Kenya’s tea industry is experiencing a significant upswing as tea export prices reach an eight-year high. In May, the average price for Kenya’s tea exports surged to Ksh 335,407 ($2,351) per tonne, driven by a weakened shilling and robust demand for the beverage. This positive development coincides with multinational companies and local tea firms engaged in fierce competition to secure tea leaves from small-scale farmers.

According to data from the Central Bank of Kenya (CBK), tea export earnings witnessed an impressive 33 per cent growth, reaching Ksh 16.17 billion ($113.34 million) in May. This figure marks the highest earnings recorded since March, demonstrating a significant increase from April Ksh 12.17 billion ($85.31 million) earnings. The surge in earnings can be attributed to higher tea prices, which reached their peak since August 2015, as well as a notable rise in export volumes.

The recent devaluation of the Kenyan shilling against the US dollar, reaching a record low of Ksh 142.52, proved to be beneficial for tea exporters. This decline in the local currency allowed exporters to earn more in the local unit for their tea produce. In May, tea growers managed to produce an impressive 57.88 million kilograms of tea, thanks to favorable weather conditions and improved rainfall across various tea-growing regions.

Additionally, the tea industry has witnessed intensified competition among firms due to the establishment of new tea factories in Nandi County by private investors over the past five years. As a result, major firms in the region raised their tea buying prices to attract suppliers, leading to a competitive market for tea leaves from small-scale farmers.

Micro tea processors, including Mbogo Valley, Siret, Emrock, Koisagat, Kamariny, Chepkumi, Sang’lo, and Kapchorwa, are all fiercely competing for tea leaves. For instance, Siret Tea Company, catering to over 10,000 tea farmers, now offers Sh24 per kilogramme for tea leaves, while Eastern Produce Kenya (EPK) purchases them at Sh23 per kilogramme. Similarly, Nandi Tea, the region’s oldest multinational company, is currently paying Sh23 per kilogramme, whereas Mbogo Valley offers Sh1 less.

This intense competition among tea firms benefits farmers in the region, ensuring fair prices and preventing exploitation by brokers. The competitive market expands opportunities for small-scale farmers to sell their produce at favorable prices.

Despite these positive developments, Kenya’s tea export volumes continue to face challenges arising from a shortage of foreign exchange reserves for key importing countries and conflicts, impacting exports to key markets such as Pakistan, Egypt, Yemen and Sudan.

To foster further growth in the tea sector, the Kenya Kwanza administration has pledged to implement reforms that will boost earnings for farmers. Enos Njiru Njeru, the newly appointed chairman of the Kenya Tea Development Agency (KTDA), is leading efforts to explore new markets for Kenya’s tea and promote industry growth.

With tea export prices reaching new heights and heightened competition among tea firms, Kenya’s tea industry is poised for continued growth and prosperity, benefiting both farmers and the nation’s economy as a whole.

By: Montel Kamau
Serrari Financial Analyst
3rd August, 2023

photo source Google