Military takeover in Egypt now hits Kenya tea exportsThursday July 04 2013
Egypt’s new round of political uncertainty has seeped through to Kenya’s economy, hitting key foreign exchange earners and putting hundreds of jobs at stake.
Exporters said demand for their products fell abruptly this week as the country’s political crisis heightened after Tuesday’s military coup that toppled the government of President Mohamed Morsy.
“The deepening political crisis is one of the reasons the auction prices for lower medium quality grade tea came down sharply this week,” said Mr Njau Kiarie, chairman of Kenya Tea Buyers Association.
Kenya’s lowest grade of Pekoe Dust (PD) tea fetched Sh236 per kilogramme at the Tuesday auction, from Sh238 and while that of D1 fell to Sh220.
“Egyptian packers showed fewer enquiries,” the Mombasa-based African Tea Brokers (ATB) said in its latest report.
Tea dominates Kenya’s trade with Egypt, accounting for 96 per cent of the Sh21.4 billion worth of goods that Kenya exported to the northern African nation last year.
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Tea exporters suffered similar uncertainties and price drops during weeks of protests that ended the 30- year rule of Morsy’s predecessor Hosni Mubarak in 2011.
Expanding trade with African countries such as Egypt is at the heart President Uhuru Kenyatta’s foreign policy.
Thursday, Mr Kenyatta was cautious in his comment on Egypt’s crisis which he described as a matter of serious concern to democracy.
He said Kenya stood with the African Union in rejecting military coups. “The foreign affairs cabinet secretary is going to issue a statement shortly but the position of the AU on coup d’états is very clear,” he told journalists in Nairobi yesterday.
Egypt trades with Kenya on preferential terms negotiated by 19 states under the Common Market for Eastern and Southern Africa (Comesa) bloc.
The waning Egyptian demand for tea mirrors a general declining trend in the last few weeks as the country’s political crisis deepened.
Data prepared by Kenya National Bureau of Statistics show that Egypt rose to become Kenya’s third largest export market by the end of February but has since been pushed back to the fifth position.
The data released last month show that by beginning of May, Kenya had exported goods worth Sh10.7 billion to Egypt compared to Sh19.1 billion to Uganda, Sh13.4 billion to UK, Sh12.1 billion to Netherlands and Sh11.8 billion to Tanzania.
Tea Board of Kenya data for the first five months of the year, however, show Egypt remained the top buyer of Kenyan tea, giving it a big influence on the Sh100 billion-a-year export industry.
Farmers exported a total of 9.8 million kilogrammes of tea or 22 per cent of total volume to Egypt, followed by Afghanistan which bought 7.6 million kilogrammes and Pakistan which imported 6.1 million kilogrammes.
“We had 10 US cent drop on the Egypt-type tea last week and we expect this to escalate next week if the crisis is not resolved,” said Mr Peter Kimanga, director at the Mombasa-based Global Tea & Commodities (K) Ltd.
Apart from tea, Kenya’s other export to Egypt include spices, tobacco, textile fibres, dairy products, aluminium, sisal, soda ash, commercial crafts and fresh fruits.
In February this year, Kenya’s veterinary department signed a new deal with Egyptian Agriculture ministry that opened up the northern African state for export of live animals, frozen and boneless beef.
In exchange, Kenya imports a wide range of products from Egypt such as rice, sugar, fish and fish products, paper, iron and steel, textiles, cosmetics, resins, leather, pharmaceuticals, fertiliser and construction materials.
According to information from Kenya’s Cairo embassy, there is a potential for other Kenyan products such as ghee, butter, coffee, cut flowers, nuts and fresh produce to sell in the Egyptian market.
A section of tea exporters, however, downplayed the military coup in Egypt saying supply lines to the northern African nation remained wide open for Kenya’s exporters.
“This looks like a temporary issue and has no potential of escalating to an extent that it sabotages trade,” said a manager of a Kericho-based tea company who asked not to be named.