Africa Tea Trade Journal

ISSUE 9 VOL. 9 SEPTEMBER 2012

Africa’s Authoritative Tea Journal

EATTA to engage Government on

AD VALOREM LEVY ISSN 2224-8714

NTBs still impede REGIONAL INTEGRATION says new report

Auction automation process in its INITIAL STAGE

EATTA to ride on Citibank’s online BANKING PLATFORM

9 772224 871001

KENYA SHS. 300

UGANDA SHS. 8,286

UGANDA SHS. 5,377

RWANDA FRANCS 2,034

BURUNDI FRANCS 4,407

Gold Crown Beverages (K) Ltd. P.O. Box 16453 Mombasa, Kenya.

Tel: +254-41-2223404/5, +254-20-2653939, www.goldcrown.co.ke

CONTENTS

IN THIS ISSUE

Issue 9 Vol 9 September 2012

COVER STORY EDITORIAL

From the Managing Director

2

IN THE NEWS

4

EATTA Updates COUNTRY UPDATES

EATTA to engage Government over

AD VALOREM LEVY

10

INTERGRATION

News from Rwanda News from Tanzania News from Uganda News from Kenya

6 8 16 20

INTERGRATION

Trade Barriers Cost Africa Billions - World Bank

23

ACHIEVEMENT

KTDA Allied Factories Bag Award

24

TECHNOLOGY

29

Out of this World ENVIRONMENT

NTBs still impede REGIONAL INTEGRATION says new report

22

e - COMMERCE

Auction Automation process on it’s

INITIAL STAGE ICT

Tackling Climate Change Effects at Farm Level Tea Producers to get Climate Change Advice

30 31

ANNALYSIS

32

Tea Statistics GLOBAL UPDATES

International Tea Briefs

26

35

PICTORIAL

EATTA News in Pictures

36

Q & A

Let us embrace TECHNOLOGY to remain relevant

14

EATTA to ride on Citibank’s online

BANKING PLATFORM

28 1

EDITORIAL

FROM THE MANAGING DIRECTOR

Good governance a prerequisite for SUSTAINABILITY

W

elcome to the second edition of the tea trade journal in 2012. At the time of writing this foreword to the Africa Tea Trade Journal we are just about half way through the activities of 2012. This has been an eventful year for the Association. Before going into some of the issues we have grappled with and the plans we have for our members in the future, it is important for me to introduce myself although I have been with the East Africa Tea Trade Association (EATTA) for the last five months.

I joined East Africa Tea Trade Association with 24 years experience in the co-operative sector. I was the Chief Executive of Kenya Union of Savings Credit and Credit Co-operatives (KUSCCO) for six years before going into private consultancy. Many will ask the similarities in the two organisations. Indeed the common areas are in terms of support for member services particularly in the area of advocacy and also in training and consultancy. These are particular competencies I hope to bring to the secretariat on behalf of you who are our members.

In 2012, we embarked on the start of our second five year Strategic Plan. This is a plan that we developed in close consultation with you and it is my expectation that all members will adopt the document as a blue print for EATTA. One of the most important themes in the strategic plan is in the area of governance.

EATTA has reached a size and level of complexity where proper governance structures are imperative for t he sustainability of the organisation. The EATTA Board has reconstituted the Board committees and in the process reduced them to four in line with global best practice. Going Forward EATTA Board committees are the Finance and Human Resource, Audit and Risk, Rules and Auction Conditions and Business Development, Strategy and Technology. The Business Development Strategy and Risk Committee combine the roles previously carried out by the ICT committee, the Public Relations and Educational Committee and the Trade Policy Quality and Logistics committee.

The AMIS project is ongoing with sensitization workshops for the member sub associations and the producers in Kenya, Uganda, Rwanda and Tanzania. A team went to India and Sri Lanka to complement a team of brokers that visited the same countries in February. We are keen to get the consensus of all our members and that explains the need for the AMIS sensitization workshops. The process of bringing on board two additional banks to provide a payment system is ongoing. Equity Bank and Citibank have been approved by the Board to initiate piloting of their systems in parallel to the CFC Stanbic system. This is expected to start before the end of the third quarter of this year.

The secretariat continues to be at the forefront as a lobby to address the needs, concerns and challenges facing EATTA members in regard to matters relating to regulatory and statutory requirements. EATTA has recently engaged a consultant to help us write a position paper with a view to seeking a review of the ad valorem levy introduced in February 2012. EATTA obtained a commitment from Ministry of Local Government in Kenya waiving the charges levied by municipal councils on trucks transporting tea from Tanzania.

I wish to thank all members for their continued support to the secretariat and we look forward with optimism to a bright future. We intend to engage much more with our members through this journal as well as in our open forum. We have introduced a quarterly briefing session between EATTA and Tea Board of Kenya. I intend to visit our non Kenya members as part of my familiarization visit and will use these fora to hear from you.

Finally, I wish to welcome you to enjoy the contents of the journal.

Edward K. Mudibo, Managing Director, East African Tea Trade Association

2

IN THE NEWS

EATTA UPDATES

Edward Mudibo takes over as EATTA MD The East African Tea Trade Association (EATTA) recently named Mr. Edward Mudibo its new Managing Director, replacing Dr. Kipkirui Lang’at who left the association early last year. EATTA’s Operations Manager Mr. Geoffrey Rimbere has since been holding the position in an acting capacity. Mr. Mudibo joins the tea industry with a wealth of experience gained from 20 years in the co-operative industry and 5 years in consultancy.

Prior to his appointment, he was the Principal Consultant and Managing Director of the Enterprise Skills Development Consultants Africa (ESDA) Limited.

He also previously served meticulously for 6 years as the Managing Director of the member based umbrella association of SACCOs, the Kenya Union of Savings and Credit Co-operatives (KUSCCO) Limited until February 2007.

Before becoming MD he served in various capacities as the Executive Assistant to the Managing Director, Education and Training Manager and Training Officer with KUSCCO Limited; National Expert in Training and Follow up with the Co-operative Management Improvement Project Organization-(ILO/ UNDP); Co-operative Officer with the Ministry of Co-operatives and Lecturer at the Co-operative College of Kenya.

Mr. Mudibo holds a Bachelor of Commerce Degree from Kurukshetra University and Master of Arts Degree in Rural Economics and Co-operative Management from Agra University, India. He obtained a Post Graduate Diploma in Advanced Financial Management from the Credit Union National Association of America, Denver, USA. Mr. Mudibo is a member of the Institute of Directors of Kenya, Kenya Institute of Management, a Board member of the Co-operative College of Kenya and Chairman of Naiwest Housing Co-operative.

Among the professional bodies he served include the African Confedera-

tion of Cooperative Savings and Credit Associations (ACCOSCA) which he served as secretary, the East African Regional Association of SACCO’s and the Cooperative and SACCO Legislation Review Taskforce in Kenya both of which he was a member.

He has also been a delegate at the World Council of Credit Unions (WOCCU).

Mr. Mudibo was the Operational and Governance specialist in a landmark consultancy assignment which assessed and made recommendations on how to improve the financial and operational efficiency of Cooperative societies in Tanzania. He has also conducted Consultancies and made presentations in international fora in Uganda, Rwanda, Ethiopia, Ghana, Senegal, Swaziland, South Africa, Poland and USA. He has extensive experience in Community and Rural Development, Cooperative Management and Consultancy for SACCO’s and MFIs. His areas of specialization include Administrative Governance, institutional systems analysis, Training Needs Assessment, Programme Planning, Implementation, Monitoring and Evaluation.

The Africa Tea Trade Journal wishes him well in his new appointment.

Official Publication of the

East African Tea Trade Association Tea Trade Centre Nyerere Avenue P.O.Box 85174 - 80100 Mombasa, KENYA. Tel: (+254) 41 2228460/ 2220093 Fax: (+254) 2225823 GSM Lines (+254) 0722208699/ 0733208700 info@eatta.co.ke www.eatta.co.ke EDITOR Abdulsamad Ali STAFF WRITERS Barani Khatib Eugene Omilo CONTRIBUTORS Brian Ngwiri Isaac Gitau Reuters Alertnet SALES AND MARKETING Francis Mwathi GRAPHIC CONCEPTION, LAYOUT Mshenga Mwacharo SUBSCRIPTION info@cuttingedge.co.ke ON - LINE VERSION http://africateatradejournal.cuttingedge.co.ke PUBLISHED BY

Cutting Edge Communication Ltd Enzi Centre Block Three Dedan Kimathi Avenue, Kizingo P.O.Box 80586 - 80100 Mombasa, KENYA Tel: 254 (0)41 2319513 Email: info@cuttingedge.co.ke

COVER PHOTO

EATTA Chairman Peter Kimanga (left) with Uganda’s Trade, Industry and Cooperatives Minister Mrs. Amelia Kyambadde (second right) at the Tea Brokers E.A. Ltd premises.

The contents and opinions expressed herein are not necessarily representative of the views of the publisher, Cutting Edge Communication Ltd or East African Tea Trade Association (EATTA). All material published is deemed to originate from the author, and neither the publisher nor EATTA will accept any liability whatsoever in respect to articles that have been sourced from contributors. While every caution is taken while compiling the contents of this magazine, neither the publisher nor EATTA will accept any liability for the effects arising thereof.

4

COUNTRY UPDATE

NEWS FROM RWANDA

Better pay for tea farmers as government

RAISES PRICES OF GREEN LEAF

R

wanda is set to review its tea pricing structure which will see a rise in farm gate prices for green leaf later this year.

The move is expected to earn more money for farmers and effectively boost production. The farmers will be paid commensurate with global tea prices, a departure from the current structure where the gate prices are determined by the cost of production.

Stakeholders in the tea industry met on June 7, to discuss the proposed pricing structure which is expected to be considered by the Ministry of Agriculture for adoption.

For instance, while last year Rwanda’s tea attracted as high as $4 per kilogramme at Mombasa auction with the rising commodity prices, farm gate prices remained unchanged at Rwf86 ($0.14) per kilogramme of green leaf tea.

“With the new pricing model, farm gate prices will be determined by the market — this should motivate farmers to work harder to produce more volumes and better quality tea which will fetch high prices,” said Ernest Ruzindaza, the Agriculture permanent secretary.

