An auction at the Tea Trade Centre in Mombasa. Exporters have not shipped the commodity this week due a scanner breakdown. PHOTO | FILE
What you need to know:
The scanner at the Port of Mombasa has broken down and the dealers have been denied export clearance.
Kenya has been unable to export tea worth Sh2 billion this week following a breakdown of a scanner that checks for contraband items, leaving buyers at a crossroads.
Tea scanning started last week after a consignment of the commodity was intercepted in Thailand a fortnight ago and found to contain ivory tusks.
Now the scanner at the Port of Mombasa has broken down and the dealers have been denied export clearance. Buyers are worried that the market might collapse next week as increased volumes are expected at the auction resulting from rains that have boosted production.
“There is a crisis right now in the tea industry as buyers are stuck with millions of kilogrammes of tea that is due for export since the scanner broke,” said Peter Kimanga, a director with Global Tea and Commodities.
Tea dealers export more than eight million kilos of tea weekly, mainly to Egypt, Pakistan and to the United Kingdom. This is worth Sh2.2 billion based on the current price of Sh275.5 per kilogramme.
Rwanda, Uganda, Burundi, Malawi, Mozambique, Democratic Republic of Congo, Tanzania and Madagascar also use the auction to sell their tea. These countries are currently contributing 25 per cent of the entire beverage.
Initially, tea was exempted from scanning because of the huge volumes that are exported daily. Fifty containers of the commodity pass through the port daily.
Kenya is the leading tea exporter in the world, selling 95 per cent of the commodity to the outside world, with only five per cent consumed locally.
Mr Kimanga says without urgent intervention, buyers will default in paying for what they have purchased because of the held stocks. He urged the government to suspend the mandatory checks to enable the tea that is due for export to be shipped and allow activities resume at the auction.
The delays are likely to create a glut, hurting the good price that farmers are enjoying.
The price of tea at the weekly Mombasa auction is nearly crossing the $3 dollar (Sh285) mark to register a new high in the past two years. Last week, a kilogramme of made tea fetched $2.92 which was an improvement from $2.78.
The rising prices have been supported by the drop in volumes of made tea following severe weather that cut production of the green leaf. According to the Kenya Tea Development Agency (KTDA) volumes of made-tea dropped by 28 per cent in February compared to a similar period last year.
The drought that started last year in December saw the volumes of made tea drop to 24.2 million kilogrammes from 33.7 million kilogrammes in a similar period in 2014.
The dry weather, which affected major tea producing zones, saw KTDA green leaf production in February decline by 36 per cent to 56 million kilogrammes from 88 million kilogrammes produced in a similar period last year.
The Business Daily could not get a comment from the Kenya Ports Authority, which instead referred us to the Kenya Revenue Authority.
