The Tea Junction

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TEA The Official publication for EATTA

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) 0722 208699/0733 208700 info@eatta.co.ke www.eatta.com

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W

elcome to the inaugural edition of the Tea Junction.

The publication will be a useful tool for information to the members and will inform you on what is going on in the tea world. Run by a new team of publishers, the Tea Junction replaces the Africa Tea Trade Journal that was the EATTA publication for the last 5 years.

Our aim is to make the tea junction a quarterly publication of the East African Tea Trade Association.

The journal will incorporate some changes from the previous journal. Firstly, we aim to make it more regular, readable and cover topical issues of interest to you. The third important addition to the magazine is that we intend to make it sustainable through advertising income for the association.

The year has been very eventful with numerous activities taking place. The members’ taskforce is carrying out its work to make EATTA more effective.

We are working with regulators to enhance the environment that the tea industry operates particularly as the devolved system of government takes shape in Kenya. In this regard, EATTA has together with other business membership organisations joined hands to make a petition to the Mombasa Governor on various areas that need urgent improvement. We are also pursuing the review of the Ad Valorem Levy. To this end, a consultant has been contracted to carry out a research study to establish the depth and scale of impact that the Ad Valorem levy has had on organisations in the tea trade.

The evidence will be used to present a policy position paper to be presented to the Government.

The major event is of course the 2nd Africa Tea Convention and Exhibition in Kigali, Rwanda, and and I wish all exhibitors and participants a successful event. By the time of writing

Word from the MD

this foreword, the convention is a week away.

I would like in conclusion to recognise past members of the Board of EATTA who have retired in the last few months.

Nelson Orgut who has been a past Chairman of EATTA and a member of the Board for many years retired in April 2013. Mr. Peter Kimanga our immediate past Chairman retired from the Board in March 2013. Mr Daniel Tanui who stepped down from the Board in February. Ms Njeri Rionge our independent director’s term came to an end in March. Mr Digvijai Singh who represented Tea Association of Tanzania term also ended earlier in the year. I would like to pay tribute to all of them by saying that in the short time I have worked with them I have found them to be people of integrity, wise counsel and a balanced approach to matters. I do wish them well.

I would also like to welcome the new members of the Board including Mr. Peter Gitata representing buyers, Mr. Ivan Fernandes representing the warehousemen and Mr. Chris Flowers and Mr Peter Rowland representing producers.

I wish you an enjoyable reading.

Edward K. Mudibo Managing Director East African Tea Trade Association

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IN THIS ISSUE

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28 26 16

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10 THE TEA JUNCTION SEPTEMBER 2013

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contents Researcher waits nod for new tea clones…....…....... 4

EU Tea Market trends ………………..........………...... 18

Exporters get reprieve on new KRA rules…………....... 5

New tax system faces opposition …………………….. 20

Railway levy: farm input prices to rise………………..... 6

Uganda predicts good tea output …….................... 22

Drop in piracy boosts tea industry………………………...... 8

TBK e-portal to go live in September ………………...... 23

Value addition: Partner with buyers to boost earnings……….....………..... 10

TBK turns to paperless trade ………….........………... 26

Hydro power projects to transform tea factories…………………........ 12

Kenya’s tea sector vibrant despite Egypt upheavals …….......................…………. 27

Cover Story:

International Tea News ……………………………….......... 28

Rwanda hosts International Tea Convention amid new global trends ……....…..... 14 2

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Researcher waits nod for new tea clones Half a kilogramme of processed purple tea leaves sell at Sh2,600 while the same amount of either black or green tea goes for Sh200, which speaks volumes of its monetary value.

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ea Research Foundation of Kenya (TRFK) has submitted an application for granting of Plant Breeders Rights for two new clones; low caffeine green and black tea suitable clones. The clones are likely to be officially released in early 2014, says Dr Samson Kamunya, a plant breeder at TRFK. In the last 10 years, over 900 new clones with varying potential for use in processing different products of tea have been developed, the researcher said.

“Tea improvement is a protracted process that requires concerted efforts of all players including tea tasters in Mombasa tea auction, marketers,

consumers and other stakeholders. The varieties are normally released once they have been registered with the Plant Variety Protection Office at the Kenya Plant Health Inspectorate Service (KEPHIS),” Kamunya said.

The new purple tea variety has high return as it is used to process high value tea product with enhanced antioxidant capacity (it has high medicinal value compared to other tea products including green tea).

The most remarkable breakthrough in the research foundation was the release of purple tea variety in 2011 which is said to have over 10 times the common variety Kenya farmers are growing. The special purple tea (TRFK 306) was development for 25 years.

The new varieties are able to withstand bad weather, drought, frost, pests and diseases that have conspired to reduce farmers output and earnings. Farmers have often challenged agricultural research institutes to come up with new varieties of the crop that can withstand frost, pests and diseases.

Farmers have quickly adopted the new technology, says Dr Kamunya, although they lack processing equipment

“The new tea variety with a purple pigmentation successfully received a nod from the National Variety Release Committee in

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in their respective catchments. Currently, it is only Kangaita Tea Factory that has a small tea value addition system in place to process the product at a commercial scale.

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Briefly 2011 and has a wide range of benefits, making it a favourite for the market due to the high prices it fetches,” says Dr Kamunya.

Half a kilogramme of processed purple tea leaves sell at Sh2,600 while the same amount of either black or green (tea) goes for Sh200 and this alone speaks volumes of its monetary value.

Majority of tea bushes in Kenya were planted a long time ago, about 60 years ago, having been inherited from either colonial masters or fore-fathers making research breakthrough a welcome move. Such bushes have been found to be less productive and give low quality tea, more so if they are not taken care of properly.

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However, according to Dr Kamunya, such bushes can be uprooted and replaced with purple tea to improve production as well as raise quality. The clone has a vast adaptability to designated teagrowing regions and requires no special maintenance other than the one tended to the ordinary tea bushes.

But the plant breeder says the new variety is not meant to overhaul the existing black, green and white varieties as these also have a niche in the outside market, though he notes it will boost the quality of Kenyan tea exports — since 95 per cent of the other varieties produced locally is exported — and this cannot happen if they are of bad quality.

