Many feel that any auction should be organised by independent entities with no interest in the outcome of the selling process.
by The Star
Audio By Vocalize
Once a tea farmer delivers their green leaf to a tea buying centre, their biggest expectation is to have it ferried to the factory and processed into tea ready for sale at the tea auction at the highest possible prices.
The Mombasa Tea Auction, the largest in the world by volumes transacted, has played this critical role since its formation in 1957.
At the Mombasa auction, brokers offer teas on behalf of producers with buyers bidding for such teas on offer mostly on behalf of their overseas principals and well for own use.
Historically, all 13 East African countries growing tea have been relying on the Mombasa Auction as the primary trading floor for their teas. Over the years the volumes transacted have increased as production has grown tremendously across all the countries.
Africa produces about 800 million kilogrammes of tea every year, with about 80 per cent being sold through the tea auctions. Mombasa Auction is the largest. There is also the Limbe Tea Auction organised by The Tea & Coffee Merchants Association of Malawi. But this only serves Malawi with plans to attract Mozambique, Zambia and Zimbabwe.
Out of the 50 million kilogrammes produced in Malawi every year, only about 10 million are sold through the Limbe Auction with the rest being sold through private treaty in a country where 98 per cent of total production is exported.
On November 13, 2023, Dar es Salaam Tea Auction held its first sale where 66,920 kg of tea was offered, with 31,094 kg being sold, fetching an average price of $0.77 (Sh100.85) per kg. Subsequent auctions showed a fluctuating trend.
The second auction on November 27, 2023, offered more tea and sold a higher quantity at an improved average price of $0.84 (Sh110) per kg. However, by the third auction on December 4, 2023, there was a significant drop in the volume sold with only 6,994 kg out of 47,066 kg offered being sold, with the average price remaining stable at $0.83 (Sh108.67) per kg.
Rwanda has made clear its intentions to start its own tea auction and it is believed the plans are at an advanced stage.
In July 2023, Kenya licensed a second Tea Auction Organiser to run a second tea auction leveraging technology to offer an alternative to the current Mombasa Auction organised by EATTA.
The second Tea Auction Organiser has developed two special technologies. One is based on the established quality parameters as used in trade, blending and packing to offer the most objective and consistent basis for tea quality analysis and determination.
This technology generates data that could easily be used by producers to set quality production targets, for buyers, blenders and packers to match what they are looking for, easing the buying decision.
The second technology is basically a Trading Platform, which brings producers and buyers together with super efficiencies that ensure selling teas within days of production. This is also built with a super settlement system that ensures payments are remitted instantaneously directly to the producer by the buyer using a special banking system.
There have been several grievances, especially by producers, on the need for alternative trading floors and approaches to enhance competition and allay some long-held suspicions of collusion and conflicts of interest within the current trading structure as well as take full advantage of modern technology.
Some quarters hold that the stagnation of prices for some time now is as a result of these grievances. Many feel that any auction should be organised by independent entities with no interest in the outcome of the selling process.
As it were EATTA is a company limited by guarantee with shareholding and membership cutting across producers, buyers, brokers, packers and warehouses. While EATTA continues to play a critical role as an umbrella body for all tea industry players, it’s about time a new member category of Tea Auction Organisers was introduced.
It is no secret that many auction floors are going to be established across the region as the above grievances remain. Ultimately the one offering the best price discovery mechanism and efficiencies will win the day. I am delighted to witness this unfold.
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