News Column

Lower Tea Earnings to Slow Kenya's Export Growth

August 18, 2014

Richard Mungai

Tea companies and smallholder farmers face big shocks in earnings decline owing to lower prices, according to researchers at the Economist Intelligence Unit.

The cash crop has been Kenya's biggest export earner but price depression and a drop in overall production will impact negatively on farmers and investors in tea-growing companies.

"Lower prices and export earnings, which reflect shifts in global demand and supply patterns, are having a negative impact on both plantations and smallholders... Kapchorua, Sasini and Williamson, are facing lower profits," the EIU said in a forecast last Thursday.

The three companies are listed at the Nairobi Securities Exchange.

Data from the Kenya National Bureau of Statistics show tea export earnings fell sharply in January to June because of the steep decline in prices at the Mombasa auction.

Prices tumbled to $2.03 (Sh178.72) per kilogramme in June and averaged $2.25 (Sh198.09) per kilo in the first half.

The earnings were lower than a year earlier by nearly a fifth, the lowest in five and a half years. Tea export revenue shrunk by 17.3 per cent to $540.4 million (Sh47.58 billion) in the first half of 2014 from $653.8 million (Sh57.56 billion) in a similar period last year.

"Reduced tea earnings will constrain export growth in 2014, although higher inflows from coffee and other sectors will offset the shortfall," the EIU forecast.

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Source: AllAfrica

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