“Currently tea factories get higher prices but when it comes to pay farmers they get the same prices — we want to link the price of green leaf to the auction price which should motivate farmers to produce more quality volumes,” said the PS.

6

Tea is currently Rwanda’s third largest export earner after coffee and minerals having generated $63.9 million.

This year, it is projected to fetch $65.2 million despite the falling commodity prices on the international market.

However, industry analysts said while the move is likely to boost farmer’s incomes, there are potential risks related to price fluctuation which may have adverse effects.

For instance, in March 2012, tea prices fell by 5.7 per cent due to the sharp fall in Indian prices because of a seasonal drop in tea quality.

“If done properly (the new pricing model), farmers will benefit. But while it is easier to ask the factory owner to raise the price for the farmer, it is difficult to tell the farmer to accept a lower price if the international prices have gone down,” said an industry expert on

condition of anonymity.

Industry players said the success of the new pricing model will largely depend on sufficiently addressing the interests of the different stakeholders including tea factory owners, farmers and investors.

“It has to take into account all the costs incurred by the different stakeholders,” he added.

Recent statistics show that there are approximately over 30,334 tea farmers in Rwanda with active operations with over 13,000 hectares under plantation.

“If you compare with last year — though the commodity prices are down it is still higher than the cost of production — the prices last year were abnormally high,” said Mr Ruzindaza of the falling commodity prices.

Rwanda’s existing production of tea is mainly Black CTC (crush, tear, curl), though tea factories are also expanding into orthodox loose leaf and green tea varieties.

Rwanda’s tea sector currently has 11 factories with an annual production over 23,000 tonnes of dry tea.

Five of Rwanda’s 11 factories are 90 per cent owned by private sector and 10 per cent by small scale growers following a massive privatisation drive by government.

Approximately 97.3 per cent of the crop is exported in its raw form with 60 per cent of it sold in auctions, 37.3 per cent sold directly and 2.7 per cent is sold locally.

Land area under tea cultivation is about 15,000 hectares and production has grown from 5,414 tonnes in 1995 to 23,249 tonnes in 2010.

While tea is among Rwanda’s traditional exports that fetch higher revenue, this year it is projected to fetch in lower revenue due to falling prices due to weaker global demand.

Tea prices are projected to fall by 7 per cent though the volume is expected to increase by 10 per cent respectively, according to the Ministry of Finance and Economic Planning.

As a result of the projected weaker demand, in 2012, export revenue is projected at $466.7 million, slightly higher than $464.2 million earned last year.

Stakeholders in the tea sector are set to have a meeting to discuss the proposal.

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COUNTRY UPDATE

NEWS FROM TANZANIA

DISCRIMINATORY LEVIES: The Mombasa Municipal Council town hall (left). The Ministry of Local Government has issued a directive to the Mombasa Municipal Council and Kwale County Council ordering them to stop imposing levies on Tanzanian tea destinied for the Mombasa Tea Auction. The move came as a result of concerns raised by EATTA over the imposing of the discriminatory levies by the two councils.

Reprieve for Tanzanian teas as Municipal

LEVIES SCRAPPED OFF

K

enya’s Ministry of Local Government has prevailed upon local councils within the border with Tanzania from imposing levies on Tanzanian teas destined to the Mombasa Tea Auction.

The Ministry was reacting to complaints by the East African Tea Trade Association regarding the unfair charges.

A directive from the Ministry signed by Amb. P. Owade on behalf of the Permanent Secretary said the charges are in contravention of the Northern Corridor Transit Agreement on rates and payment arrangements.

According to the order, the charges levied by both the Mombasa Municipal Council and Kwale County Council for Tanzanian tea destined to Mombasa auction are discriminatory due to the fact that, Kenyan producers are not subjected to the same levies neither other transit teas from partner state destined to Mombasa auction passing through Malaba border.

The directive, however, listed exceptions in some of the charges applicable to commodities including transit teas such as charges for administrative expenses entailed for traffic in transit, charges which are generally applicable for traffic in the territories of the

8

contracting parties and charges levied on the use of toll roads, bridges, tunnels and ferries, warehousing and parking fees.

Other exemptions are charges and sales taxes imposed on the cost of services rendered and on purchases made during the voyage which the Ministry indicated that the respective council should provide the basis of levying to determine whether they fall within the exceptions.

EATTA’s petition was part of an ongoing effort to attract Tanzania to utilize the Mombasa Tea Auction hence balancing trade within the tea sector. Stakeholders in Mombasa have welcomed the move terming it long overdue.

Traders had indicated that the situation had made Tanzanian producers had resorted to using Mombasa as a market gauge, and then ship their teas overseas.

A stakeholder who spoke to ATTJ observed that the producers used to be double charged hence it was hard to realize the full potential of their produce due to the extra charges incurred, a fact that he says affected the bottom line for the farmer.

“As the costs go up, the producers will be forced to seek for other avenues or opt to ship directly to their clients,

resulting to less reliance on the Mombasa auction, other neighboring countries like Burundi even preferred using the Tanzania auction to the Mombasa auction,” he revealed. Stakeholders also want several other measures put in place to protect the Mombasa auction including reducing bureaucracy to facilitate smooth flow of transit tea to Mombasa and beefing up security at every stage on the roads though highway patrols to cub theft of transit teas.

The stakeholder also raised concerns with the KRA SIMBA system which he said should be made more efficient to avoid delays on clearance.

At the same time, he pointed out that COMESA tea has zero rate tax yet contrary to this, the tea is subjected to 25% duty during entry registration although KRA is currently relooking at the impasse.

Most traders are of the view that KRA’s regional office in Mombasa should be approved to ease the lengthy bond cancellation process which delays tea trade.

It is envisaged that once these and other bottle necks are looked into, the Mombasa Tea Auction will attract more transit teas to utilize its facilities.

Rungwe farmers to own tea processing firm

IN TWO YEARS

I

n the next two years Rungwe Smallholder Tea Growers Association (RSTGA) will buy off all shares of Tanzania Tea Packers Limited (TATEPA) in the Wakulima Tea

Company (WTC).

The move will allow the RSTGA to become the majority shareholder and ultimately own 100 per cent of the company and be the owner of the

two tea processing factories known as Katumba and Mwakaleli. WTC is joint venture Company between TATEPA and RSTGA with the shareholding in the ratio of 70 to 30, respectively.

“Within the next two years, we will purchase all shares of Tatepa and there after all the assets of WTC including those two factories will be owned by smallholders’ tea growers,” the Chairperson of RSTGA Johnson Mwakasege said. The Administration and Liaison Manager for WTC, Mr John Mbogoni said over TSh 10b has been invested in the company in acquisition of new machinery, plantations, buildings and vehicles.

He said TATEPA has agreed to sell all its majority shares in WTC so as to enable small farmers in the district being a role model on green leaf production and operator of large tea factories for their own benefit and the nation at large.

The RSTGA chairperson said their association which started with capital of only TSh 10m in 1998 has now the capital that worth over TSh 1.5b.

9

9

COVER STORY

TEA LEVIES

EATTA to engage Government over

AD VALOREM LEVY

Stakeholders outline negative consequences of the implementation of the new levy

T

he East Africa Tea Trade Association is working to seek a review of the Tea Ad Valorem Levy introduced in February 2012. This levy is faulted by stakeholders in the Kenyan tea fraternity.

The Kenya Tea (Amendment) Act 2011 changes the amount payable from a Manufacturing cess charged on tea produce at the rate of Ksh 0.46 per kilo prior to 27 February 2012 to an ad valorem levy charged at 1% value of tea at the point of export.

At prevailing prices in the third quarter of 2012 this change represented an increase in taxation of the order of 480%.

EATTA’s position is that the Ministry reneged on its commitment to consult with the tea trade prior to any introduction of the changes to the levy.

The ad valorem subject was first

10

introduced to stakeholders in August 2011 by the Ministry of Agriculture though those who attended felt that as far as the new levy was concerned, the intention was to inform the attendants of the progress rather than open up the subject for stakeholder review and response.

The collective response from the stakeholders who attended was that such a levy was too high and could result in buyers factoring the levy into their bid price thus putting Kenyan tea to disadvantage over other teas at the Mombasa Auction.

The engagement between the tea trade and the Ministry of Agriculture (MoA) at the time of developing the 2011 Act did highlight the trade’s discomfort and objections to this proposed change which included:

(a) the extent of the possible increase in the levy – the Act provides for a levy of up to 2%. (b) the regressive basis of an ad valorem levy in that it taxes the producer based on output not profit. (c) a higher levy will impact more on the small scale tea producer (accounting for 60% of total produce); i.e. those least able to pay.

Although the Ministry has explained that the proceeds of the levy will finance the operations of the Tea Board of Kenya and the Tea Research Foundation of Kenya, stakeholders feel the basis for the increase has not been adequately demonstrated.

The Tea Task Force Report recommended a review of Section 18 (1) of the Act: “ to provide for a Tea Promotion levy at an initial rate of Ksh 0.54 of made tea, to

Defining Ad Valorem An ad valorem tax (Latin for “according to value”) is a tax based on the value of real estate or personal property. It is more common than a specific duty, a tax based on the quantity of an item, such as cents per kilogram, regardless of price.

An ad valorem tax is typically imposed at the time of a transaction(s) (a sales tax or value-added tax (VAT)), but it may be imposed on an annual basis (real or personal property tax) or in connection with another significant event (inheritance tax, surrendering citizenship,or tariffs). In some countries stamp duty is imposed as an ad valorem tax.

Source: Wikipedia

What the TEA ACT (Cap 343) says 3. The Minister imposes an ad valorem levy payable at the rate of 1% per centum of the customs value for made tea exports or imports.

4. The Ad Valorem Levy imposed under paragraph 3 shall not apply to made tea imports imported in bulk into Kenya for blending and re-export.

5. Any made tea packed in Kenya in accordance with Kenya Standard 1927:2005 Tea packets and containers – Specification (KS1927: 2005) or an equivalent standard shall be exempt from payment of the ad valorem levy.

6. A tea exporter or importer shall pay an ad valorem levy to the Board or its collection agent based on the customs value of each consignment of made tea at the point of export or import.