Exporters get reprieve on new KRA rules East Africa Tea Trade Association (EATTA) has won a battle against a directive issued early this year, which industry players said would hinder international trade.

Tea exporters will now not be required to show approval of export by revenue authorities of destination countries.

The new requirement was announced by Kenya Revenue Authority (KRA) on April 12 this year to prevent refund of export related fraudulent claims.

However, EATTA protested the move, saying that divergence of tea meant for export was very remote.

EATTA, which runs the weekly Mombasa auction, has played a central role in initiating reforms in the industry to enhance efficiency.

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Railway levy Farm Input Prices To Rise

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he first batch of a Sh3 billion fertilizer consignment arrived at the port of Mombasa in late July to be distributed to more than 560,000 tea farmers across the country.

65 tea factories it manages across the c o u n t r y for onward distribution t o smallholder tea farmers.

However, as the 32,166 metric tonnes fertilizer begun to be offloaded from the vessel, tea farmers were cautioned over the rise in price for the commodity.

M o m b a s a based KTDA subsidiary company, Chai Trading Company Limited (CTCL) handles the clearing and forwarding, logistics and warehousing issues of the cargo. The type of the fertilizer is Chemically Compounded NPK and is expected to greatly boost tea production in the tea growing zones.

Uncertainty and fears heightened over a possible rise in price after the Value Added Tax Bill failed to specify whether the farm input would be exempted from VAT and the introduction of the Railway Levy.

In a statement released to the press, Kenya Tea Development Agency (Holdings) Chief Executive Officer Mr Lerionka Tiampati said whereas farmers made huge orders due to a competitive global and local price last year, things might be different this year due to the introduction of the levies.

“Whereas the international price of the fertilizer this year was comparable to last year’s, local dynamics this year could impact negatively on the price. “The introduction of the Railway Levy and possible imposition of VAT might increase the cost of imported fertilizer,” said the CEO.

“The product was sourced directly from the Romanian manufacturers and hence acquired at the most competitive price,” said Mr Tiampati.

Mr Tiampati said, “The final price of a 50kg bag will be determined once handling, warehousing, transport and insurance costs have been factored in”.

The fertilizer was the first consignment of a total of 64,000 metric tonnes with the second consignment of 32,600 metric tonnes expected to arrive at the port this month from Romania.

After offloading, the fertilizer would transported by trucks contracted by KTDA to all the

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Last year, KTDA imported 63,500 metric tonnes of fertilizer worth Sh 2.8 billion for the small scale tea farmers.

Due to what Chai Trading Company Ltd Managing Director Mr Charles Mbui said was quality fertilizer and good crop husbandry, tea production in the country has been on an upward trend.

Mr Mbui said Green Leaf tea production was 908 million kg in the 2011-2012 period and was expected to rise to 1.1 billion kg in the 2012-2013 period.

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DROP in piracy BOOSTS tea industry

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he significant reduction in the number of successful pirate attacks off the Somali coast and the enhanced capacity of the port of Mombasa to handle huge vessels is a major boost to the region’s tea market, industry players say.

The dredging of Mombasa port and improved dwell time has seen shipping lines deploy huge vessels, a move that is expected to improve competitiveness of the facility due to reduced freight costs.

Peter Kimanga, of (EATTA) said shipping lines are now deploying many vessels to the region, allaying fears that had gripped the industry that Dubai Tea Trading Centre (DTTC) was becoming a serious threat to Mombasa auction.

Somalia and the Gulf of Aden have seen a dramatic decrease in piracy attacks, dropping from 237 in 2011 to 75 in 2012, with hijackings also reducing by half, falling from 28 in 2011 to 14 in 2012, according to the International Maritime Bureau (IBM).

“With the successful suppression of Somali pirate attacks and peace in Somalia, more ships are now calling at the port of Mombasa,” Kimanga said.

The dredging of the port and the improved dwell time has seen shipping lines bring huge vessels, a move that is expected to improve

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competitiveness of the port due to reduced freight costs.

Last year, ship dwell time reduced to five days compared to over 10 days before. Maersk Shipping, the biggest shipping line commanding over 30 percent of cargo volume, is expected from August this year to deploy a fleet of one of the biggest vessels to ever call at Mombasa port.

The vessels have a length of 300 meters and will be expected to occupy the new berth No.19 and part of berth No.18, Kenya Ports Authority (KPA) said in a recent press release. The longest vessel in the world is 400 meters long.

The DTTC, an initiative of the Dubai Multi Commodities Centre (DMCC), has set its eyes on African tea producers with regional producers of tea in Kenya and Rwanda becoming members to join the growing community, a move that the industry players felt would reduce significance of Mombasa, the biggest black tea auction in the world.

Kenya Tea Development Agency (KTDA) and OCIR, the official Rwandan Tea Authority are active members of the centre. DTTC is a dedicated facility where international tea THE TEA JUNCTION SEPTEMBER 2013

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producers and merchants hold stocks of tea that are ready for shipment to the Middle East and adjacent regions.

Kenya is the third largest producer of tea in the world and controls about 23 per cent of global tea exports. In 2012, KTDA was responsible for 60 per cent of Kenya’s total tea production. In Rwanda, annual tea production reached 22.5 million kilos in 2012, Tea is Rwanda’s largest export earner.

“One of the strategic objectives of the DTTC is to strengthen Dubai’s role as focal point for the international tea trade by enabling the availability of a variety of multi-origin teas through the centre,” said Ahmed bin Sulayem of DMCC. “Kenya and Rwanda are significant examples of this, and we expect to see strong

interest in African tea from blenders a n d buyers,” he added.

The Kenyan E x p o r t Promotion C o u n c i l announced plans to set up a tea warehouse next year in Dubai in an effort to expand its market in the Asian and Eastern European countries. The new warehouse is intended to take advantage of the eight-year-old DTTC which sells and processes teas from 13 different countries.

