Relatively low global oil prices and currency devaluation of countries that are major buyers of the Kenyan tea have taken a toll on the price of the beverage, now at a five-year low of Sh190.
East African Tea Traders Association (Etta) says this has had a negative impact on disposable income of consumers leading to reduced purchasing power and demand of the commodity.
“Economies of a number of importing countries are heavily dependent on oil and gas whose prices have been persistently low. Currency devaluations in a number of importing countries have had a negative impact on disposable income for consumer goods,” said Eatta in a statement.
Pakistan continues to be a major player in the global tea trade but the impact of currency devaluation in the country is felt in Kenya. The agency says inflation in Egypt reached highs of 20 percent in 2018 but is projected to drop to 14 percent in 2019 while the United Kingdom continues to be unpredictable in the wake of uncertainties associated with Brexit. Pakistan is the number one buyer of the Kenyan tea followed by Egypt and UK, which combined buy close to 90 percent of the total production.
Eatta says other contributing factors in tea prices and returns include the levying of VAT on direct sales by local exporters, VAT on buyer inter-trading and lack of adequate consumer-driven research and development and promotional activities. Global tea production in 2018 increased by 0.68 percent to 5.81 billion with Africa contributing 717 million kilos. Global tea exports were 1.85 billion kilos while Africa’s contribution was 654 million kilos accounting for 35 percent. Productivity is predominantly driven by weather and improved husbandry. Global consumption of tea in 2018 was 5.61 billion kilos compared with 5.48 billion kilos in 2017 an increase of 2.4 percent and a surplus of 241 million kilos.
The Mombasa tea auction is currently the largest black CTC tea auction centre in the world and accounts for 32 percent of global tea exports. Tea is one of Kenya’s largest foreign exchange earners, contributing over Sh114 billion in 2013, Sh101 billion in 2014, Sh124 billion in 2015, Sh120.6 billion in 2016, Sh129 billion in 2017 and Sh140 billion in 2018.