Boon for Kenya as Pakistanis defy tea consumption cut

The country had in June called for a reduction in uptake to reduce import bill.

In Summary

•It is one of the world's largest importer of tea, buying in more than $600million (Sh71.9 billion ) worth of the commodity last year.

•It accounts for 40 per cent of Kenya's tea exports.

Packaged tea for export at warehouses in Shimanzi, Mombasa/FILE
Packaged tea for export at warehouses in Shimanzi, Mombasa/FILE

Tea is arguably one of the most popular beverages in the world, consumed by about two-thirds of the global population.

In mid-June, the Pakistan population was asked to reduce the amount of tea they drink to keep the country's economy afloat.

It is one of the world's largest importer of tea, buying in more than $600million (Sh71.9 billion ) worth of the commodity last year.

Sipping fewer cups a day would cut Pakistan's high import bills, senior minister Ahsan Iqbal had said, a time when the country was struggling with depleted foreign currency reserves.

The South Asian country’s foreign exchange reserves dropped from around $16 billion (Sh1.9 trillion) in February, to less than $10 billion (Sh1.2 trillion) in the first week of June, which was barely enough to cover the cost of two months of all its imports.

"I appeal to the nation to cut down the consumption of tea by one to two cups because we import tea on loan," Iqbal was quoted by local media.

The call was however not well received in Kenya as Pakistan is the biggest export market for her teas, sold through the weekly Mombasa Tea Auction.

Last year, the commodity accounted for 19.6 per cent of the total domestic exports, valued at Sh130.9 billion, in 2021, the second highest export earner after domestic exports of horticultural products which were valued at Sh165.7 billion.

This was up from Sh130.3 billion the previous year, the Economic Survey 2022 by the Kenya National Bureau of Statistics(KNBS) indicates, with tea remaining a major foreign exchange earner for Kenya.

The higher earnings came despite exported volumes declining from 5.76 million metric tonnes in 2020 to 5.57 million metric tonnes in 2021, on account of reduced production.

Any consumption cuts by Pakistan is a headache for Kenya, as it means a reduction in exports and earnings.

It accounts for 40 per cent of Kenya's tea exports.

According to the East African Tea Trade Association (EATTA), Pakistan is the biggest buyer at the Mombasa Tea Auction, taking up 38 per cent of the total weekly sales.

It is followed by Egypt (18%), the UK(9%), UAE, Russia and Sudan each five percent, Yemen (3%) while Afghanistan and Poland each take up two per cent share of the exports. 

Iran is at the lower end with one per cent with the rest of the world taking up the remaining. 

EATTA had warned that any reduction on exports to Pakistan would impact on auction prices.

The association took to engagements with its Pakistan counterpart (Pakistan Tea Association), to avert any market disruption, noting Kenya is also a huge consumer of Pakistan rice.

Last August, Kenya and Pakistan ended a long-standing tariff war that had hurt trade between the two countries, mainly Kenyan tea exports.

The two countries agreed to remove ‘Attestation Fee’ that was charged by the Pakistan. 

Calculated at 0.5 per cent of the entire export volume for the tea exporters from Kenya, it made Kenyan tea costlier when it landed in Pakistan compared to other teas.

Pakistan slapped the fee on Kenya tea when the latter  taxed Pakistan rice at 75 per cent under the East African Community (EAC) protocol in 2007.

“Removal of Non-Tariff Barriers will open a new era for Kenyan tea exporters and Pakistan importers,” Pakistan High Commissioner Saqlain Syedah said during the event hosted by Trade CS Betty Maina.

So far, Kenya is relived that the call for Pakistanis to reduce tea consumption has not had any significant impact on export volumes.

According to EAATA managing director Edward Mudibo, Pakistan continues to be the main consumer of Kenyan tea, standing at 38 percent of the current market share.

“We were afraid that the move would have affected export of teas from Kenya to Pakistan but as of now, there hasn’t been any significant indication that the purchases or the demand has gone down,” Mudibo told the Star in Nairobi, on Thursday.

“It is a process because the beverage is also treated as a food item and is part and parcel of their culture. They have gotten roped to the good Kenyan tea,” he added.

He spoke during a National Multi-stakeholder tea forum held in Nairobi.

“Pakistan is the largest world tea importer and our tea export to Pakistan constitutes about 38 percent. This is above 200 million kilograms, which is about a kilo per every Pakistan. We are the dominating country exporting to the Asian Country with about 200 million kilos coming from Kenya,” said Mudibo.

He termed this as a “good business for the Kenyan tea fraternity”, including smallholder farmers, tea plantations, independent tea producers and the entire value chain players.

“We have been in liason with the Pakistan Tea Association which is equivalent to EATTA and we have been discussing it to ensure that there will be no significant change," he said.

On tea prices, Mudibo said Kenya is currently doing above two dollars per kilo. Last year, the average price was between $1.80 (Sh 215.28 ) and $1.90 (Sh 227.24 ).

“We are doing much better this year. This year we are relatively higher at above two dollars and at least the producers are able to meet their cost of production,” he said.  

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