Kenya’s dependence on Pakistan for tea exports is gradually being eroded by the Asian country’s improved ties with India.
Pakistan, which buys more than 17 per cent of Kenya’s black tea, last year imported a 21.8 million kilogrammes of tea worth $27.2 million (Sh2.3 billion) from India, compared to 8.3 million kilogrammes worth $15.5 million in 2010.
“One would expect that with the improved trade relationship with Pakistan more and more tea will be bought from the neighbouring country,” said East African Tea Trade Association marketing manager Brian Ngwiri.
As India’s share of the Pakistani market grew, Kenya’s slice dropped from 60 per cent in 2010 to 55 per cent in the last financial year, according to latest data from the Pakistan Tea Association (PTA).
East African Tea Trade Association showed that Kenya exported 58 million kilogrammes worth $175 million (Sh14 billion) to Pakistan in 2010 compared to 70 million kilogram worth $204 million (Sh16.9 billion) in 2011.
“Kenya’s share of total tea imports by Pakistan has reduced by five per cent,” PTA said in a press briefing last week.
Total Pakistan tea import increased by a third in the last fiscal year to 127 million kilogrammes worth $301 million from 95 million kilogrammes worth $252 million imported in 2010.
However, industry insiders said more Kenya tea could be finding its way to Pakistan through smuggling via Afghanistan.
Tea Board of Kenya data indicates Afghanistan increased its imports from Kenya by the highest margin — 48 per cent to 49 million kilogrammes — among the 48 destinations supplied with Kenya tea last year.
“The ratio between tea imports through legal and illegal channels is almost equal,” said PTA Chairman Mohsin Saifi adding that Pakistan loses between $50 million and $80 million annually in revenue due to tea smuggling through Afghanistan.
The Pakistan government charges a 10 per cent import duty, a 15 per cent sales tax, a 10 per cent value added tax and another two per cent income tax on imported tea, laying the ground for a black market to flourish.
Afghan imports Kenyan tea that is blended and sold to Pakistan at an extra charge of 15 per cent making it competitive
Pakistan meets its green tea requirement from five countries including Indonesia, Vietnam, Bangladesh, China and Sri Lanka. Vietnam has a major share of 64.38 per cent in this group. Indonesia, Bangladesh and China shares in Pakistan’s green tea market are 2.33 per cent, 3.58 per cent, and 29.76 per cent respectively.