The National Export Promotion Council of Kenya chairman Hudson Aluvanze said the

Dubai auction centre has been a major m a r k e t competitor to the East Africa tea m a r k e t raising a necessity to establish a permanent presence to ensure that Kenyan tea is always available. Kenya’s traditional tea markets in the region are Afghanistan and Pakistan.

“We have to set up permanent distribution centres to ensure that we maintain the proximity to these markets. It will also serve to authenticate other Kenyan products like coffee in the Asian markets,” said Mr Aluvanze.

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VALUE

ADDITION Partner with buyers to boost earnings “Although VAT for tea packed for export can be refunded upon sale, the system is cumbersome… there are people with VAT returns that have been tied up for years.”

EATTA chairman Peter Kimanga.

The emerging tea market trends are increasingly limiting opportunities for export of value added tea from the region. Most of the countries importing tea from the weekly Mombasa auction prefer to buy it in bulk to create jobs in their country, a move that has dealt the country’s efforts to promote export of value added tea a devastating blow.

The logistics of exporting value added tea are also complicated, leaving producers with no

option but to sell tea from the region in bulk, East Africa Tea Trade Association (EATTA) chairman Peter Kimanga says.

He says that value addition efforts can be achieved through producers partnering with those buying tea from the region or by convincing them to establish processing units in Kenya to package their brand.

“The idea of selling Kenya’s tea in for instance a supermarket in France is not feasible in the current environment since the task of promoting tea when it gets there is enormous. Value addition would have worked well 50 years ago,” Kimanga said.

Besides that, the freight costs of selling packed tea are prohibitive, where for instance, a container can only load two tonnes of packed tea as opposed to 12 tonnes of bulk tea. Tea packers in Kenya have protested that the rising cost of packaging materials and high taxes give the East African rivals an edge in the domestic market.

Kenya is the only member of

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the East African Community that charges Value Added Tax on tea, raising the retail prices of the commodity even where the costs of production are competitive.

Tanzania and Uganda tea are becoming more common in supermarkets in Kenya because they are exempt from the 16 per cent levy charged on locally-packaged produce.

Although the VAT for tea packed for export can be refunded upon sale, the system is cumbersome according to Kimanga. “There are people with VAT returns that have been tied up for years,” he said.

Kenya produced 377.9 million kilograms (833 million pounds) of tea in 2011, of which 97 per cent was sold in bulk. Some growers in the region have joined the Dubai Tea Trading Centre, or DTTC, which offers

12T

Amount in tonnes a container can carry of bulk tea THE TEA JUNCTION SEPTEMBER 2013

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a tax-free environment as well as processing and blending facilities.

Members of the DTCC in East Africa include the Chai Trading Co., a unit of the Kenya Tea Development Agency, Finlays Kenyan subsidiary and McLeod Russell India Ltd. (MCLR)’s Ugandan and Rwandan units.

Total tea traded through the center is over 8.5 million kilograms per year.

“The center offers warehousing, blending and packing facilities under one roof,” DTTC said.

“Increasingly, merchants are using this to develop blend recipes specific to countries’ and market requirements.”

However, with successful suppression of Somali pirates and a peace deal in Somali, Kimanga says, DTTC is no longer a threat to regional

teas as was earlier feared.

“With the dredging of the port of Mombasa and calm off Somali Coast, more ships are now calling at the port,” he said.

Firms processing tea locally churn out 22 million kilos per year but are grappling with the rising cost of food-grade packaging materials that are sourced from Sri Lanka, Dubai or India.

While the foreign exchange cost of these materials has been on rise, imports are also subjected to duty and other tax. This is besides the the 16 per cent VAT the government levies on tea bought outside the Mombasa auction.

Kenya, the largest CTC (crush tear and curl) teas exporter, has for decades depended

on bulk exports due to the lopsided tax regime which subjects the industry to numerous taxes—which the EATTA says stands at 30 per cent. While exporters of bulk tea are spared the 16 per cent VAT, local packers buying the commodity for value-addition are not.

The multiple tax regimes for value added tea has also made local produce non-competitive globally, a big blow to the ongoing generic marketing by the Tea Board of Kenya (TBK), which in 2011 introduced a mark of origin.

The manner in which the Tea Act is crafted has been a major hindrance to trade. It requires operators to seek licenses every year and without certainty that the licenses will be renewed, investors shy from committing huge investments, Kimanga added.

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Hydro power projects to transform tea factories

Each of the factories spends between Ksh 35 million and Ksh 40 million annually on power. Besides saving on electricity costs, farmers will benefit from an alternative source of revenue through the sale of surplus power to Kenya Power.

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Four tea factories in Nyeri are set to benefit from a multi-million dollar small- hydro power project that will see them diversify their revenue sources next year when the project is completed.

The construction work by VS Hydro from Sri Lanka is progressing well. Kenya Tea

Development Agency (KTDA) is spearheading 13 other similar projects which are at various stages of implementation at all the tea-growing zones, says Charles Kimathi KTDA group head of corporate affairs.

Set to be commissioned in December 2014, the Gura Small Hydro Power Project is expected to cost Ksh 1.3 billion and will generate 5

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Mega Watts of electricity.

The revenue generated will be shared between Gathuthi, Gitugi, Iriaini, Chinga tea factories in Nyeri and the KTDA Power Company Ltd who are the shareholders.

Thirteen other Small Hydro Power Projects countrywide are also in the pipeline as KTDA Power Company moves to mobilize resources to enable all the 65 KTDA managed factories diversify their business and generate additional revenue.

Each of the KTDA factories spends between Ksh35 million and Ksh40 million annually on power costs. The cost of putting up a small hydro is high and factory companies have to resort to loans to raise the THE TEA JUNCTION SEPTEMBER 2013

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power supply. The farmers will benefit from an alternative source of revenue through the sale of surplus power to Kenya Power,” said Kimathi.

KTDA’s first small hydro pilot project was at Imenti Tea Factory in Meru County, with its 1Mega Watt small hydro plant that was commissioned in 2009. The power project has been able to reduce the factories electricity bill by almost 60 per cent, according to KTDA officials. The factory consumes about half of the electricity generated (0.4 MW to 0.5 MW) and sells the surplus to the national grid through a power purchase agreement (PPA) with Kenya Power.