Source: The Tea Act (Cap 343)

be charged at the point of sale and collected by the Kenya Revenue Authority.

This will be in addition to the existing Manufacturing cess of Ksh 0.46 per Kg charged to producers.

Stakeholders argue that according to the Task Force, this would increase funding for the two operations from Ksh 140 million per annum to sh340 million per annum- an increase of around 143%.

As it is currently, the amended Act completely changed the formula for collection from a quantity based one to a monetary based one.

At the same time, the financial implications are enormous for the following reasons: a) TBK’s income from the cess formula was sh180 million for the year of 2011. b) In the first four months of the Ad valorem levy (March 2012 to June2012 inclusive) TBK received Ksh275 million which averages out to Ksh825 million per annum .

c) This is an increase in tax on the industry of 450 % over the 2011 cess figure and 145% more than recommended by the Task Force Report.

Additionally, the fact that this is a tax on the tea industry brings into question as to whether such an astronomical increase in tax (amounting to 450 per cent) goes against the overall thrust of government policy.

Another concerns too is how such a proposal was not cleared by and done in conjunction with other related government entities such as the Ministry of Finance and the Ministry of Trade.

The ad valorem levy literally punishes the producers of quality tea since it is

based on the auction price and not on volume. In essence the finer the quality of your tea and the more premium the price the greater the tax.

The tea industry, like many sectors in Kenya, has been subjected to a large increase in the costs of production and the ad valorem levy of 1% of the monetary value increases that burden further.

Compromise EATTA Marketing Manager Mr. Brian Ngwiri said the association is seeking to reason out with the relevant government arms to reach a compromise over the matter which has been described within the industry as extremely punitive.

Mr. Ngwiri also added that there is need for the levy to be charged in a manner that will cause minimum disruption to the operations of the tea industry.

“It is a huge increment in expense particularly in a year that has seen the tea industry go through many challenges including frost, congestion at the port and the appreciation of the Kenyan shilling, ” said Mr. Ngwiri.

11

EDITORIAL

TEA LEVIES

Over regulation stifling

TEA SECTOR 109bn Kenya’s total tea earnings in 2011

10%

Tea’s estimated contribution to Kenya’s national annual budget of Ksh1.2 trillion

12

R

EGULATION is by simple definition an administrative legislation that constitutes or constrains rights and allocates responsibilities. Regulation mandated by a state attempts to produce outcomes which might not otherwise occur, produce or prevent outcomes in different places to what might otherwise occur, or produce or prevent outcomes in different timescales than would otherwise occur. It is generally agreeable that various business industries require a level of regulation.

Well functioning markets are needed if the private sector’s role in generating growth and incomes is to be sustained.

But markets often fail to function well if left on their own and public intervention may be required when markets fail to deliver economically efficient outputs of goods and services. Intervention may also be needed if the markets generate an outcome that is inconsistent with broader goals of social justice or environmental sustainability.

The tea industry in East Africa is primarily driven by the private sec-

tor. Experience has shown that when properly regulated and operating under competitive market conditions, the private sector can generally achieve much more than the public sector. The private sector is more motivated to use resources efficiently so as to maximize returns.

Many studies and surveys have listed the impact of regulation on innovation and it has been found that economic regulation sets market conditions; it often changes the market efficiency and potentially affects the equality and fairness of the market. In the case of the ad valorem levy introduced on Kenyan tea at one percent of the value of the tea, the levy makes Kenya tea more expensive than similar tea from other origins thus depressing its demand in the auction. The impact of introducing as levy is counterproductive despite the good intentions of the Government of Kenya.

The intention of Tea Board of Kenya in introducing the levy is to generate funds from the industry to be used for: 1. Generic marketing activity on behalf of the trade 2. To fund activity of Tea Research Foundation 3. To fund infrastructure development The premise is that Tea Board of Kenya intends to use the funds to implement major investments that the private sector would otherwise not get involved in. The question to ask is if this is really the case. Generally, the more stringent a regulation is, the more it increases risk, cost, and the chances of market failure.

The more flexible it is brings about the opposite effect.

Flexibility describes the number of implementation paths firms have available for compliance. The responsibility of making compliance flexible is with the regulator. With stringent, inflexible and limited implementation paths comes the risk of non compliance or diminished attractiveness of an industry.

It is unfortunate that in some cases licenses and levies are not used as a means to regulate business entry and activities in areas where business activities may have security, health or safety implications but are used as a mechanism to raise revenue for the regulatory authority

Governments that want to improve economic activity and growth prefer to create an enabling environment by removing bottlenecks that come in the way of the businesses. An example of what Tea Board of Kenya can do is harmonising the payments made by the tea industry to various bodies by creating a single window payment system.

The government should be doing everything it can to reduce regulation.

This is essential if growth, productivity and employment are to be the main goal of business. Tea is the leading foreign exchange earner for Kenya. In 2011, tea earned Kshs 109 billion. This was as a result of high prices pushed up by high demand and a favourable exchange rate.

In 2012, the prices though still favourable are not at the levels of 2011, the

exchange rate of the US Dollar to the Kenya Shilling has declined. This, combined with the loss of tea earlier in the year due to frost and the congestion of the port of Mombasa in January and February has made the tea industry experience a combination of several negative effects.

Vision 2030 states that Kenya will raise incomes in agriculture through commercially oriented and modern agriculture. The emphasis on commercially oriented is assumed to refer to private sector driven. The tea industry in East Africa is primarily driven by the private sector.

It is for this reason that rather than adding regulatory bottlenecks on the industry, the Government should be bailing out the tea industry.

TEA BYTES

Sacco to Build Tea Factory in Bomet A tea growers Sacco has unveiled plans to put up a tea factory in Bomet district. The factory is expected to give KTDA-run factories in the district a run for their money. Sot Tea Growers Sacco is in the process of setting up a private tea processing plant to ease congestion in KTDA-run factories which has become a nightmare for farmers.

The Sacco’s chairman Zakayo Sang said the move has been prompted by heavy losses experienced by tea farmers in the region due to delays in the collection of tea. “Our society has been unable to realize expected recoveries for loans granted for a couple of months from tea proceeds due to losses incurred by. This prompted us to unveil the projected we’ve been considering a while,” said Sang while unveiling the factory’s building plans.

Sang said the idea was proposed by the Sacco management and seconded by delegates and staff. He said, the society will partner with ABC bank in the construction of the private tea factory. With more than 10,000 members the society hopes to solicit some Sh20,000 in form of share holding for an agreed contribution before the partner releases the funds for the start of the constructions work at allocation yet to be identified.

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Burundi H1 tea revenues up 11 percent on better harvest Burundi’s tea export revenues rose 11 percent in the first half of the year compared with a year ago, driven by a stronger harvest and reduced competition in the regional market after Kenya’s tea output waned, a tea board official said recently.

Landlocked Burundi, which exports 80 percent of its tea through a weekly regional auction held in the Kenyan port city of Mombasa, earned $13.9 million from the export of 4,882,623 kg, the state-run tea board (OTB) said.

It collected $12.6 million last year from the sale of 4,512,956 kg.

“Harvest of tea leaves in most tea growing areas was better in the first three months of this year, and this enabled the country to export a high quantity of the commodity,” said

OTB export official, Joseph Marc Ndahigeze.

“On the other hand, a fall in overall output of Kenyan tea has boosted prices of Burundi’s tea,” he told Reuters.

Kenya is the top east African producer and is the world’s biggest exporter of black tea.

Kenya’s crop is one of its largest foreign exchange earners, raking in $1.27 billion last year.

Ndahigeze said the average export price per kg climbed to $2.85, up from $2.80 the previous year.

Tea is the second-largest hard currency earner for Burundi after coffee generated $22.2 million in revenues for the country in 2011, up from $18.2 million in 2010.

The commodity supports 300,000 smallholder farmers in a nation of 8 million people.

13

INTERVIEW

Q&A

Let us embrace to remain relevant During EATTA 55th Annual General Meeting, the mandate of Mr. Peter Kimanga as chairman was renewed. Mr. Kimanga spoke to ATTJ’s Ms. Barani Khatib about events that marked his previous tenure and shared his views on pertinent issues touching on the industry.

Qn: As you prepare to start your second tenure at EATTA’s helm, what are the major events and issues that the association dealt with?

PK: Of course the greatest was the successful 1st Africa Tea Convention where several delegates attended, and for the 1st time, the head of state visited a

workshop organized by EATTA. We have also trained several of our producers members on Food safety Management systems (FSMS)through a generous financial support from Trade Mark East Africa. We also held our Board meeting in Uganda, the second largest supporter of Mombasa auction after Kenya. It gave the Board a chance to interact with producers from that country.

The removal of council levies charged on non Kenya teas coming to Mombasa for auctioning was a great achievement, increased liaison with KPA that has seen the formation of a joint working team to address issues affecting shipments of tea and the drafting of EATTA’s five year strategic plan.

Qn: What are the priorities, goals and plans that you have in store for EATTA? PK: Foremost is the conclusion of both the Strategic and ICT charters and have the members owning the charters.

Secondly, the registration of the Kenya Tea Association to be handling the ever growing policy issues affecting the Kenyan membership of EATTA.. Forward, I plan to lobby and have Mombasa auction considered a ‘terminal’ and not a’ transit’ platform for non Kenyan Teas.

This will avoid the bureaucracy of warehousing these teas in customs ware-

The removal of council levies charged on non-Kenya teas coming to Mombasa for auctioning was a great achievement...

houses. We also want to lobby the EAC governments to fast track the full integration of the EAC protocol especially the clauses that deal in free movement of goods and services. A committee is in place to look at costs of selling teas through the Mombasa auction to attract more teas through the auction which have been declining.

Qn: What are some of the challenges faced by the association in its operations and in relation to the various government agencies it deals with?

PK: The major challenge is EATTA members operations cut across several Government ministries, while producers should be largely mothered by the Ministry of Agriculture, some of their operations lie in Ministry of Energy, Environment and Labour. The tailend of the Industry (Mombasa) would be more appropriately placed in the Ministry of Trade and Finance. This ‘orphaned status’ complicates handling of issues affecting the industry especially where rapid results are expected. While Kenya stands a golden chance to attract investments in value addition for tea due the volume and consistent supply of tea from within the region, increased government controls with less facilitation will make investors shy away from taking up the initiative. Our producers and indeed the country at large could suffer lost opportunities if one of our partner countries decides to establish a value addition hub.

ing Director who has a wide knowledge of membership based organizations, a great asset to an organization like ours where members demands are diverse.

