Tanzania tea producers have swapped to direct sale as a way of offsetting high operational costs incurred at the Mombasa Weekly Tea Auction.
This has triggered decline on tea production in Tanzania one of largest black tea auction across the globe.
Statistics reveal that between April and June last year, Tanzanian tea quantities at Mombasa auction were 3,080 tons while in the same period this year it received only 2,710 tons, a decline of to 12 per cent.
Last month’s sale dropped drastically by over 53 percent compared to that sold at the auction in the same period last year.
When this is seen as a blow to Tanzania’s tea, on the contrary, the move has helped the country’s producers to benefit more from the crop’s revenue.
In an exclusively interview with The Guardian, Nicholaus Mauya, Tea Board of Tanzania (TBT) acting director general, confirmed:
“It is true that our tea sales in Mombasa are declining and this is due to the fact that producers tend to consider direct sales than the action.”
Mauya explained that the move has been fuelled by the fact that direct sale prices favour the producer as they range between USD2 and USD3 per kg, while at the auction the average price is between USD1.66 to USD1.72.
According to him, for the period between April this year and September, over 13,350.95 tons of tea was exported through direct sales whereby USD26.7m was earned.
He added: “Storage and broker charges are inevitable at the auction, and when the price declines, the broker tends to hoard tea till the prices get better. Therefore, the producers pay the charges, but with direct sales, costs of storage, transport and brokers’ fees are born by the buyer.”
According to media reports, Tanzanian and Malawian producers threatened to withdraw their supplies at the auction recently, citing uncertainty in business.
The report quoted Peter Kimanga, Chairman of the East African Tea Trade Association as saying: “This trend is attributed in part to the Kenyan government requirements for the lodge of 10m/- deposit, and a requirement to invest in warehousing, without any guarantee of future licensing of operations.”
Reports also suggest that farmers want to exploit the benefits of Everything But Arms Agreement (EBA), a pact, which the two countries (Tanzania and Malawi) have adopted.
The trend, however, comes at a time when the viability of the auction floor is also threatened by the increasing purchases of the crop outside the auction system.
Maulawa Mwakajala, a stakeholder in the country’s tea industry, told this paper that there should be more efforts so as to make the crop profitable to the farmers as currently the processors are the ones benefiting from the produce.
“Currently, it is the processers and blenders who benefit from the crop so there should be more efforts so as to make ensure that farmers also benefits, in fact this is where Tanzania Smallholders Tea Development Agency (TSTDA), Tea Board of Tanzania (TAT) and Tea Research Institute of Tanzania (TRIT) should come in for rescue.
Mombasa Tea Auction is one of 11 largest black tea auction sites across the globe, where about 80 brokers and buyers take part in the transactions that take place every Monday and Tuesday.
Currently, Tanzania is the fifth major tea producer in Africa after Kenya, Uganda, Rwanda and Burundi with about 32,000 tons per annum, which constitute about 1 percent of world tea production ranking the nation number 19 globally.
Tea was introduced in Tanzania by the German settlers at Amani Agricultural Research Station, Tanga in 1902 and was also grown at Kyimbila in Rungwe District, Mbeya Region in 1904.
Commercial production began in 1926 and increased considerably after World War II, when the British took over the tea plantations.