dropped to 26.93 million kilogrammes. The dip was lower than the 36.07 million kilos recorded in comparable month in 2022.

The sector is weighing heavily from the slump in demand. This is sparking additional costs of storing large volumes of the product amid depressed sales.

Kenya Tea Development Agency (KTDA) said it had to rent extra warehouse space after sales slumped. Tea shipments fell by a fifth over the last year.

And it is not just the price and quantities of tea sold that has dropped, the tea sector has taken multiple hits from local political unrest, squeeze in dollars at export destinations like Pakistan as well as armed conflict in key markets of Russia and Sudan.

Read also: Stars are aligning for Kenya tea farmers

Unlock dollar challenges

While customers usually pay up front and in dollars, KTDA has had to resort to letters of credit. This is one of the strategies with buyers from Pakistan in a bid to unlock the dollar challenges.

Challenges in the sector have been compounded by increased poaching and invasion of brokers. Together, these have escalated green leaf theft in tea growing areas. According to the tea agency, brokers offering famers a quick Kes25 at farm gate. Consequently the farmers are diverting tea from factories where they would earn Kes50.

KTDA said they have noticed a proliferation of unregulated and unregistered small-scale factories. The agency is blaming them for illegal hawking of tea leaves in various parts of Mt Kenya region.

Kirinyaga small-scale tea directors have put on notice all illegal tea hawkers who are buying the produce from their members. The directors say the practice will encourage theft of green leaf in the area.

DP Gachagua will host a sector forum whose focus seems to setting up a rival tea auction in Kericho. It will also focus on setting a minimum price in the market, besides tackling fertiliser subsidy issues. An increase in monthly payments to farmers, and payment of bonuses in July as opposed to October will also feature agenda. Stakeholders will also discuss reduction of interest rates for affordable loans.

The two-day conference in Kericho county tomorrow will provide the way forward for the proposed tea reforms.

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