Kenya’s tea industries where players in Kenya’s top export earner are predicting tougher times ahead for the industry.
The East African Tea Traders Association (EATTA) has said the recent imposition of economic sanctions on Iran, which is among the emerging markets for Kenyan tea, is threatening to slow down the industry’s growth prospects even further.
Tea is Kenya’s biggest export revenue earner, having raked in 140 billion shillings in 2018 representing an 8% increase in earnings over the previous year.
But 2019 looks set to be one of the lowest years for Kenya’s tea industry.
Global tea prices have been on a steady decline over the last two years, with average tea prices at the Mombasa tea auction dipping to a low of 1 US dollar and 76 cents per kilogram in July.
Although tea prices have since gone up to 2 us dollars and 5 cents, overproduction of tea remains a major risk to tea earnings. Global tea production in 2018 was estimated at 5.85 billion kilos up from 5.81 billion kilos in 2017 but global consumption of tea in 2018 was at 5.61 billion kilos, creating a surplus of 241 million kilos.
Adding to Kenya’s worries is the weakened performance of the economies of a number of tea importing countries such as the United Arab emirates that are heavily dependent on oil and gas whose prices have been persistently low.
Currency devaluations in a number of importing countries such as Pakistan, which is Kenya’s biggest tea buyer, have also slowed down purchase of Kenya’s tea exports.
The recent move by the United States to slap additional economic sanctions on Iran, which is an emerging market for Kenyan tea, is now threatening to slow things down even further for Kenya’s Tea Exports.
The unfolding crisis over Britain’s exit from the European union is also creating fresh uncertainty for Kenya’s Tea Exports. This coupled with increased production costs means tea farmers should expect lower earnings this year.
In order to arrest the situation, stakeholders in the tea industry are now proposing to diversify into premium value-added and specialty teas in order to stabilize earnings.
Tea industry players also plan to roll out more campaigns to encourage more tea consumption in the local market, which currently stands at a per capita level of only 500 grammes.