KTDA Power Company expects to sign a power wheeling agreement with Kenya Power once the regulator approves, which will facilitate transmission of power to factories that are not within close proximity to the hydro sites. necessary capital in addition to equity contribution.

Gura project is financed through 35 per cent equity and the remainder as loan.

The project is owned by Gura Power Company, whose shareholders are: Gathuthi Tea Factory Co, Gitugi Tea Factory Co, Iriaini Tea Factory Co., Chinga Tea Factory Co., all KTDA-managed Tea Factory Companies and KTDA Power Co. “The project’s direct benefit to the factory companies includes cheaper, more reliable and better quality

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Greening Tea Industry in East Africa (GTIEA), an initiative that was initiated

by East African Tea Trade Association last year sought to establish 6 small hydropower demonstration projects in at least 4 of the EATTA member countries. The studies and planned small hydropower installations will serve as training grounds for the entire tea sector.

Global Environmental Facility (GEF) funded the project and was co-implemented by United Nations Environmental Program (UNEP) and African Development Bank (AfDB).

Tea production cost, according

to EATTA comprises 60 per cent of the tea prices realized at the Mombasa auction, 30 per cent of which are energy costs. It is estimated that reverting to hydro energy would help reduce the energy costs to 12 per cent thereby improving the producers’ profit margin substantially.

Mombasa auctions tea from Kenya, Uganda, Tanzania, Burundi and Rwanda. Other countries include Mozambique, Madagascar Malawi and Democratic Republic of Congo.

In Kenya, the initiative supported KTDA Gura River small hydro project in Nyeri County and 3 MW Kipchoria River in Nandi County owned

by Eastern Produce Kenya (EPK), a company owning seven tea factories in Kenya and ten in Malawi.

It has been estimated that Kenyan electricity is among the most expensive in the world, a situation that places Kenya, and the tea sector specifically, at a cost disadvantage compared to its international competitors - primarily Sri Lanka.

The main obstacle to the adoption of small hydro power projects agreement has been on the tariff for “power wheeling”- the cost of transmission of power generated from a hydro site to tea factory using the existing medium voltage power lines infrastructure.

While this is common practice in other countries, it is a new development in Kenya and the decision on the tariff by the Energy Regulation Commission will set an important precedent in determining the supply of electricity by independent producers into the national grid.

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Rwanda hosts International Tea Convention amid new global trends 14

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Cover Story

THE THETEA TEAJUNCTION JUNCTIONSEPTEMBER SEPTEMBER2013 2013

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T

The 2nd Africa Tea Convention and Exhibition comes in the wake of major events that are emerging globally that are increasingly shaping tea markets that over 250 delegates in Kigali, Rwanda will ponder and digest, if African Tea will continue playing its vital role.

Themed ‘African Tea, Refreshing the World; Driving the African Economy’, the convention brings together tea producers, exporters, traders, experts, researchers and development partners, in a similar forum that two years ago created room for exchange of ideas, interaction and creation of networks among various players.

The 2nd Africa Tea Convention and Exhibition will also bring t o g e t h e r members of the brokers, tea packers, and warehousemen from East and Central Africa as well as investors in the sector.

Organised by East African Tea Trade Association (EATTA) in collaboration with National Agricultural Export Development Board (NAEB), the convention which was first held in Mombasa, Kenya, two years ago has now become a landmark event that will be held every two years to understand the market trends.

Such importance has the forum become that non other the head participate in the

event. When it was hosted in Kenya, then the president Mwai Kibaki opened the convention.

“Participants in the convention are expected to use the forum to share their experience with different experts in technology as well as leadership skills expected to be freely shared by international experts,” organizers said in a recent statement to the media.

The convention will interrogate regulatory environment of the tea industry and its impact on the market.

Stakeholders, especially in Kenya, which hosts the weekly M o m b a s a auction where tea from nine regional countries is sold have in the past complained of strict regulatory and taxation regime that has affected the progress of tea industry.

Tea players have also complained of non tariff barriers that hinder movement of goods. But recently, the new government led by Uhuru Kenyatta, issued a decree to remove NTBs, which Peter Kimanga, EATTA chairman says has eased loading of containers into the ships.

The convention is expected to discuss the issue of research breakthroughs in tea sector and products diversification to accommodate emerging markets and new consumption habits.

Speakers changing

will trends

of

discuss global

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tea consumption especially in Europe, where Barbara Dufrêne, an expert in specialty tea and author says ‘drinkers are ‘quite neatly segmented into the “tea only, tea mainly” consumers in the UK and Ireland, the “coffee mainly and tea sometimes” consumers in Germany, France, Netherlands and Poland and finally the “tea rarely” markets in Spain, Italy, Scandinavia (see a separate opinion piece).’

At slightly over 59 million kilos of tea exported to UK last year, it is the third biggest destination of tea auctioned at Mombasa after Pakistan and Egypt.

The first Africa tea convention took place in Mombasa in 2011 with 600 delegates in attendance. Twenty-nine countries were represented with 34 companies participating in the exhibition.

In the previous tea convention, two factories from Rwanda- Gisovu and Kitabi- received first and third prizes, respectively, for the best quality tea in the cupping competitions that were held.

Rwanda was selected to host this year’s convention because of its notable promotion of the tea industry, quality and quantity presented especially at the Mombasa auction.

Tea industry players say that the Mombasa auction, the biggest black tea auction in the world, needs to position itself in order to continue playing its critical role. It is one of the 11 tea auction sites across the globe.

The amount purchased outside the auction system last year rose from 20 per cent of sales to 30 per cent. This has left about 18 per cent of tea remaining unsold each week, THE TEA JUNCTION SEPTEMBER 2013

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which tea experts say is not healthy for the future of the auction which sells tea in bulk.

According to Kimanga, this trend is attributed in part to government administrative requirements such as lodging of huge deposit and a requirement to invest in warehousing, without any guarantee of future licensing of operations. Players are licensed annually and with the huge investment needed in the industry, investors shy away.