His predecessor, Dr Langat an equally knowledgeable gentlemen helped the association greatly in creating and training the Board and members on corporate governance structures. We now have a solid team at the helm which will free the Board members from engaging in the secretariats operational issues as has been the case in the past.

Qn: What message do you have for stakeholders in the tea trade?

PK: The commodities market has become very dynamic and members should always keep their ‘antennas’ high for any new developments in the industry. Technology and consumer

demands will continue to shorten the supply chain from ‘bush’ to ‘cup’ and those members sitting in the middle of the chain between the producer and the consumer must demonstrate synergy if they want to remain relevant. It is for this reason that our members, and I’m addressing the ‘bosses’ to take deeper interest in technology for stretching their business horizons and cutting down costs through improved efficiencies.

To our farmers, global warming is a real threat and wages will continue to rise, funding should be sought to explore alternative energy sources and better water management practices. Aggressive Tree Planting and construction of the energy efficient ‘green’ factories will help in reducing the ever rising costs of production.

Qn: The board recently appointed a new MD. What does this herald for the association?

PK: We are privileged to have a Manag-

15

COUNTRY UPDATE

NEWS FROM UGANDA

EATTA chairman Mr. Peter Kimanga and Mrs. Amelia Kyambadde, Ugandan Trade minister.

Uganda Trade Minister visits EATTA

U

gandan minister for Trade, Industry and Cooperatives Mrs Amelia Kyambadde led a high level delegation from her country to the East African Tea Trade Association on a fact finding mission in May 2012.

The tour to EATTA was part of her three day itinerary to Kenya to find ways of improving Uganda’s earnings on her exports including tea.

At EATTA, she held a fruitful meeting with a section of EATTA directors before getting an opportunity to tour a tea brokerage firm and a warehouse as well as acquaint herself with the operations of the Mombasa Tea Auction.

The minister praised EATTA’s role in driving the tea industry in the region while noting that her ministry is working towards investing in capacity building to strengthen trade associations in Uganda.

She also raised concerns of Ugandan tea producers top amongst them being the lower prices that the Ugandan tea has attracted eth Mombasa Auction,

16

taxation and theft of transit teas on the Kenyan highways.

The minister also said she was worried with the lack of spirit in the East African Community in terms of custom practices.

“Tea is an agricultural product but we wonder why it is subjected to Comesa charges as is done to other imported commodities against stipulated procedures,” she complained.

Among those who accompanied the minister were Mr. Fred Ogere who is an Under Secretary in the ministry of Trade and Ugandan High Commissioner to Nairobi Amb. Emmanuel Hatega.

The delegation also visited various tea brokerage firms and warehouses in Mombasa to familiarize with their operations and new technologies.

During the meeting with the delegation, EAATA officials recommended that Uganda needs to invest in more factories to match the volumes of its annual tea harvests.

E ATTA chairman Mr. Peter Kimanga said Uganda’s tea attract low prices

at the Mombasa Auction due to poor preparation methods which is partly caused by the lack of adequate factories to process it.

While analyzing the Ugandan produce, Mr. Kimanga said Ugandan tea fetches poor prices at the Mombasa Auction because of poor harvesting and processing methods.

During the first quarter of 2012 for example, the highest bid for Uganda’s tea was a modest 2 US dollars per kilo as compared to an average of 3.7 US dollars and 4 US dollars for Kenya and Rwanda respectively.

Mr. Kimanga explained that Rwanda is able to score highest because it has less tea and therefore unlike Uganda, has more time to process it.

“Ugandan tea pickers also pluck up to five leaves and a stalk in a bid to increase volume instead of the standard 2 leaves and a bud,” said Mr. Kimanga.

He said apart from quality, the ambitious harvesting method has also injured the recovery time of most Ugandan tea bushes.

A TIME TO HARVEST

Uganda sees 2012 tea output down 8% on drought

Tea harvesting at a plantation in Uganda. Analysts indicate that the country’s tea production is forecast to drop 8 percent this year, depressed by a severe drought in parts of the country.

AGREEMENT

MARKETS

Tea Workers Get Salary Rise

Coffee Exports Pick up

The Uganda Tea Association and the National Union of Plantation and Agricultural Workers have signed an agreement to increase the salaries and wages for the Tea plantation workers.

According to a press statement issues by both unions, the increase will be effected in the financial year 2012/2013 The agreement was signed on Wednesday, 20th June 2012 by the Executive Secretary of Uganda Tea Association, George Ssekitoleko and the General Secretary of the Plantation and Agricultural Workers Union, Joram Pajobo.

Ssekitoleko and Pajobo, say in the statement that the agreement is important because it will ensure fair and equitable salaries for the tea sector workers.

The officials have however called on government to expedite the reconstruction of the bridge linking Kanungu and Rukungiri districts because that is where tea is produced.

They also request the government to consider subsidizing costs of inputs like fertilizers which impact on tea production.

Coffee exports from Uganda, Africa’s biggest seller of the beans, climbed to a seasonal high in June after the harvest in the southern and southwestern regions peaked, the Uganda Coffee Development Authority said.

Shipments rose to 275,057 60-kilogram (132-pound) bags, surpassing the May exports of 252,548 bags, the earlier record, the authority said recently via e-mail from Kampala, the capital.

While exports in June beat an earlier forecast of 250,000 bags, they were 26 percent lower than the 370,924 bags a year earlier after heavy rains hampered drying of the beans, according to the authority.

Uganda may export 3.1 million to 3.2 million bags in the 2011-12 season, which started on Oct. 1 and runs through September, according to the authority. This compares with the forecast of 2.8 million to 2.9 million given by National Union of Coffee Agribusinesses and Farm Enterprises on May 8.

Download free QR Readers from the web and scan this QR(Quick Responnse) code with your phone to access the online edition of the journal.

Uganda’s tea production is forecast to drop 8 percent this year, depressed by a severe drought in parts of the country, an industry official said.

The crop is a key commodity export for the east African country alongside coffee and tobacco and an important earner of hard currency.

George Ssekitoleko, secretary general of Ugandan Tea Association, told Reuters that Uganda would likely produce an estimated 52,000 tonnes of tea, down from 2011’s 56,000.

“There was a severe drought in tea-growing areas around January to March which made leaves wither and dry prematurely,” Ssekitoleko said.

“We might get good rains toward the end of this year but probably not enough to offset the loss from the drought,” he said.

Uganda’s tea is grown mostly in the central and south western regions.

The majority of leaves, produced on around 25,000 hectares of land, are sold at Kenya’s Mombasa tea auction.

Progressive shifts in traditional weather patterns have seen rains in Uganda become increasingly erratic and scarce, exacting a heavy toll on the country’s mostly rain-fed agriculture.

Ssekitoleko said fewer farmers were applying fertilizer in their fields, which had affected output.

“Fertilizer is too expensive for farmers so most of them don’t apply it and those who use it don’t apply it in sufficient quantities and that lowers yields,” he said.

Uganda earned about $90 million from tea exports in 2011, according to Ssekitoleko, and the sector employs about 50,000 people directly while supporting more than 600,000 others.

It is a small producer compared with neighbouring Kenya, which is the world’s leading black tea exporter.

17

MAY 2012

MAY

2012

COUNTRY UPDATE

NEWS FROM KENYA

New Bill Proposes Tax-Free Entry of

KENYAN TEA INTO USA

K

enya’s top foreign exchange earners— tea, horticulture and coffee —are lined up for access into the US market in a fresh bid to boost exports under preferential trade with African countries.

The proposal to include all agricultural products in the list of products exported to US duty-and-quota -free under the African Growth and Opportunity Act (Agoa) is contained in a Bill that is already before the US Congress.

If passed, the changes in the legal text of Agoa will allow African exporters to bypass stringent quality screening that have traditionally slowed the sale of their produce in the USmarket.

“Sanitary and Phytosanitary Standards, though important for maintaining food quality and protecting human, plant and animal health, do impose additional demands on exporters, and can limit agricultural market access for Agoa-eligible products.” says a new report on Agoa .

The report titled the African Growth and Opportunity Act: Looking Back, Looking Forward — is written by Mr Witney Schneidman, a key drafter of Agoa law during Bill Clinton’s administration.

Since Agoa’s inception 10 years ago, agriculture—which accounts for a quarter of Kenya’s Sh2.7 trillion GDP and employs more than 70 per cent of

20

population— has not made any noticeable impact on Kenya’s (mainly textile) Agoa exports.

Trade ministry officials together with private industry players and top officials of Export Processing Zones (EPZ) Authority are the US to lobby the Congress to put the Bill in its priority list.

Despite low level of value addition in agriculture, the current legal text of Agoa envisages processed products as the basis for sustaining the preferential trade relationship.

The report adds, “Although the US provides a great deal of capacity- build-

ing support to Africa, more support is needed to help countries meet these standards and export agricultural goods to the US market—as well as coordinate the activities of the US agencies that provide this support.”

For Kenya, revising Agoa text to include agricultural products means increased inflow of hard currencies from tea, horticulture and coffee industries— the top foreign exchange earners which exporters have aggressively been scouting for new market outlets.

Last year, Kenya earned Sh109 billion from tea exports— mainly to Asian

The five largest Kenyan Exports to US in 2011

42% Knit Apparel 3% Miscellaneous Foods 8% Edible Fruits and Nuts 13% Spices, Coffee, and Tea 13% Spices, Coffee, and Tea 34% Woven Apparel

U.S.-KENYA TRADE FACTS

700 600 500 400 Imports 300

Exports

100 0 2000

2008

2009

2010

2011

Source: www.ustr.gov

200

U.S. Goods Trade with Kenya (in million of dollars) countries with the earnings from US falling below five per cent.

The country also earned Sh98 billion from exports of horticultural products but more than 80 per cent of this receipt came from Europe. Coffee export also relies mainly on European countries despite the early inroads it had made into the US market.

