Economic pain in Pakistan threatens Kenyan tea industry

Kenya’s tea industry is facing uncertainty. This comes as Pakistan looks for ways to conserve its fast depleting foreign exchange reserves. Tea is a staple drink in Pakistan. “I appeal to the people to reduce their tea drinking by one or two cups a day because we also borrow money for the tea, which is imported,” Iqbal told reporters in June 2022.

In 2020, Pakistan imported over US$600m worth of tea, predominantly from Kenya, making it the world’s largest importer of the commodity. Pakistan is also the biggest market for Kenyan tea, accounting for 36% of all exports in March. 

Towards the end of July 2022, Kenyan media reported weakening tea prices as Pakistani importers reduced volumes and the State Bank of Pakistan limited the use of letters of credit for imports

Pakistan’s current account deficit has swelled in recent times, its currency is trading near historic lows against the US dollar, and its foreign exchange reserves have plummeted. In May, the country restricted the import of all non-essential luxury items, partly to conserve foreign currency.

Some traders in Kenya are worried the Minister’s comments might be a precursor to an official cap on the importation of tea. During a forum in July, its National Chamber of Commerce and Industry chairman, Richard Ngatia, said his organisation is looking to boost tea exports to other countries to make up for anticipated depressed demand from Pakistan. These include Iran, the Democratic Republic of Congo, the United Arab Emirates, Malaysia and Egypt.

Tea has been cultivated in Kenya for over a century and accounts for the biggest portion (18.4% in 2020) of the country’s export earnings, followed by cut flowers (9.13%) and refined petroleum (4.72%). It is predominantly grown on the highlands by a combination of large estates and small-scale farmers. The Kenya Tea Development Agency (KTDA) is owned by 54 tea companies, which, in turn, have about 600,000 smallholder tea farmers as shareholders. The tea companies collectively own 69 tea-processing factories. KTDA offers agri-extension, transport, processing and marketing services to smallholders.

 

References

‘How giant tea companies exploit Kenyan plantation workers’, WSWS, 01 October 2019.

‘Kenya Tea Industry Performance Highlights for March 2022’, Tea Board of Kenya, March 2022

‘Kenya Tea Development Agency’, Wikipedia, 16 April 2022

‘Kenya faces tough tea export future in Pakistani cuts’, Business Daily, 16 June 2022

‘Pakistani govt chided for ‘Drink less tea, save money’, AP, 16 June 2022

‘Pakistan bans imports of all non-essential luxury goods – minister’, Reuters, 16 June 2022

‘Tea prices continue to fall as Pakistan curbs imports’, Business Daily, 25 July 2022

‘Kenya banks on Iran for tea sales as Pakistan cuts imports’, The Star, 28 July 2022

‘Tea in Pakistan’, OEC, 10 August 2022

‘A global leader in quality teas’, Kenya Tea Development Agency Ltd., 12 August 2022​