The activities of the Dubai Tea Trade Centre (DTTC) have also come into sharp focus for attracting business away from Mombasa, with major players such as Unilever, James Finlay and Kenya Tea Development Agency, which is the marketing agent for 650,000 small-scale farmers, signing up to use DTTC. Kenyan and Rwandan teas are now being regularly shipped to the centre, which is facilitating sales in these teas through sampling and building awareness. Until the tie up with DTTC as a sales source, the bulk of the teas produced in Kenya and Rwanda have been sold through the Mombassa auction.

“As one of the world’s major producers of quality tea, we are delighted to partner with the DTTC and we look forward to a long and fruitful partnership,” Samuel Karima, KTDA General Manager Sales and Marketing was quoted saying recently.

But perhaps what will excite every tea player is the efficiency that has been created in handling of tea exports, which constitutes the biggest volume handled by Mombasa port.

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Kenya Ports Authority (KPA) is carrying out major infrastructural projects that have enhanced efficiency at the port. Coupled with the recent decree from Uhuru Kenyatta government to remove Non Tariff Barriers, which Kimanga says has eased loading of containers.

59m The amount of kilos of tea exported to UK last year

The construction of the 240 meters long berth No.19 that was launched in July 2011 is now complete and the port can now comfortably berth three ships with an average length of 250 meters.

250

With an added stacking yard of 15 acres, the port added an additional annual capacity of 200,000 TEUs; a factor that has improved ship turnaround time to five days and is expected to lower freight rates of region’s imports and exports in the coming days.

Shipping lines have already announced intention to deploy huge vessels to the port due to enhanced capacity following completion of channel dredging last year as well as completion of berth 19.

Berth No.19

Last year the port commissioned construction of the Second Container Terminal which is now at 38 per cent complete with the first phase expected to be ready by March 2016.

number of delegates expected in Kigali, Rwanda for the 2nd Africa tea Convention.

at the Port of Mombasa is brand new and can comfortably berth three ships with an average length of 250 meters.

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EU

Tea makes inroads in traditional coffee markets

Tea Market Trends

Although the economic crisis is hitting hard and unemployment has become a crucial issue, fine food and drink remain attractive because TEA DRINKING responds to several important trends.

T

he European tea drinkers are quite neatly segmented into the “tea only, tea mainly” consumers in the UK and Ireland, the “coffee mainly and tea sometimes” consumers in Germany, France, Netherlands and Poland and finally the “tea rarely” markets in Spain, Italy, Scandinavia. Whilst the big consumer markets will purchase mainstream teas, the smaller markets increasingly focus on origin and specialty teas.

The global tea market pattern has changed hugely during the past 10 years or so, with China not only becoming the world’s number 1 tea producer but also restoring its many fine traditional “terroir teas”.

In developing a completely revamped high added value specialty tea market segment China has created a lively incentive towards the introduction of wider selections of origin and specialty teas also in more conventional tea growing countries.

Furthermore global tea production has reached and gone beyond the 4 million

tonnes of annual output in 2012 and is still on the rise.

This unheard of volume has put the billions of cups of tea drunk all over the world at an ex aequo level with the billions of cups of coffee for the first time ever. This has stimulated the competition for throat share and it seems that tea consumption remains on the rise in particular in the traditional coffee drinking markets in Europe!

Today teas from Africa do not really have a very strong profile, most of them are CTC blends for tea bags. However since recent years single origin and a few fine terroir teas have become available in Europe and there is room for many more!!

Although the economic crisis is hitting hard and unemployment has become a crucial issue, it appears that fine food and drink remain attractive as their purchase allows to indulge at reasonable costs. Quality teas are amongst the foods that remain on the shopping list, because tea drinking responds to several important trends today.

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For the mainstream teas, consumers are mainly concerned of:

Health considerations: Tea with its strong AOX effects is reported to have major benefits for the prevention of CVD and neurodegenerative diseases, to help fight obesity, to improve alertness and mood; there are no side effects at all and more and more study results strongly support the positive impact of regular tea drinking on public health. This explains why green tea consumption is rising fast in Europe and in the USA where this cup was virtually unknown only 15 years ago.

and without plant pests.

Europeans care more and more for clean and untreated products, free from pesticides and chemicals. Building up solid communication around this message could specifically enhance African teas.

Social responsibility: Making the European consumers aware of the significant share small holders have within the African tea industry holds a high potential of “sharing”; further more direct

Responding to the same trend, i.e. the need to “go fast” are the RTD teas and the instant tea preparations, just have a glance at Japan where they are on the market for over 20 years. These teas are also particularly comfortable to use when you travel or go for long drives.

Clean food: African teas are grown in clean air, far away from industrial areas and smoking chimneys, often in high elevation THE TEA JUNCTION SEPTEMBER 2013

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A few such African terroir teas are already on the market in Europe and highly appreciated, there is room for many more.

Not to forget the scenic beauty and colourful tea fields that give consumers the desire to explore such faraway places as the Rift Valley, the Great Lakes, the Nile Congo crest, the giant volcanoes, for you to write up such African Tea Tales.

Taking into account all the above there is considerable mileage here for gearing European tea consumers’ choice and preference towards quality teas from Africa.

Convenience: tea is easy to brew, no need for technical devices like roasting and grinding! Only clean water that needs to be heated. NB: cold water infused teas are gradually becoming quite popular in Europe for the hot summer period, that is “ice tea”. Good quality tea bags are easy to carry along, guaranteeing your usual cup taste and “no messy wastes” to look after: an important message for the EU customer!

i.e. clearly identified and fully traceable place of growing, plant variety and production process.

sourcing from producer cooperatives provides transparency and traceability, which are key issues for informed consumers.

This approach has proven very successful in the coffee sector and should certainly be equally rewarding for tea.

Sustainable farming: This set of rules which intends to help with the prevention of climate change is an important issue for consumers who pay attention to the labels.

In order to engineer strategies that build on these trends, either one by one or bundled together you might envisage looking at the achievements of the coffee industry within the EAFCA; Hence you might consider setting up your own body to look after the East African Fine Tea Development.

Dr. Barbara Dufrêne, July 2013 “La Nouvelle Presse du Thé” Paris, France.