Easing entry of these top foreign exchange earners into world’s largest economy is likely to come in handy in addressing the widening gap between imports (which hit 1.3 billion in 2011) and exports (Sh511 billion) This mismatch—which worsened Kenya’s trade balance by 49.7 per cent in 2011 compared to 21.3 per cent in 2010 — had earlier been cited for piling pressure on shilling to record 107 against the dollar in October last year.

“Africa has been pushing for inclusion of agriculture in the list of Agoa products after acknowledging that they don’t have competence to export most of the 6,400 product lines initially assigned to them,” said Mr Jonathan Chifallu, head of communications at the EPZ Authority.

Kenya and other Agoa eligible countries have faced challenges looking at EPZ growth. Despite of the five years of sustained campaign to diversify its exports base, official records indicate that 80.3 per cent of the Sh18.8 billion that the zones earned from US under Agoa last year came from textile sales.

But uncertainty has hit the future of textileexports from Kenya.

The third-country fabric rule —which allow Kenya to export garments made from imported fabric (95 per cent of apparel exports under Agoa) is set to expire in September with no clear indication of that the Congress will renew.

The Bill which seeks to amend to Agoa law to among other things —introduce agricultural products, extend the third country fabric rule and make Agoa permanent —has been pending before Congress from late last year.

Uncertainty In an article published last week, the Wall Street Journal wrote: “Few bills have made itto a vote in Congress this year. Any Bill, including an extension of the third-country rule, that comes up for a vote therefore runs the risk of having a range of legislation appended to it that otherwise is unlikely to reach the House floor.”

“For Kenya, revising Agoa text to include agricultural products means increased inflow of hard currencies from tea, horticulture and coffee industries— the top foreign exchange earners which exporters have aggressively been scouting for new market outlets.”

Kenya is currently our 105th largest goods trading partner with $846 million in total (two way) goods trade during 2011. Goods exports totaled $464 million; Goods imports totaled $382 million. The U.S. goods trade surplus with Kenya was $83 million in 2011.

EXPORTS Kenya was the United States’ 98th largest goods export market in 2011.

U.S. goods exports to Kenya in 2011 were $464 million, up 23.7% ($89 million) from 2010, and up 95.1% from 2000.

The top export categories (2-digit HS) for 2011 were: Aircraft ($66 million), Machinery ($64 million), Special other (articles donated for relief) ($44 million), Milling; Malt; Starch ($30 million), and Electrical Machinery ($27 million), U.S. exports of agricultural products to Kenya totaled $94 million in 2011. Leading categories were: pulses ($19 million), and vegetable oil (excluding soybeans) ($12 million).

IMPORTS Kenya was the United States’ 103rd largest supplier of goods imports in 2011.

U.S. goods imports from Kenya totaled $382 million in 2011, an 22.6% increase ($70 million) from 2010, and up 248.3% from 2000.

The five largest import categories in 2011 were Knit Apparel ($143 million), Woven Apparel ($117 million), Spices, Coffee, and Tea (coffee) ($45 million), Edible Fruit and Nuts (macadamia nuts) ($29 million), and Miscellaneous Foods ($11 million).

U.S. imports of agricultural products from Kenya totaled $95 million in 2011. Leading categories include: coffee (unroasted) ($39 million), and tree nuts ($31 million) Source: www.ustr.gov

21

COUNTRY UPDATE

REGIONAL INTERGRATION

NTBs still impede regional integration,

SAYS REPORT

A

report compiled during the ministerial assessment tour of the ports of Mombasa and Dar es Salaam, indicates that though some partner states have tried to eliminate trade barriers, more hurdles were still obstructing the effective running of businesses in the region.

During the tour, the ministers discovered bureaucratic tendencies at the two ports, unnecessary roadblocks and other administrative issues, as among the bottlenecks.

The many weighbridges along the northern and central corridors result in goods not reaching their destinations on time. Affected destinations are Rwanda, Uganda and Burundi.

There were 36 roadblocks between

22

Mombasa and Kigali and 30 between Dar -Es Salaam and Rusumo border while Uganda nine between Malaba and Gatuna.

FINDINGS The findings show that Tanzania has reduced Dar es Salaam - Rusumo roadblocks to 15. Rwanda and Burundi were identified as doing all they can to remove all roadblocks compared to other member states.

Lengthy procedures in issuing work permits among EAC Partner States, especially Tanzania were also revealed as a problem.

Others problems cited were lack of parking yards at border posts, corruption along the two corridors and some

countries as well as blocking of cargo trucks from moving beyond 6:00 pm within Tanzania.

NEGOTIATIONS Uganda’s Permanent Secretary in the Ministry of Trade and Industry Mr. Emmanuel Hategeka, said that intense negotiations to ensure total elimination of barriers were taking place.

“We are discussing with other members of the bloc to reduce the weighbridges, especially as regards transit cargo, along the corridors,” said Mr. Hategeka.

The Northern and Central corridors link the two ports to the hinterland.

Tanzania has accepted to remove a $200 levy imposed on Kenyan trucks and also scrapped visa charges on Kenyan businessmen entering it.

Some truck drivers, however, complain they are still being hindered by roadblocks not only in other countries but also in Rwanda, something they said needed an immediate solution.

“I normally drive from Kampala through Kigali and Bujumbura. There are many roadblocks in Uganda and Bujumbura.

Trade barriers cost Africa billions: World Bank

bery in the DRC. “I drive from Bujumbura to Kigali and then to Goma in the DRC. We always encounter the problem of corruption and highway robbery in Burundi and Goma,” he said.

He added traffic officers in Kigali normally stop him to check driving licenses and other documents but they have never asked for bribes.

When contacted, Rwanda Revenue Authority’s Director of Tax Payer Service Development, Drocella Mukashyaka, refuted claims of roadblocks in Rwanda.

“Those drivers are just exaggerating. We no longer have these roadblocks and if you want to know more you should come to my office and we discuss,” she said.

Gerald Mukubu, deputy CEO in charge of advocacy at the Private Sector Federation, observed that trade barriers still existed even in the country.

Even in Kigali they still exist.

“From Gatuna to Kigali, I am always stopped by traffic police officers about four times and at each roadblock I have to pay something (a bribe), at least Rwf1000, and if the truck lacks some documents I pay Rwf 5000,” said a truck driver who wished not to be identified.

The driver said that they still pay the Rwf1000 for parking per hour, something he said has always affected his business.

Hamid Assuman, a Burundian national who operates between Bujumbura, DRC and Kigali transporting construction materials, said his fear is high way rob-

TRUCK MOVEMENT According to Mukubu, on average, around 150 trucks come to Rwanda everyday, including those in transit to Bujumbura and the eastern part of the Democratic Republic of Congo.

The trucks, according to Mukubu, are stopped at a site in Rugende, just outside Kigali to avoid traffic congestion during the day and then released at night.

He advised that at least these trucks should be released after every thirty minutes to allow them move in order not to be accused of causing delays.

Among the key decisions taken at the dedicated session were; transit vehicles will be weighed twice from the Port of entry and Port of exit for Kenya, Rwanda, Uganda and Burundi while the United Republic of Tanzania awaits a study on the establishment of the weighbridges.

A World Bank report released earlier this year indicated that African countries were losing out on billions of dollars in potential trade earnings every year because of high trade barriers with neighboring countries, and that it was easier for Africa to trade with the rest of the world than with itself.

According to the report, “De-Fragmenting Africa: Deepening Regional Trade Integration in Goods and Services”, regional fragmentation would become even more costly for the continent with new World Bank forecasts suggesting that the economic slowdown in the eurozone could shave Africa’s growth by up to 1.3 percentage points this year.

The authors said: “while uncertainty surrounds the global economy and stagnation is likely to continue in traditional markets in Europe and North America, enormous opportunities for cross-border trade within Africa in food products, basic manufactures and services remain unexploited.”

The report said this situation deprived the continent of new sources of economic growth, new jobs, and sharply falling poverty, factors which accompanied significant trade integration in East Asia and other regions. The cross-border production networks that have spurred economic dynamism in other regions, especially East Asia, have yet to materialise in Africa.

Regional integration in Africa has long been recognised as essential to address the issues of the small economic size of many countries and the often arbitrarily drawn borders that pay little heed to the distribution of natural endowments. But, as is often noted, Africa trades little with itself, at least to the extent that is recorded in official customs statistics.

The report noted that until the onset of the financial crisis, most sub-Saharan African (SSA) countries grew rapidly and often at much higher rates than the world average.

Economic growth in these countries was robust and driven by the boom in commodity prices, which led to very high growth in export values, especially for minerals, to new fast-growing markets such as India and China.

African leaders have called for a continental free trade area by 2017 to boost trade within the continent. Do you think Africa can become a free trade area by 2017?

Moses Watengula, Trade Minister, Kenya

Anne Kyambadde, Trade Minister, Uganda

Francois Kanimba, Trade Minister, Tanzania

23

ACHIEVEMENT

EMA AWARDS

PROUD ACHIEVEMENT: Ms. Virginia Chege, Factory Unit Manager, Gitugi Tea Factory in Nyeri County, proudly displays the Fuel Savings Award (Large Company) won by her factory after receiving it from KenGen Managing Director Eddy Njoroge (right) during the Kenya Association of Manufacturers’ Energy Management Awards ceremony. Looking on is Mr. Alfred Njagi – KTDA GM Operations.

KTDA allied factories bag

ENERGY AWARD As KAM, KTDA call for more invests in energy sector to boost capacity

T

hree KTDA managed tea factories emerged victorious at the 2011 edition of the annual Energy Management Awards initiated by the Kenya Association of Manufactures (KAM).

The three were awarded for their proficiency in field saving as well as for being the best first time participants in the awards.

Gitugi Tea Factory won the Fuel Savings Category with Munuga Tea Factory coming in as 1st Runners Up in the same category.

Munuga also scooped the Best New Entrant Category award while Tegat Tea Factory emerged the 1st Runners Up in the same category.

The three are among the KTDA-managed tea factories across the country that ventured into investing in small hydro power projects commissioned in 2009.

The Energy Management Awards (EMA) is an initiative that was started by the Kenya Association of Manufacturers through its Centre for Energy Efficiency and Conservation (CEEC)

24

and in conjunction with Ministry of Energy in 2004 to promote excellence in energy management.

