East Africa Tea Trade Association members during an auction session at Tea Trade Centre in Mombasa September 9, 2014. Uganda is considering bypassing the regional tea auction in Mombasa to boost its export earnings through a more efficient direct-sale arrangement. PHOTO | KEVIN ODIT
What you need to know:
Uganda is considering bypassing the regional tea auction in Mombasa to boost its export earnings through a more efficient direct-sale arrangement.
Currently, about 97 per cent of all the tea produced in Uganda is exported and sold through the Mombasa tea auction and branded as Kenyan.
The auction in Mombasa serves several countries, including Rwanda, Burundi, Uganda, Malawi, Mozambique and Tanzania.
Uganda is considering bypassing the regional tea auction in Mombasa to boost its export earnings through a more efficient direct-sale arrangement.
Moses Mabala, an official of the Uganda Export Promotion Board (UEPB), said growers would attract premium prices by selling their produce to buyers in emerging markets such as Belarus, Qatar, Hong Kong, Canada and France.
“For instance, a tonne of tea exported to Kenya fetches $1,627 and the same unit would cost $8,539 in Hong Kong, $8,689 in Qatar and $11,190 in Belarus,” Mr Mabala said.
The auction in Mombasa serves several countries, including Rwanda, Burundi, Uganda, Malawi, Mozambique and Tanzania.
Most of the tea offered at the weekly Mombasa auction is from Kenya. Currently, about 97 per cent of all the tea produced in Uganda is exported and sold through the Mombasa tea auction and branded as Kenyan.
Although the direct-sale system has the potential to bolster farmers’ earning it has its downsides especially in markets that are not well structured.
Attempts to introduce the system in Kenya’s coffee industry has for instance failed to pick up after the emergence of cartels who engaged in crop theft.
A source who preferred anonymity because he is not allowed to speak on behalf of the Uganda Tea Association (UTA) said the system may not readily work in Uganda because the country lacks sufficient facilities such as warehouses to stock tea from various growers before shipment.
“Setting up warehouses is a very costly venture. That is why it’s cheaper to export through Mombasa,” the UTA source observed.
A recent drop in tea prices at the auction in Mombasa due to oversupply has hurt the confidence of many growers. The region has experienced good rains from 2013 through to 2014 leading to sharp rises in the volume of tea produced.
The global tea market is also awash with supplies, piling the pressure on tea prices.
The East African Tea Trade Association (EATTA) that runs the auction in Mombasa recently launched a real-time streaming of operations to try and win the confidence of critics who claimed that lack of transparency at the auction may be influencing prices negatively.