Finally there is also the growing interest in more knowledge and refinement that fuels demand for single origin and specialty teas. Here the African tea producers have a high value added market niche opening its doors to them: provided that their teas fit with the specialty tea profile,

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22/08/2013 10:46:41

New

system

faces opposition

A

new tax system set to roll out in East Africa faced obstacles when revenue authority commissioner generals from Kenya, Uganda and Rwanda failed to strike an agreement with freight agencies at a meeting in Mombasa recently.

The meeting between Commissioners’ General of Kenya, Uganda and Rwanda Revenue Authorities Mr John Njiraini, Ms Allen Kagina and Mr Ben Kagarama at the Kenya Ports Authority failed to provide answers to questions surrounding the system set to roll out soon.

The new Single Customs Territory system was announced in a joint communique after a tripartite summit involving the Heads of State for Kenya, Uganda and Rwanda at Entebbe on June 25 who directed that the collection of customs duties for goods destined for landlocked countries and warehouses be charged from Mombasa port.

Introduction of the system meant that customs and clearing agents of the partner countries have to be based in Mombasa.

This caused opposition from the Kenya International Freight and Warehousing Association (KIfwa) which claimed that if implemented, the system will cause loss of business for 700 Kenyan companies to Uganda and Rwanda.

Further, Kifwa argued that Kenyan transporters would lose business while 500,000

Kenyans employed directly in the transit trade and transport service sector would also lose employment.

“There will be loss of source of income for nearly 1 million Kenyans eking a living from small businesses along the corridor and at the border stations,” said Kifwa adding that security bonds to local insurance companies will also be lost.

At the meeting with the revenue bosses where Kifwa was represented by their national Chairman Mr Boaz Makomere, Mr Njiraini said stakeholders would be involved from henceforth since there was no time to bring them onboard citing little time the system took to be introduced.

In a joint statement later after a tour of the port facility, the three revenue bosses urged the freight agencies and the general public to support the programme as its benefits would much outweigh the losses.

“The Single Customs Territory development stands to positively impact the three partner states’ trade activities as it will ensure that assessment and collection of taxes is done at country of destination before such cargo moves out of the port,” said the statement.

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The new Single Customs Territory system was announced in a joint communique after a tripartite summit involving the Heads of State for Kenya, Uganda and Rwanda at Entebbe on June 25 who directed that the collection of customs duties for goods destined for landlocked countries and warehouses be charged from Mombasa port.

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It added that the East African Community Customs Union will join the ranks of the South African Customs Union and European Union among others where restrictive regulations are eliminated to form one region for customs purposes.

They promised to engage with private sector associations, government and clearing agents associations such as Kifwa with a view to harmonizing operational logistics and procedures.

They envisage that the system will reduce cargo clearance delays, clearance costs and multiple bond securities, eliminate checkpoints along the Northern Corridor, ensure seamless flow of goods and increase revenue collection through easier payment systems among other benefits.

However,

Kifwa

maintains

that the system should be suspended until appropriate legal framework is in place and all stakeholders who were allegedly left out are brought on board.

Mr Makomere warned that the system was created in a hurry and would hurt the Kenyan economy greatly through a massive loss of revenue, jobs and businesses. Mr Njiraini admitted during the press brief that some jobs would be lost but this was insignificant compared to the major gains to be achieved.

But Kifwa argued that the system would mean containers are scanned, verified and opened at the port of entry before they are released to countries of destination which will cause more delays of cargo clearance.

However, the three revenue

Tea Processing Machinery and Spares Tea Grading and Cleaning Machinery Conveyor Systems Belting Multiwall Paper Sacks from Sri- Lanka IMA’s Range of Tea Bagging Machines Form Fill Seal Machines For Tea Sachets

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bosses reiterated that joint technical committees on ICT, Business Process, Enforcement, Change Management, Legal and Human Resource which have given several reports had been put in place to manage the implementation roadmap.

Further

meetings

including

that of the ministers of finance were expected to be held to be followed by a summit of the three Heads of State later in Mombasa.

Supply of Filter Paper, Thread and Staple Wire for Tea Bags Plucking Shears Ochiai’s Harvesting & Pruning Machines Cotton Bulking & Green Leaf Bags Chauvin Arnoux’s Electrical Testing Tools

22/08/2013 10:46:44

Uganda predicts good tea output as scientists warn of a looming climatic threat.

Uganda, Africa’s third biggest tea grower, may produce its highest ever crop after raising its 2013 forecast on favorable weather and half-year yields.

T

The East African nation is expected to produce 60 million kilograms (132 million pounds) this year, up from a January forecast of 55 million, George William Ssekitoleko, Executive Secretary of the Uganda Tea Association, told Bloomberg recently. That would beat a record yield of 59 million kilograms in 2010.

Uganda, which is Africa’s biggest robusta coffee grower, exports about 97 percent of its tea via Mombasa auction.

“Field reports indicate good yields so far, although we haven’t compiled figures,” Ssekitoleko said. “We may achieve 60 million kilograms if the weather remains favorable.”

The new forecast is percent higher than

year’s 57 million kilograms, he said. Yields are rising due to increased planting in the last few years and the use of more fertilizers, Ssekitoleko added.

But the good news ends there.

A recent report released

by International Center for Tropical Agriculture revealed that climatic suitability of much of Uganda’s tea growing areas will decline significantly and tea production is predicted to disappear almost completely by 2050.

Uganda currently ranks 13th among the world’s largest tea producers and third in the East and Central Africa region after Kenya and Malawi. The tea industry spends more than Sh30 billion in salaries and wages and pays more than Sh8 billion in various taxes annually.

Tea is the nation’s third largest foreign exchange earner with coffee topping the list. Favourable climate and soil conditions have enabled Uganda to develop some of the world’s best quality tea and the main tea-producing areas

Experts say that despite tea being a major cash crop in the country, it has not been given enough attention by the government in terms of research compared to neighbouring countries like Kenya where Kericho Institute is responsible for tea-related research.