The Energy Management Award event is aimed at giving special recognition to companies that are making efforts to utilise the available energy resources efficiently.

Honoured at the event are enterprises that have made major and sustainable gains in energy efficiency through the application of modern energy management principles and practices, and in the process made significant energy savings and cost reduction.

KAM’s chief executive officer Ms. Betty Maina said Kenya is affected by a number of environmental concerns from pollution to waste disposal and its effects to the environment and degradation among other concerns.

She said there is increased pressure on the available resources including water and energy because their exploitation is faster than their replacement.

“As KAM we are encouraging investment in the energy sector to boost capacity and mitigate some of the

challenges being faced. We also encourage the general populace to manage the available resources wisely,” said Ms. Maina.

KTDA’s corporate affairs manager Mr. Francis Muriuki says KTDA has been in the forefront to champion for the conservation of energy sources and has been assisting factories to invest in renewable energy sources.

He says factories have been mobilized in a countrywide campaign aimed at planting over 10,000 acres of land with trees for fuel wood which is equivalent to 30 percent of the overall fuel wood requirements.

He says the agency is also involved in constant evaluation of energy requirements needs, regular audits and implementation of recommended energy conservation measures.

It also liaises with the relevant stakeholders in the industry like KAM, Kenya Institute of Management and the Energy Regulation Commission.

“We have brought onboard initiatives that are farmer oriented with the introduction of farmer field schools to train farmers on sustainable agricultural practices that include environmental conservation measures, Rainforest Alliance certification of factories which ensures that farmers comply with Sustainable Agriculture Network (SAN) standard requirements,” he explains.

The SAN requirements include conservation of high value ecosystem like forests and wetlands and training programmes in conjunction with other organization’s ethical training partnerships.

On its part, KAM is involved in conducting energy audit facility that assists companies in checking on their energy usage and recommends ways in which establishments can use the energy efficiently.

To this end, KAM has profiled numerous options in which tea factories can save on energy which include improvement in boilers efficiency by proper lagging of steam pipes & flanges, production and utilization of steam at the optimum pressures which argues use of appropriate mixture of fuel and air at the burners to improve efficiency and undertaking preheating measures of combustion air at the exhaust to reduce the fuel combusted.

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e - COMMERCE

BUSINESS AUTOMATION

Auction Automation process on it’s

INITIAL STAGE Project estimated to be complete by July 2013

26

T

he anticipated automation of the Mombasa Tea Auction processes from its current manual to an electronic platform is expected to finalize its stakeholders’ sensitization workshops phase in August to seek membership acceptance and buy in as EATTA gears towards adoption of ICT Technology.

EATTA’s Mr. Isaac Gitau who is one of the project’s coordinators says if all goes well, and members accept the proposed project current roadmap indicates that the project will be completed

by July next year if all factors remain constant.

“The implementation has been phased so as to allow membership acceptance and buy in before design and execution takes place. This means the execution phase will be dependent on membership acceptance,” he says adding that the July 2013 target will only be achieved if the membership understands and supports the initiative.

The forums focused on sensitizing stakeholders on the proposed Auction Management Information System (AMIS) project in relation to EATTA ICT strategy. Among the efforts made to attain the change management objective include continuous workshops targeting senior representatives of membership focus groups, encompassing brokers, buyers, packers, warehouses and producers.

It also aligns and enlightens stakeholders on EATTA ICT strategies and in gathering new system requirements as well as discussing critical success factors associated with the implementation of the project.

During these workshops several issues are deliberated at length as members are taken through the pros and cons of the current systems, cost benefit factors, advantages of adopting technology, scope of the implementation and SWOT (Strength, Weakness, Opportunity and Threats) analysis.

A number of foreseen challenging questions on funding, ICT infrastructure, se-

curity, IT Capacity/Skills and integration with existing automated member systems are still in minds of stakeholders but recent efforts by EATTA to conduct the stakeholders’ workshop have seen major challenges explained.

EATTA notes that the change is necessary to keep up with the fast-moving technological dymamics. The E-Auction system is expected to integrate the process starting from receipt of print program by warehouses and brokers, creation of catalogues, bidding and creation /submission of invoices all the way to the release and delivery of tea from the warehouses, enabling better control and reducing duplication of work thus less time turnaround.

The system is aimed at providing real time information to the stakeholder at each stage of auction transaction and generation multiple reports to the tea industry and other stakeholders. It will see to it that there is improved efficiency along the value chain thus efficient and transparent auction process, true value price discovery in the overall auction system.

The online initiative is also expected to reduce transaction cost and auction cycle time, encourage more quantity of tea to be sold through auction as well as make the Mombasa Auction be attractive, accessible anywhere and eventual de-centralization from auction floor to office resulting to wider audience, hence new markets for African teas.

In addition to maintaining and accessing Market reports on the Mombasa and international auction centres, the switch to E - Auction comes with many other benefits to stakeholders: PRODUCER • Get real time information from the auction floor • Receive Reports on broker performance • Reduced time from factory to sale as information is exchanged on system • Faster settlement of payments from the bank as data is readily available WAREHOUSE • Improved payment system • Accurate delivery notes • Ability to integrate systems with all stakeholders and regulatory • Improved lead time on deliveries and tea pick ups BROKER • Improve the payment system broker interface • Quicker generation and distribution of Catalogue • Reduced time spent in post auction call back • Quicker generation and distribution of invoices, delivery notes

BUYER/PACKER • Faster delivery of accurate catalogue • Quicker auction time and quicker release of delivery notes • Notification of over payments • A report on TRD per broker and Lots per warehouse AUCTION ORGANIZER • Record real time auction statistics and reports • Automated subscription management procedures • Maintain updated membership contacts, track and trend member issues • Access to Secure and inexpensive mode of communicating with the association/web portal STATUTORY AND REGULATOR • Easy access interfacing with tea stakeholders

Role of the different stakeholders involved in the E-auction Producer • Produce and provide a quality product to the market • Accurate origination of data (Tea Product detail sheet) • Dispatch of lot-wise teas • Issue of garden invoice • Manufacture/sale period cycle • Timely delivery of available teas for sale to warehouse/buyers

Warehouse • Issue of arrival & weight notes • Offer Storage facility • Transportation of tea (within Mombasa) • Blending services • Containerization (Transport to the Port) • Electronic storage/monitory facility

Broker • Tasting of tea (Evaluate tea) • Offer Valuation) • Sampling tea quality and arbitrate quality issues.

• Administer bidding and offer advice • Selection of highest bidder • Advice product availability • Act as representation of other members categories in the auction • Tea tracking of samples and invoices

ABOVE: Kericho Tea producers take part in a past training. BELOW: Broker participate in group discussion in Mombasa.

Buyer/Packers • Buy/Trade Tea • Sale proceeds • Taste / Bidding • Minimize duplication of data entry • Packing and Selling

Auction Organizer • Capture and disseminate real time information to the trade • Efficient and effective management of the auction services • Lobby and advocate on behalf of the membership issues

Statutory and Regulators • Standardized input/output formats from their system

27

COMMUNICATION TECHNOLOGY

EMBRACING ICT

EATTA to ride on Citibank’s online

BANKING PLATFORM

T

he East African Tea Traders Association (EATTA) has partnered with Citibank to roll-out an electronic Tea Sales Payment Platform in line with the ongoing automation of the Mombasa Auction. The move which is supported by Citibank’s ‘Citi Direct’ system will enhance efficiency and manage information flow for stakeholders during and after the tea auctions.

According to Citibank, who are working on the solution together with EATTA and other stakeholders, the system will help seal loopholes that exist in the flow of information.

28

OUT OF THIS WORLD? The bank seeks to promote the best interests of the tea trading in the region by using a centralized online system.

The process will see EATTA riding on Citibank’s online banking platform to shore up its operations with the bank facilitating a straight through and online flow of information of tea sales and payments to the respective stakeholders.

Implementing this system will also mean that brokers guarantees will no longer be required because Citibank’s platform for trading will integrate with the banking system to provide online information of tea payments to the respective stakeholders.

The new system will render obsolete the manual process that involves the physical movement of documents such as delivery notes to warehouses and invoices to buyers among others because the Citi system, has an online interface that will be accessible to authorized users of buyers, sellers (brokers) and warehouses and transactions will be monitored and actualized online before tea is collected by the buyers.

The system has a module that integrates all stakeholders to ensure all the information is accessed online. The system uses e-mail and short message services (SMS) to notify all stakeholders namely sellers (producers) warehouse, brokers of the sale updates.

Samples of tea can also be requested online by the broker; once the tea has been graded the brokers will go back to the online platform and then raise a sales catalogue which details the available tea for auction.

The beauty of the system includes the fact that the broker and the producer will only see their own transactions online until it becomes a sales catalogue to be seen by all.

Accessing the system will be based on the individual stakeholders and in line with that, profiles will be created for specific brokers, producers, buyers profile and various EATTA associates.

This will ensure that the various users are restricted to accessing only mod-

ules assigned to them and information related to them only.

The system has a security module which will enable authorization and access control function through the use of access rights and password management mechanisms and will ensure segregation of duties principle is observed.

It will also oversee the maker-checker functionality by ensuring that the power to initiate, approve/authorize and review items in the system is not held by the same person.

The module will be responsible for audit logging to enable a comprehensive audit trail is developed based on user actions/activities and will also be configurable so as to enable provision of various security alerts.

Immediately tea has been sold invoices will then be generated and directed to the buyers. Once the buyer send funds to the designated account at Citi, as will have been advised to them by EATTA through the agreements signed, the bank will inform all the stakeholders online of payment.

The Tea Release Document (TRD) are produced and dispatched online to the buyers, the brokers and the warehouse.

The streamlining of the tea auction operation will go a long way towards enhancing service delivery for EATTA, which is mandated with the role of facilitating the Mombasa Tea Auction operations while ensuring compliance to the stipulated rules of trade.

An important benefit of implementing the Tea Sales Payment Platform is that the interests of the buyers will be protected. The whole infrastructure will have an audit trail to provide EATTA an oversight and the ability to control information online anytime.

Launched by South African soft drinks company BOS Ice Tea, the vending machine is called Bev. To receive a free sample of BOS Ice Tea, users need to tweet a certain hashtag, the # symbol commonly used on micro-blogging service Twitter to identify topics.

