MORE LOSSES

Tea auction postponed as key export earners continue to plunge

Over 20 per cent of the volume of tea that was offered for sale at last week’s auction was not sold

In Summary

•Last week’s total volume traded was 764,777 less than the previous week’s auction

•Further suspension or a complete shutdown of the weekly tea auction is likely to have a detrimental multiplier effect on a number of sectors along the supply chain

Sacks of tea for Export at one of the warehouses in Shimanzi,Mombasa. Kenya is one of the leading exporters of Tea
Sacks of tea for Export at one of the warehouses in Shimanzi,Mombasa. Kenya is one of the leading exporters of Tea
Image: FILE

This week's tea auction has been suspended as the country puts in place more measures to tackle the spread of the coronavirus

The East African Tea Trade Association made the announcement yesterday

“It is in this regard that the East African Tea Trade Association (EATTA) has taken a decision to postpone Auction-Sale 12, the Secondary auction of Monday, March 23 and the Primary auction of Tuesday, March 24, 2020,” EATTA managing director Edward Mudibo said in a statement to members.

The Mombasa Tea Auction is one of the largest in the world where tea from Kenya, Uganda, Rwanda, Tanzania, Malawi, Ethiopia and the Democratic Republic of Congo is traded.

 

A complete shutdown of the weekly tea auction is likely to have a detrimental multiplier effect on a number of sectors along the supply chain including factories, warehousing, transporters, and farmers.

“If the auction is shut, factories will not process more tea, tea farms will lay off pickers, warehouses will close down and transporters will also be affected,” Mudibo said.

The tea sector is already grappling with oversupply owing to prolonged rainfalls in tea growing areas in the country. This led to a drop in auction prices.

Agriculture and Food Authority data shows that last year, tea exports earned the country Sh117 billion, placing it among the top four foreign exchange-earners alongside diaspora remittance, tourism, and horticulture.

More than 20 per cent of the volume of tea that was offered for sale at last week’s auction was not sold. “The big volumes of tea not sold is the key area of concern,” Mudibo said last week.

Last week’s total volume traded was 764,777 less than the previous week’s auction.

This as tea prices continue to decline. Tea auction data shows the average price of a kilogramme of tea dropped to $1.88 during last Wednesday’s auction from $1.94 in the previous auction.

 

Pakistan, Egypt, UK, UAE and Sudan, Kenya's key export destinations for the predominant black CTC-type of tea produced in Kenya have already reported cases of the virus.

The coronavirus spread across the globe has stunted a number of major economies, in turn hurting Kenya’s biggest foreign exchange-earners.

Data by the Central Bank of Kenya shows Kenyans living abroad sent home Sh23 billion ($218.9 million) last month, a drop from Sh26 billion sent in January.

Diaspora remittances to Kenya are expected to fall to the lowest level this year, due to the impact of the lockdown in Europe and America due to coronavirus.

On the other hand, cut flower exports- which contribute more than half of the revenue generated from horticulture are set to be slashed by half and decline further with the ongoing lockdown in Europe.

Europe accounts for 70 per cent of Kenya’s cut-flower exports.

Kenya Flower Council chief executive Clement Tulezi said the restrictions have slashed daily orders in half.

“They (customers) cannot go out and get those flowers because they have fear for their own health,” he said. “We have seen flowers being poured out in tonnes, they are just destroyed.”