Ethiopia plan to boost tea output causes jitters

A spirited drive by Ethiopia to boost its tea output is causing jitters in the local industry as competition for both regional and international markets intensifies.

Though its production capacity is smaller compared to Kenya, its leaf quality is causing concerns that the country could soon launch a formidable challenge to Kenya’s tea exports, including in the blending segment.

“Many countries in the region are looking up to expanding their tea industries, but our immediate attention would be on Ethiopia because we share almost similar types of soil and climate and the quality of their tea is largely similar with ours,” Tea Board of Kenya (TBK) managing director, Sicily Kariuki told Business Daily.

Statistics showed that Ethiopia currently produces about seven million kilogrammes of tea from three privately run estates even though its Agriculture and Rural Development ministry projects this could swell substantively in the coming years now that it had identified some 50,000 hectares of land suitable for production of the beverage.

While Ethiopia has emerged a success story in coffee business, its tea industry has over the decades faltered largely due to lack of investment and the lengthy periods of time that lapsed before such investors could recoup their money.

The initial investment in tea is huge and most investors get discouraged by the fact that it takes a minimum three years for the bushes to mature before any harvests could be done and leaf sold to realise any returns.

Lacklustre government support has over the years also compounded matters for the Ethiopian tea industry with cautious potential investors keeping at bay.

This kind of apathy against tea in Ethiopia is, however, finally changing with more private investors showing increased interest in taking on the business.

For instance in April last year an Ethiopian firm signed a $300 million joint venture deal with a Dubai-based firm to develop a 5,000 hectare tea plantation in Illubabor area.

According to the pact East Africa Agri-business and Dubai World Trading Company planned to produce close to 423,000kg of black tea by 2012.

Mrs Kariuki, however, remained optimistic that the Kenya tea industry would live up to the expected increased competition on factors of quality.

“We are very strong on quality and it gives us an edge in the market,” she said.

The Food and Agriculture Organisation (FAO) in December predicted that the global tea market would witness some shake-up in terms of supply and demand as producing countries rush in to expand areas under the crop in a bid to cash-in on the record high prices witnessed over 2009.

The indicative world price for black tea reached a high of $3.18 a kg in September 2009, compared to an average price of $2.38 per kg in 2008.

TBK said it anticipates prices of the commodity at the weekly Mombasa auction to remain firm in the short term despite the return of heavy rains in some of the growing areas, especially west of the Rift Valley.