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March 31, 2010

Severe winter in the West boosts Kenya tea exports

by Allan Odhiambo


An upsurge in purchases by consumers in Europe, north America and the middle East seeking to build up their beverage stocks during the winter period helped to grow Kenya’s tea exports over January.


Statistics recently released by the industry regulator indicated export volumes in January increased 12 per cent to 39.2 million kilogrammes compared to the same month the previous year.


“There was also significant growth in Kenya tea exports to most market destinations in Europe, North America, and Middle East due to increased demand occasioned by higher consumption during the winter season,” Tea Board of Kenya (TBK) managing director, Sicily Kariuki said in a statement.


The western world experienced a severe winter which triggered massive disruptions of transport systems in several countries and even caused damage to key infrastructure facilities.


The adverse weather conditions have tended to work in favour of beverage commodity producing nations such as Kenya with consumers in the countries affected by winter preferring to take tea and coffee to keep warm.


Exports to the UK increased 28 per cent to reach seven million kilogrammes, Afghanistan 64.7 per cent (six million kilogrammes), UAE 124 per cent (1.7 million kilogrammes), Canada 200 per cent (338, 860 kilogrammes) and the US 14 per cent 346, 481 (kilogrammes).


The winter-triggered demand could prove a further boon for local farmers given the global market is experiencing shortages of the commodity, which has in part led to high tea prices that stood at an average of $2.99 a kilogramme in January compared to $2.31 in January 2009.


Tea production grew 47 per cent to 37.7 million kilogrammes compared to the same period last year, thanks to favourable rains.


The weatherman expects the country to receive above normal rainfall between March and May, which means that Tea production is set to maintain an upward movement.

The optimism over production together with high tea prices should guarantee farmers tidy earnings and the country increased flow of foreign exchange.


The top five export destinations including Egypt, which accounted for about 20 per cent of the export volumes, UK, Pakistan, Afghanistan and Sudan (1.9 million kilogramme) accounted for 74 per cent of Kenya tea export volume.


Among the five export destinations, Afghanistan recorded the highest growth at 64 per cent compared to the same period of 2009, adding to Kenya’s dilemma in the wake of protests from once leading buyer of Kenyan tea--Pakistan.


Pakistan claims that the sudden upsurge in imports by Afghanistan is fuelling smuggling of tea into her market.


The Pakistani Tea Association recently said that close to 70 million kilogrammes of the commodity was illegally smuggled into the country every month through the Afghan Transit Trade Agreement (ATTA) that offers concessionary trade terms.


The ATTA was initiated in 1965 as part of a deal by Pakistan to help its landlocked neighbour open up to international trade.


Tea was however only added to the list of products covered under the programme in 2004, effectively opening up avenues for smugglers.


The Pakistani’s have even demanded that tea sales to Afghan buyers be vetted, a position Kenya has ruled out citing the free market economy. Kenya instead looks up to stepping up lobbying for a review of the import duty charged on tea by Pakistan to help curb the vice.


“There is very little we can do in terms of regulating what volume goes into Afghanistan because its an open market system and everyone has a right to buy from anyone but we have resolved to continue lobbying Pakistan to lower the import duty on tea that enters its market,” Mrs Kariuki said in a previous interview.


Pakistan currently charges 10 per cent import duty, alongside a 15 per cent sales tax and an additional 10 per cent value-added tax and another two per cent income tax on imported tea.

Smugglers charge between 15-20 per cent overall duty on their consignments.


“Such improved sales are good for us but we are concerned about the possible side effects in the long term. Such smuggling comes alongside adulteration of the original product that could see us lose customers after a while because nobody would want compromised quality,” Mrs Kariuki said.


Meanwhile local consumption of tea in January dropped 5 per cent compared to a similar period last year, owing to lower consumer purchasing power.


“The drop in local tea consumption was due to reduced buying by the consumers following their purchasing power erosion after the December 2009 festive season and less promotion activities by the stakeholders,” TBK said.


Business Daily Africa

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