Looming shutdown of tea auction sends jitters in EAC

The looming shutdown of the Mombasa Tea Auction and suspension of three shipping lines from Mombasa port is beginning to have a grave effect on the economy of the Coast and the greater East African region which depends on this gateway.

The Mombasa Tea Auction is one of the largest in the world where tea from Kenya, Uganda, Rwanda, Tanzania, Malawi, Ethiopia and the Democratic Republic of Congo is traded.

Already, the coastal economy is reeling from the paralysis in the hospitality sector following the evacuation of tourists and cancellation of hotel bookings as a result of the novel coronavirus.

Devastating effect

And now analysts are warning that turmoil at the auction could lead to its total shutdown in the coming weeks with a devastating effect on the local, national and regional economies. China is a leading importer of Kenya’s tea.

Tea prices at the auction slammed to a year’s low while the volume of leaves not sold, out of the volumes put on sale on Wednesday, doubled due to threats of the virus.

Yesterday, tea traders did not rule out the possibility of suspending the auctions that support a sub-sector which is a means of the livelihood of 600,000 small-scale farmers and employees.

A report from the auction reveals that over three million kilogrammes or 20 per cent of the volume of tea offered for sale at the Wednesday auction were not sold.

Traders in Mombasa warn that if the auction is shut, the multiplier effects on many sectors of the economy like factories, warehousing, transporters and on farmers will be big.

“Tea is the most critical agricultural sub-sector and its cultivation and manufacturing spreads across 15 out the country’s 47 counties,” said Dominic Mokua, a tea trade analyst in Mombasa.

According to the data from the Agriculture and Food Authority (AFA), tea contributed Sh117 billion to the country’s GDP last year.

“If the auction is shut, factories will not process more tea, tea farms will lay off pickers, warehouses will close down and transporters will also be affected,” said Edward Mudibo. Mr Mudibo, who is the East Africa Tea Trade Association (EATTA) managing director, said one big buyer failed to participate in the last auction because of the fears of Covid-19.

“We are evaluating the trends every day. If we close down the auction, farmers, tea factories, transporters, warehouse, and even tea pickers will be affected badly,” he said.

According to the figures from the auction, an average price continued with its downward spiral from Sh200 ($1.94) it sold in the last auction to Sh194 ($1.88) during the Wednesday auction.

Over 20 per cent of the volume of tea that was offered for sale at the auction was not sold. “The big volumes of tea not sold is the key area of concern,” said Mr Mudibo.

He said the buyer, one the biggest, which stayed away from the auction is expected to return to the auction to buy after EATTA put in place measures to keep the virus at bay.

“This week’s total volume traded was 764,777 less than last week auction. UK is one of our biggest markets but we are still getting orders from there,” said Mudibo.

He said packers from Pakistan and Egypt, two of Kenya’s tea big markets, showed strong interest during this week’s auction.

At the Port of Mombasa, cargo off-take has slowed down after Kenya Revenue Authority (KRA) phased out nine private cargo tracking firms and enlisted the services of a Malaysian firm.

Other State agencies and private firms operating from the port have also reduced their workforce in a move aimed at containing the spread of the contagious virus in the country. “KRA revoked the contracts for nine private vendors providing tracking services for trucks transporting transit cargo. It has created congestion,” said Ken Oseke, a clearing agent.

He said there was a snurl-up at the port as over 400 trucks that had gone to pick containers had not done so because of state agencies’ skeleton staff or delays in mounting seals.

On Tuesday, Kenya Ports Authority introduced rules for ships calling at the port in a bid to contain the coronavirus. All ships coming from high-risk countries are to be inspected at the quayside.