The drink is made from Rooibos, a local plant used to make traditional tea.

To make the machine respond to tweets, its developers configured a specific hashtag as a filter.

When the hashtag appears on Twitter, the vending machine checks it and - if correct gives out a drink.

The tweet is then displayed on a screen on the front panel of the machine.

Users can also follow Bev on Twitter, and become friends with it on Facebook as well.

There is no partnership with Twitter. The micro-blogging service told the BBC that it would not comment on the initiative.

Social media possibilities Although there is only one such machine for now, it will soon go on a tour around South Africa, to “interact physically with as many people as possible”, BOS co-founder Grant Rushmere told the BBC. “We use sampling extensively to promote our product,” he said.

“Our goal, while sampling, is to create fun, interactive and inspiring environments to do so.”

Twitter’s popularity in South Africa was growing, said Mr Rushmere, and the project would demonstrate the creative ways to use social media.

“Bev the vending machine is just one example of many different ways we do this.

“If a giraffe on a bicycle gives you a BOS Ice Tea one day, you will see what I mean.”

29

ENVIRONMENT

CLIMATE CHANGE

SINCE 1990, YEARLY EMMISSIONS OF CARBON DIOXIDE HAVE GONE UP

BY ABOUT 6 BILLION METRIC TONS WORLDWIDE, WHICH IS MORE THAN A 20% INCREASE. ALMOST ALL OF THAT INCREASE IS DUE TO HUMAN ACTIVITIES.

Tackling climate change effects at

FARM LEVEL Droughts, frost and hail are all manifestatins of of global warming and now researchers working around the clock to counter these adverse effects that continue to take a toll on tea production.

R

esearchers in Kenya’s tea growing fields are working towards arresting the effects of global warming, which has heavily affected tea production in recent years.

The experts say signs that climate change is taking place are apparent in the tea sector and have moved to counter the threat by introducing copying practices at farm level.

The evident conditions include temperature rises, melting and retreat of

30

the mountain glaciers on Mt Kenya and Mt Kilimanjaro as well as increasing frequency of extreme climatic events like droughts, frost and hail which are all manifestations of global warming.

In Kenya, frost has outstandingly been a major threat, making farmers incur huge losses.

Tea Research Foundation of Kenya’s (TRFK) Director of Research Prof.

Francis Wachira says the condition is expected to persist and urges farmers to take up adaptation as the only option to

counter it.

In an interview with ATTJ, Prof. Wachira suggests the preparation of sector based climate change programmes, strategies, policies and projects aimed at countering the challenges of global warming.

“We also encourage closer collaboration between stakeholders in resource mobilization to support climate change adaptation activities within the sector which will go hand in hand with awareness creation and public education,” he explains.

His sentiments have been echoed by other experts in the tea sector who have argued that there is need for intensification of data and information collection and forecasting which would involve review of various climate change scenarios, analysis and review of available data while referencing to current Kenyan tea /soil map and analysis of current weather patterns in tea growing zones.

Many of similar sentiments were shared during the first Africa Tea Convention and Exhibition held mid last year in Mombasa.

Prof. Wachira points out that progress has been made so far as Kenya is already implementing several measures aimed at negating the effects of climate change.

One such measure is efficient management of soil and water resources which entails the promotion of precision farming and judicious use of inputs such as fertilizer in the tea growing zones.

He said other programmes are in place to address catchment protection where farmers are incentivized to plant Bamboo, environmental conservation and control of deforestation through river bank protection, sustainable management of forests through planting of hedges and natural barriers to forests.

Tea producers to get CLIMATE CHANGE ADVICE

R

esearchers in Kenya’s tea growing fields are working towards arresting the effects of global warming, which has heavily affected tea production in recent years.

The experts say signs that climate change is taking place are apparent in the tea sector and have moved to counter the threat by introducing copying practices at farm level.

The evident conditions include temperature rises, melting and retreat of the mountain glaciers on Mt Kenya and Mt Kilimanjaro as well as increasing frequency of extreme climatic events like droughts, frost and hail which are all manifestations of global warming.

In Kenya, frost has outstandingly been a major threat, making farmers incur huge losses.

Tea Research Foundation of Kenya’s (TRFK) Director of Research Prof.

Francis Wachira says the condition is expected to persist and urges farmers to take up adaptation as the only option to counter it.

In an interview with ATTJ, Prof Wachira

suggests the preparation of sector based climate change programmes, strategies, policies and projects aimed at countering the challenges of global warming.

“We also encourage closer collaboration between stakeholders in resource mobilization to support climate change adaptation activities within the sector which will go hand in hand with awareness creation and public education,” he explains.

His sentiments have been echoed by other experts in the tea sector who have argued that there is need for intensification of data and information collection and forecasting which would involve review of various climate change scenarios, analysis and review of available data while referencing to current Kenyan tea /soil map and analysis of current weather patterns in tea growing zones.

Many of similar sentiments were shared during the first Africa Tea Convention and Exhibition held mid last year in Mombasa.

Prof Wachira points out that progress has been made so far as Kenya is already implementing several measures

aimed at negating the effects of climate change.

One such measure is efficient management of soil and water resources which entails the promotion of precision farming and judicious use of inputs such as fertilizer in the tea growing zones.

He said other programmes are in place to address catchment protection where farmers are incentivized to plant Bamboo, environmental conservation and control of deforestation through river bank protection, sustainable management of forests through planting of hedges and natural barriers to forests.

Others are soil and water conservation measures and water harvesting structures or the building of micro-catchments.

“In these programmes, players have been advised to cope by growing low water demand tea varieties, exposure and promotion of alternate sources of energy like wind, solar and hydropower as opposed to wood fuel as well as embracing crop insurance and delineation of tea areas,” he says.

Along similar lines, global sustainable practices organization Ethical Tea Partnership (ETP) has started a campaign to increase Kenyan tea producers’ resilience to climate change.

The aim is to secure their future livelihoods and make these livelihoods more environmentally and economically sustainable. The project began last October and will run until October 2013.

Its key tasks are to identify the areas of highest risk to climate change, develop and test adaptation resources, train tea producers on the implementation of adaptation techniques and record and publish the lessons learnt.

Key institutions involved in the project include Kenya Tea Development Agency (KTDA), Tea Board of Kenya, Tea Research Foundation of Kenya, Kenyan Agricultural Research Institute (KARI), Climate Change Modellers (CIAT), Cafédirect Producers’ Foundation and the Rainforest Alliance.

31

ANNALYSIS

TEA STATISTICS

Producers

PRODUCER SALES

Kenya Tea Development Agency Ltd James Finlay (Kenya) Ltd McLeod Russel (Uganda) Ltd Rwanda Mountain Tea The Toro & Mityana Tea Co. Ltd Eastern Produce Kenya Ltd Unilever Tea Kenya Ltd Office du The du Burundi Uganda Tea Development Agency Ltd Sotik Tea Company Ltd Kipkebe Ltd Kaisugu Ltd Rwenzori Commodities Ltd Nandi Tea Estates Ltd Nationale Agriculture Export Development Board Sotik Highlands Tea Estate Mohammed Enterprises (T) Ltd Kiptagich Tea Estate Ltd DL Koisagat Tea Estate LTD Ngorongo Tea Company Ltd Maramba Tea Factory Ltd Mabale Growers Tea Factory Ltd KATF Kawalazi Estate Company Limited Uganda Tea Corporation Kibena Tea Ltd Gisovu Tea Company Ltd East Usambara Tea Company Ltd Mufindi Tea Company Ltd Karirana Estates Ltd Mpanga Growers Tea Factory Co. Ltd Dayalbhai Madanji & Co Kibwari Ltd Rusekere Growers Tea Factory Ltd Kijura Tea Factory Ltd Unilever Tea Tanzania Ltd Sociedade de Desenvolvimento da Zambezia, Limitada (SDZ Ltd) Nshili Kivu Tea Factory S.A.R.L. Prothem-Usine S.A. Kinkiizi Development Co. Ltd Siret Tea Company Ltd Nyayo Tea Zones Devt. Corporation Mwera Tea Estates Ltd Sociedade de Desenvolvimento da Zambezia, Limitada (SDZ Ltd) Cha de Magoma Joao Ferreira Dost Santos, S.A.R.L. Bombay Burmah Trading Corporation Ltd Nyambya Tea Company Limited Kagera Tea Company Ltd Sorwathe S.A.R.L. Namayiba Tea Estate Ltd Jardins Theicoles de Mbayo - Congo Sidexam SA Makandi Tea & Coffee Estates Ltd New Mponde Tea Factory Ltd Kisigo Tea Company Ltd

32

Sum of Weight (kgs) 89,340,943.00 7,028,191.00 6,775,616.00 5,401,593.10 5,057,854.00 4,792,566.00 4,514,591.00 4,480,551.00 4,289,396.00 4,011,674.00 3,796,755.00 2,778,097.00 2,747,860.00 2,372,881.00 2,346,768.70 2,314,674.00 2,113,560.00 2,027,032.00 1,956,379.00 1,871,960.00 1,618,876.00 1,503,287.00 1,492,300.00 1,312,396.00 1,193,882.00 1,191,996.00 1,174,811.50 1,117,282.00 1,094,473.00 1,034,899.00 1,009,686.00 797,154.00 796,896.00 785,580.00 773,816.00 733,395.90 714,222.00 619,474.00 611,256.50 525,342.00 490,520.00 443,180.00 419,364.00 416,390.00 414,450.00 382,972.00 309,464.00 215,768.00 192,154.00 174,288.00 168,982.00 129,316.00 42,708.00 37,126.00 9,415.00

Kenya tea exports up 10% in first quarter-board

Kenya’s tea exports rose 10 percent in the first quarter of this year even while output fell, according to the Tea Board of Kenya.

The board said Kenya exported 118.1 million kg in January through March, up from 107.4 million kg in the same period of 2011.

Kenya is the world’s leading exporter of black tea, which is the east African economy’s top foreign exchange earner, having fetched 109 billion shillings ($1.3 billion) in 2011.

The board’s managing director Ms. Sicily Kariuki said that drought and frost had led to a 15 percent drop in first-quarter output to 72 million kg but that heavy rains were expected to cause a turnaround in tea production.

