Falling tea prices strains East African economies

by Trust Matsilele 0

“Kenya is by far the largest producer and largest exporter in the world but what we have seen in Kenya is prices falling by a third of their value over the past year,” Edward George, head of Soft Commodities Research at Ecobank told CNBC Africa.

(READ MORE: Kenya coffee sector close to clutching at straws)

“The future for a lot of these African economies is to develop new markets in the emerging markets where tea consumption is on the rise and not just focusing on the traditional markets,” he added.

George noted that the prospects for the industry was positive looking at the rise in tea consumption in certain markets.

He said that there was a rise in tea consumption in countries like Pakistan, Egypt and the United Arab Emirates.

Excessive supply is believed to have pushed down the tea and coffee prices in Kenya.

(READ MORE: Kenya’s economy grew 4.7 % in 2013-Minister)

George urged Kenya’s tea and coffee sector to explore domestic markets as an alternative to the falling United Kingdom and USA markets.

“It makes sense to build domestic sources of demand factoring that in Kenya tea is part of the culture though not as strong as in countries like UK and USA.”

George also posited that encroachment in the land used for tea and coffee plantations by real estate developers was also driving down land for tea cultivation.

East Africa’s tea sector is facing a lot of constrains with very low yields.  

“Even though Tanzania is one the countries with highest tea yields in the world it’s extremely low. The biggest issue over-hanging the sector is uncertainty over its export market.”

George urged the region to invest in research and development into targeting particular products of tea to the African market.