The report, experts say, is a wakeup call for everyone involved in the tea sector in Uganda. It is predicted that some areas will become unsuitable for tea, especially in western Uganda and farmers will have to identify alternative crops. According to the report, some places may remain suitable for tea but only when the farmers adapt their agronomic management to the new conditions the area will experience.

5.3 last

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with high climate-suitability are located above the western Rift Valley, western lake side and south of Lake George.

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TBK e-portal to go live in September.

T

ea Board of Kenya (TBK) automated e-portal will go live next month.

TradeMark East Africa (TMEA) partnered with the TBK last year to develop and design an online web portal and a Management Information System (MIS) that will aid in the automation of TBK’s business processes.

When it goes live, the system is expected to significantly improve application and issuance of licenses, certificates and permits for stakeholders in the tea industry.

“The TBK web portal will aid in the sensitization of the tea traders on TBK requirements, regulations and procedures for tea trade and offer online application for licensing and permits; thereby improving trader compliance and reducing the time it takes to apply and issue trade documents,” said TradeMark East Africa’s Kenya Country Director, Jason Kapkirwok.

Following the commissioning of the project early this year,

Rafica Limited was engaged to provide consultancy services in developing and deploying the online e-Portal.

“More ground has been covered in the preparatory stages of system development by the consultant. Extensive systems analysis has been conducted by gathering the necessary information from various stakeholders and reviewing the business processes,” TMEA says in a statement.

The portal will is also be integrated with other government agencies like Kenya Bureau of Standards (KEBS), Kenya Plant Health Inspectorate Services (KEPHIS) and Kenya Revenue Authority (KRA) with a view to reducing the turnaround time for tea trade transactions.

The portal will also facilitate controlled and secure online electronic document processing at the comfort and convenience of stakeholders.

The e-Portal deployment as a service delivery innovation will address the challenges faced in the industry and transform the way business is conducted

at the TBK. TBK is responsible for regulating and promoting the tea industry to oversee its smooth running of the tea industry through policy guidance, licensing, registration and trade development as well as facilitating research in all aspects of tea growing, manufacture and pest and disease control.

TMEA is providing business process automation and web-based portals to various trade facilitation agencies to allow for easier access to standardised trade information and documents, improved and consistent application of trade regulations by trade facilitation agency staff, increased compliance rates by traders and increased transparency and accountability in import and export trade operations.

These solutions also enable government agencies and the private sector to participate in the eventual national and regional electronic Single Window Information for Trade (SWIFT) that will reduce time and costs for traders and trade facilitation agencies in the East African region. SWIFT is a trade facilitation concept whose implementation allows cross-border traders to a c c e s s , apply for and submit regulatory documents at a single location.

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22/08/2013 10:46:45

EAST AFRICAN TEA TRADE ASSOCIATION Auction performance report July 12 2013 Quantities and average price (Month on month – 2012 and 2013) 2012 average Month January February March April May June July August September October November December

quantity and prices Weight Price 38,393,686 2.64 28,898,580 2.65 26,110,909 2.75 24,386,976 2.78 18,645,875 2.80 24,816,362 2.88 28,193,200 2.99 23,763,228 3.09 22,681,209 3.03 33,605,422 2.97 28,999,045 3.05 22,223,257 3.08 320,717,747 2.89

Key markets for 2012 DESTINATION PAKISTAN EGYPT UK AFGHANISTAN SUDAN U.A.E RUSSIA

2013 average Month January February March April May June

QUANTITY 90,394,302 88,829,583 59,312,290 41,808,398 24,883,737 23,844,201 20,554,978

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quantity and prices Weight Price 36,960,212 3.05 31,326,855 2.91 31,606,988 2.66 33,591,113 2.37 33,163,629 2.40 36,535,161 2.31

203,183,957

2.62

VALUE 24,506,487,559.78 22,841,832,243.98 14,211,098,225.23 12,762,580,367.65 4,501,462,526.09 6,230,872,242.30 5,531,904,108.13 THE TEA JUNCTION SEPTEMBER 2013

22/08/2013 10:46:47

YEMEN KAZAKHSTAN SOMALIA Others Total

Key markets for 2013 DESTINATION EGYPT PAKISTAN UK AFGHANISTAN SUDAN U.A.E RUSSIA YEMEN KAZAKHSTAN IRAN

Others Total

THE TEA JUNCTION SEPTEMBER 2013

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13,797,897 12,006,396 5,122,252 49,650,535 49,650,535

4,135,554,142.42 3,686,156,116.62 506,235,227.22 13,341,703,817 13,341,703,817

QUANTITY 42,949,828.00 41,202,657.00 26,449,655.00 24,733,474.00 12,009,478.00 11,440,271.00 8,079,622.00 6,128,185.00 6,004,061.00 3,856,621.00 182,853,852.00 204,437,477.00 387,291,329.00

VALUE 10,480,877,911.82 11,086,253,161.36 6,203,393,696.80 7,001,160,998.51 2,557,263,490.72 2,936,153,177.56 2,071,738,952.81 1,699,472,955.68 2,009,044,085.91 1,138,497,753.29 47,183,856,184.46 52,572,853,065.33 99,756,709,249.79

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22/08/2013 10:46:49

TBK TURNS TO PAPERLESS TRADE The TBK portal will be integrated with other government agencies including KEBS, KEPHIS and KRA via an interface with the Kenya National Single Window system.

T

he Tea Board of Kenya (TBK) has partnered with TradeMark East Africa (TMEA) to develop and design an online web portal and a Management Information System (MIS) that will automate TBK’s business processes.

When it goes live in September, the system is expected to significantly improve TBK’s service delivery in relation to application and issuance of trade licenses, certificates and permits for stakeholders in the tea industry. Currently, these processes involve physical movement of documents from point to point.

“This new system will improve how we serve our stakeholders and also grow the tea sector.

It will improve efficiency by reducing turn around time on documentation,” said TBK’s acting managing director Mr Zakayo Magara, adding: “It will reduce duplication of information resulting in increased compliance in the tea industry as we aim to grow the tea sector by actualizing this particular system.”

TradeMark East Africa’s Kenya Country Director, Dr. Chris Kiptoo said TMEA’s mission is to promote rapid advances in East Africa’s integration, trade and global competitiveness.

