The Mombasa Tea Auction is currently facing a significant crisis, with over 119 million kilos of unsold tea, which represents an unprecedented volume for the auction, the second-largest black tea market globally. This situation has emerged due to a combination of low-quality teas and alleged mismanagement within the tea industry. The auction’s stock levels have reached alarming heights, far exceeding the 40 million-kilo minimum stock necessary to maintain a stable international tea market.
The high volume of unsold tea has been attributed primarily to the carryover from previous years, leading to a stockpile that is three times the international requirements. This situation is unprecedented in the history of the Mombasa auction, which has never seen such large quantities of tea being rolled over. Traders and government officials have pointed fingers at mismanagement within the tea sector, highlighting the impact of cartels on the industry’s operations.
Kenya’s Deputy President has recently voiced concerns regarding the Kenya Tea Development Agency (KTDA), which manages more than 90 percent of the country’s traded tea. The Deputy President accused the KTDA management of misappropriating farmers’ funds and failing to provide adequate output for the significant investments made by the government to support tea farming. He stated that audits have revealed inefficiencies in ensuring that farmers receive fair prices and dividends, despite substantial government subsidies aimed at lowering farm input costs.
The Deputy President’s criticisms extend to the agency’s expenditure practices, particularly a considerable amount spent on foreign travels. He pointed out that the KTDA has allocated over $4,000 for travel expenses alone from January to June of this year, calling for scrutiny over how the agency manages its expenditures. The emphasis on checking expenditure management is a call to ensure that funds allocated for farmers’ welfare are utilized effectively.
In addition to management issues, the low quality of tea produced has exacerbated the problem of unsold stock. High production levels of low-quality tea have led to significant rejections at the auction. Last year alone, buyers at the Mombasa auction turned down more than 100 million kilos of tea due to prices perceived as too high relative to the quality of the product. This has had a detrimental impact on farmers’ earnings, as they are unable to sell their produce at favorable prices.
In response to the market challenges, Kenya suspended its minimum reserve price of $2.4 per kilo of tea. This suspension allowed traders to purchase tea for less than $2 per kilo, significantly diminishing the market value of Kenyan tea. Consequently, Kenyan tea has struggled to maintain its competitive edge in the global market, especially against Rwandan tea, which has seen a remarkable increase in value.
Market data indicates that Rwandan tea fetched an impressive $4.02 per kilo during the September sale, significantly outperforming Kenyan tea, which sold for only $2.21. Other regional competitors include Burundi, which recorded a price of $2.24, Uganda at $1.27, and Tanzania at $1.15 per kilo. The upward trend in the value of Rwandan tea can be attributed to increased demand, further solidifying its position in the international market.
The disparities in pricing among these countries highlight the challenges facing the Kenyan tea sector. While Rwandan tea producers have focused on improving the quality of their product, leading to increased demand and higher prices, Kenyan tea has been unable to keep pace. This has resulted in significant losses for Kenya, estimated at around $2 million weekly due to the ongoing crisis in the tea sector.
By the end of the financial year 2018/2019, Rwandan tea producers had exported a total of 30.573 metric tonnes from an area of 27,112 hectares, generating an impressive revenue of $83,552,108. The country has set ambitious targets to increase its export volume to 65,099 metric tonnes by the end of this year, aiming for a total revenue of $209 million.
The East African Tea Traders Association (EATTA) plays a crucial role in the marketing of regional teas, facilitating trade through the Mombasa auction. The association previously managed to trade teas from at least 12 African countries. However, the number of participating states has dwindled to five due to logistical challenges that have cut supplies from countries such as Zambia, Malawi, Madagascar, Zimbabwe, and the Democratic Republic of Congo.
In June of this year, Kenya presented the largest volumes of tea at the auction, offering 232,574 packages. In contrast, Rwanda, known for its superior quality teas, provided 13,200 packages. Uganda offered 26,080 packages, while Burundi contributed 3,160 packages. Tanzania, in comparison, had the lowest volume with only 1,640 packages.
This crisis at the Mombasa Tea Auction not only highlights the immediate challenges facing the Kenyan tea industry but also raises broader questions about the sustainability and management practices within the sector. The combination of low-quality production, management issues, and market misalignment poses significant threats to the livelihoods of farmers and the overall economic stability of the tea sector in Kenya.
Farmers in Kenya, who rely heavily on tea as a cash crop, are feeling the impact of the ongoing crisis. The inability to sell their produce at fair prices not only affects their income but also their investment in the cultivation and production of tea. As the market continues to struggle with unsold stocks, there is a pressing need for strategic interventions to revitalize the tea sector.
Addressing the challenges faced by the Mombasa Tea Auction requires a multifaceted approach. Efforts must be made to improve the quality of tea production, ensuring that farmers are equipped with the necessary resources and knowledge to enhance their yield and product quality. Additionally, there is a need for greater transparency and accountability within the management of tea trading agencies to restore trust among farmers and stakeholders in the industry.
Furthermore, initiatives aimed at increasing market access and demand for Kenyan tea in both domestic and international markets could provide much-needed relief. This could involve promoting the unique qualities of Kenyan tea and exploring new markets to diversify the buyer base.
Ultimately, the Mombasa Tea Auction and the broader Kenyan tea industry must confront these challenges head-on to secure the future of tea production in the country. The potential for growth and recovery exists, but it will require concerted efforts from all stakeholders involved to create a more sustainable and profitable tea sector.
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