The Mombasa-based tea auction, ran by East Africa Tea Trade Association (EATTA), handled 68.1 million kg in the first quarter, sold at an average of $2.96 per kg, down from 65.8 million kg sold in the first quarter of 2011, the board said.

It said Pakistan was the leading buyer of Kenya’s tea, taking 26.5 million kg, or 22 percent of total exports, while Egypt bought 24.5 million kg and Britain 15.9 million kg.

It said Egyptian purchases rose by 39 percent growth, while Pakistan’s increased 13 percent and British buying slowed by 15 percent. ($1).

BUYER PURCHASES Cargill Kenya Ltd Global Tea & Commodities L.A.B. International (K) Ltd Cofftea Agencies Ltd James Finlay (Mombasa) Van Rees bv Juja Coffee Exporters Ltd Mombasa Coffee Ltd M.J. Clarke Ltd Abbas Traders Ltd Ranfer Teas (Kenya) Ltd Devchand Keshavji (Kenya) Ltd Chai Trading Company Limited Alibhai Ramji (Msa) Ltd Africa Tea and Coffee Company Ltd Al-Emir Ltd Stansand (Africa) Ltd Shakab Imports Exports Co. Ltd Pwani Hauliers Lula Trading Co. Maymun Enterprises Imperial Teas (EPZ) Ltd Sardia International Co. Ltd Aimco Enterprises Imperial Teas (Kenya) Ltd Gokal Beverage Lindop & Company (Kenya) Ltd Tropical Crops Commodities Afro Teas Ltd Green Leaf Trading Co. Ltd Kirindo Tea Packers

448,857 298,305 176,766 160,784 158,336 144,648 127,742 96,634 92,435 87,444 86,412 75,060 56,566 37,098 35,656 31,340 21,551 21,420 20,390 17,842 16,820 12,960 10,756 9,839 9,440 8,420 8,020 4,940 4,559 4,318 3,180

Summer Liners Company Ltd Jawai Tea Ltd Peace Business Limited Green Leaf Trading Co. Ltd Sondhi Trading Ltd Tea Rose Ltd Gacal Merchants Ltd Riotana Trading Limited Sasini Limited Black Dew Ltd Lutex Limited Apt Commodities Ltd Tanjal Tea Company Ltd Trust Tea Traders Ltd Mombasa Tea Traders Ltd Suwad Enterprise Limited Al-Itihad (1998) Ltd Peace Business Limited Oriental Tea Expo Ltd Gokal Trading Impulse General Supply Ltd Kentea Girinlin Afribridge Trade Exporters Ltd Indo-African Tea Company (Kenya) Ltd Al-Itihad (1998) Â Ltd Mombasa Advance Logistics Limited Almasi Chai Kenya Limited United (E.A.) Warehouses Ltd Chamu Supplies

3,160 2,460 2,118 2,000 1,960 1,540 1,477 1,401 1,208 1,174 1,140 780 740 700 620 620 560 499 440 280 260 260 240 200 180 140 100 80 80

AUCTION AVERAGES Auction no.

2012/01 2012/02 2012/03 2012/04 2012/05 2012/06 2012/07 2012/08 2012/09 2012/10 2012/11 2012/12 2012/13 2012/14 2012/15 2012/16 2012/17 2012/18 2012/19 2012/20 2012/21 2012/22 2012/23 2012/24

Average of Price Per Kg 2.34 2.44 2.48 2.37 2.37 2.46 2.41 2.40 2.35 2.47 2.57 2.51 2.58 2.66 2.54 2.46 2.57 2.52 2.50 2.58 2.64 2.54 2.58 2.52

2.70

Average price per Auction

2.60 2.50 2.40 2.30 2.20 2.10

33

ANNALYSIS

TEA STATISTICS

COUNTRY AVERAGES Producer Country KENYA BURUNDI RWANDA DRC MADAGASCAR UGANDA TANZANIA MOZAMBIQUE MALAWI

Average of Price Per Kg 2.87 2.73 2.60 1.76 1.69 1.53 1.25 0.98 0.98

Average of price per kg 3.50 3.00

2.87

2.73

2.60

KENYA

2.50 2.00

BURUNDI 1.76 1.69

RWANDA

1.53

1.50

DRC

1.25 0.98 0.98

1.00

MADAGASCAR UGANDA

0.50

TANZANIA

0.00

MOZAMBIQUE MALAWI

AVERAGE PRICE PER KG SALE 1 - 31

MAIN GRADE AVERAGE

2.90 3.50

3.18

2.80

3.05 2.85

3.00

2.70

2.50

2.48

2.00

2.60

BP1 1.50

2.50

DUST1

1.00

PD

2.40 0.50

2.30 1

34

3

5

7

9

11 13 15 17 19 21 23 25 27 29 31

PF1

0.00 BP1

DUST1

PD

PF1

GLOBAL UPDATES

INTERNATIONAL TEA BRIEFS UNITED KINGDOM

UNITED KINGDOM

Tea prices to rise on strong demand and weak output, McLeod says

Tea holding its ground against coffee in the UK

McLeod Russel, the world’s biggest tea grower, expects tea prices to rise in the coming years due to sustained growth in demand and weak output levels. The company, which owns 38,000 hectares of tea plantations in India, Vietnam and Uganda, is expected to announce strong revenue and profit growth because of a “pipeline deficit” in global tea supply, as global black tea consumption is projected to rise 21% in the next 10 years. Kenya, Sri Lanka and India have already reported lower outputs this year due to adverse weather conditions and the situation is not likely to improve given that tea plantation area around the world remains the same, while demand continues to rise. Companies like Unilever and Tata Global Beverages are expected to be negatively affected by these commodity price rises.

New research by Travelodge, a budget hotel chain, confirms that tea is firmly entrenched in British culture, with over half of the nation relying on a traditional cup of tea to kick-start their working day. Despite the pervasiveness of coffee shops in urban areas, only 35% of Britons choose coffee in the morning.

Contrary to popular belief, it turns out that 18-24 year olds are very much into tea, with 51% choosing tea in the morning and nearly half using tea as a comforting beverage.

According to the survey, the quality of the brew can still be improved upon, with only 16% of respondents brewing tea in a teapot and only one in ten brews it for the recommended amount of time. Finally, the study identified Wales as the most hardcore region for tea drinkers in the UK.

UNITED STATES OF AMERICA

INDIA

Sage Group Network, a Seattle-based tea industry think-tank and publisher, estimates that the size of the US tea market has been grossly underreported and is actually greater than $27 billion. The latest edition of Specialty Tea Is “Hot” Report, which encompasses industry trends, investment activity and many other relevant topics, covers all tea product types sold through all distribution channels. This includes the massive foodservice segment, which is of critical importance given that more than 75% of all tea consumed in North America is iced or cold. The new gross revenue estimate of $27 billion in 2011 places tea at a similar level to coffee, whose foodservice and retail sales are estimated to lie between $30 and $40 billion.

Authorities in India are setting up crop insurance aimed at tea farmers in order to mitigate the effects of erratic weather conditions. Indian Tea Board and Agriculture Insurance Company of India Limited seek to develop an insurance scheme to cover tea plantations against risks of heavy showers, droughts, hailstorms, frost and snow fall. As there are large variations in weather patterns across India, the group is now compiling nationwide weather data to determine thresholds and premiums for each region. Experts say that tea needs specific insurance features, because, contrary to most other crops, its price depends greatly on quality and any damage to tea bushes may lead to long-term losses that are difficult to assess.

Total US tea market tops $27bn according to industry report

India to offer crop insurance against bad weather

As Pakistan lowers imposts, Indian tea exports set to get a fillip Indian tea exports to Pakistan is set to get a fillip, following the lowering of sales taxes by a steep 11 per cent. Sales tax along with a high level of customs duty and some local imports have rendered Indian teas uncompetitive in Pakistan. This is now expected to get corrected to a large extent.

“This will provide a huge boost to Indian exports of black tea to Pakistan,” Azim Monem, Chairman, Exports and Domestic Sales Sub-Committee of the Indian Tea Association said. ITA Chairman C. S. Bedi, too, welcomed the development saying that Pakistan was now keen to buy all types of Indian tea.

Ullas Menon, Secretary of the United Planters’ Association of Southern India, said, “Genuine buyers would now get value for their money”. Bulk of the 24 million kg of tea that Pakistan imports goes from South India.

Mohammad Hanif Janoo, Chairman of the Pakistan Tea Association, told The Hindu that sales tax had been reduced to 5 per cent from 16 per cent and this would boost tea imports from India. “Import of good teas from India will increase,” he said, adding that Pakistan’s legal tea imports would now “increase from 125 million kg to around 170 million kg.”

It may be mentioned that amid the positive spirit now ruling between the two countries, in April 2012, a pact was sealed between the industry representatives of India and Pakistan to double tea exports to 50 million kg by 2015.

Pakistan is one of the top three tea importing nations with a consumption of 220 million kg and an official import of 120 million kg. Its main supplier is Kenya. “We are hopeful that India’s share will grow… tea consumption is growing in Pakistan where it is a food item,” Mr. Janoo, leader of a 13-member delegation, had said at a press meet in April.

Mr. Monem said Pakistan was now showing a preference for value-added teas and samples had been sent. He said these were mostly made of fannings of which there was surplus in India.

35

PICTORIAL

EATTA NEWS IN PICTURES

1

2

3

4

5

6

1. EATTA staffers participate in a bicycle race during the annual sports day held at the Mombasa Sports Club in April 2012.

2. Members of the Turkey delegation are taking on a familiarization tour in a Mombasa warehouse during their recent visit to the EATTA 3. The Turkey delegation is taken through a presentation when they paid a courtesy call to the EATTA secretariat in Mombasa.

36

4. Children dance during EATTA’s Sports day at the Mombasa Sports club in April 2012.

5. Chinese Embasy officials led by ambassador Liu Guangyuan (3rd L) with EATTA

officials led by chairman Peter Kimanga (2nd L) when the embasy officials paid a visit to the association in February 2012.

6. Mr. George Mwasaru of Gold Crown Beverages (K) Ltd takes Chefs through the preparation of Speciality teas during a recent Kenya Chefs Association forum at Diani Sea Resort.