“We aim to grow prosperity in East Africa through trade with the belief that enhanced

trade contributes to economic growth, reduction in poverty and subsequently increased prosperity,” he said.

address the challenges faced in the industry and transform the way business is conducted at the TBK.

He added that TMEA’s partnership with TBK is key in aiding in the sensitization of tea traders on tea industry requirements, regulations and procedures and offer online application for licensing and permits, thereby improving trader compliance and reducing the time it takes to apply and issue trade documents.

TBK is responsible for regulating and promoting the tea industry as well as facilitating research in all aspects of tea growing, manufacture and pest and disease control. The Board is also mandated to oversee the smooth running of the tea industry through policy guidance, licensing, registration and trade development.

TBK will provide kiosks with technical assistance at all their regional headquarters countrywide to enhance access to the system by all stakeholders. The TBK portal will also be integrated with other government agencies like Kenya Bureau of Standards (KEBS), Kenya Plant Health Inspectorate Services (KEPHIS) and Kenya Revenue Authority (KRA) via an interface with the Kenya National Single Window currently being developed by the Kenya Trade Network Agency (KENTRADE), with a view to reducing the turnaround time for tea trade transactions.

TMEA is providing business process automation and web-based portals to various trade facilitation agencies to allow for easier access to standardised trade information and documents, improved and consistent application of trade regulations by trade facilitation agency staff, increased compliance rates by traders and increased transparency and accountability in import and export trade operations.

The portal will also facilitate controlled and secure online electronic document processing at the comfort and convenience of stakeholders.

The e-Portal deployment as a service delivery innovation will

26

new layout.indd 28

These solutions also enable government agencies and the private sector to participate in the eventual national and regional electronic Single Window Information for Trade (SWIFT) that will reduce time and costs for traders and trade facilitation agencies in the East African region. SWIFT is a trade facilitation concept whose implementation allows cross-border traders to access, apply for and submit regulatory documents at a single location.

THE TEA JUNCTION SEPTEMBER 2013

22/08/2013 10:46:53

K

enya has exuded confidence that the political instability in Egypt, one of the biggest buyers of Kenyan tea, has not affected sale volumes due to interest from other markets and betterthan-expected weather.

Egypt, which typically accounts for about 20 per cent of Kenya’s total tea exports, has been convulsed by months of political protests and violence…but the tea market regulator said there has not been much effect on the sector.

Last month, Kenyan traders warned that tea exports to Egypt had slumped, but the Tea Board of Kenya said weather and stronger interest

THE TEA JUNCTION SEPTEMBER 2013

new layout.indd 29

from alternative markets appeared to have compensated for poorer Egypt trade. Tea is a major source of revenue for Kenya, one of the world’s leading exporter, earning the exchequer Sh116 billion last year.

“Our monthly analysis does not show any major variations.

The tea that went to the auction was bought by other actors in the market,” Zakayo Magara, Tea Board of Kenya’s Chief Executive, wrote in a statement.

Zakayo said the board needed more time to analyse the longterm effect of the Egypt unrest on Kenya’s tea exports.

He added: “We will be looking at how the situation pans out

in the next six months before the close of the year, by which time it should be possible to make a definite and accurate conclusion on the situation and impact.”

Traders who export to Egypt said they have sought alternative markets as they have waited for Egyptian traders to resume buying.

“We are now focused on Pakistan and Afghanistan, which consume a lot of our tea as well and also have a few orders from Egypt, which is an improvement from recent weeks,” said Kevin Ndago, a tea exporter who ships tea to Egypt and other Arab countries.

The tea board said Pakistan was Kenya’s leading export destination in 2012 ahead of Egypt, which was the biggest buyer of Kenyan tea in 2011.

Source: The Star 27

22/08/2013 10:46:54

International Tea News

India to ease licensing regime The Tea Board of India is restructuring its exporting policies and traders will be able to obtain an exporting license within 48 hours as opposed to the current timeframe of licensing that takes months.

Rwanda to increase tea production

Export licenses are issued by the Tea Distribution and Export Control Order, and a tea-exporter must own a valid license from the Tea Board.

Licenses come in two categories — temporary and permanent. Temporary exporter licenses are only valid for three years, while permanent licenses last forever.

The ministry of agriculture in Rwanda plans to increase tea plantations by 18,000 hectares of land at the end of 2017. The target is part of National Agriculture Export Development Board (NAEB)’s second phase programme, dubbed “New tea plantations and factory construction approach (2012-2017)”.

“The idea is to improve and streamline the system, cutting the number of documents that an exporter needs to submit for getting a license to export,” Tea Board Chairman M. G. V. K. told the media in India.

According to available NAEB statistics, the first phase, from 2004-2012 saw 20,665 hectares of land planted with tea.

In accordance with these new rules, which will take effect immediately, an exporter only needs to submit one major document, the ImportExport Certificate, from the DirectorateGeneral of Foreign Trade, rather than the 10 documents that they were previously required to provide to Tea Board officials.

In December 2012, the Tea Board embarked on a major initiative to remove fraudulent exporters from the marketplace. Because of this initiative, there are currently only 290 temporary tea exporters and 185 permanent exporters as compared to the 470 permanent exporters and 2,800 temporary exporters in 2012.

Mainly competing with other major exporters such as China and Sri Lanka, India exports close to 210 million kilogrammes of tea annually.

“We have had the plan to increase tea plantations in the country, but the process has been slow. We have developed mechanisms to ensure increase of tea farms by 18,000 hactares within five years,” a senior government official was quoted saying.

The expansion programme 2012-2017 on existing tea farms and factories will increase the production of tea in the country which is currently at 24,000 tones annually. Rwanda is considered one of the leading tea producers in the world and its quality tea is cutting kitself a niche in Mombasa weekly auction.

However, NAEB says that the resistance of some farmers to engage in tea farming was still a challenge. According to NAEB, the ongoing new tea projects in Rutsiro, Karongi, Gatare, Mushubi and Muganza-Kivu will help increase the existing plantation capacity for existing operational factories.

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22/08/2013 10:47:03