Unrelenting US sanctions on Iran spoil tea party for Kenyan exporters

FILE PHOTO: Man plucking tea

NAIROBI, KENYA: Tough US sanctions on Iran over the last few years have resulted in Kenya missing out on a key export market for its tea. 

Trade between the two countries has also been greatly affected. 

Iran Ambassador to Kenya Jafar Barmaki said the Persian country used to absorb about 20 per cent of Kenya’s tea, but in the last few years, this has fallen to below 10 per cent. 

“Unfortunately, due to sanctions put in place by the US and not the UN, Kenyan products have limitations to get to the Iranian market and vice versa,” he told Financial Standard in a recent interview.

Tea is one of Kenya’s top three foreign exchange earners, contributing about four per cent of gross domestic product (GDP). As of 2019, the value of Kenyan tea exports stood at Sh118 billion. 

The tea-loving Iran produces little of the beverage, but Kenya has lost out to countries such as India and Sri Lanka as a source market.

Statistics from the Tea Directorate show that in September 2020, for example, tea exports to Iran fell 55 per cent compared to a similar period in 2019.

The sanctions make the exchange of money difficult, with banks scared of handling money from Iran for fear of US reprisal. Barmaki said this makes it difficult for Kenyan businesses to get their payments when they export. Iranian businesses face similar challenges. 

“When a Kenyan businessman imports tea to Iran, how can he get back the money when there are no banking relations between the two countries due to the sanctions by the US? This is the issue that has reduced exports of Kenyan tea to the Iranian market,” he said. 

Still, the balance of trade between Kenyan and Iran is in favour of the Middle Eastern country that is diversifying from an oil-based economy to a knowledge-based one.

The value of Kenyan exports to Iran stood at Sh2.12 billion in 2019 compared to imports valued at Sh6 billion.

However, imports from Iran have greatly fallen in the last three years. In 2017, for instance, imports stood at Sh13.2 billion but have since more than halved to Sh6 billion, official government data shows.

The wealthy had also developed an appetite for Iran’s famed Persian carpets. Barmaki said this market has also been hit hard, and asked the Kenyan government to do more to reduce bottlenecks for businesses.

 “The Kenyan party needs to do something to secure and revive what they have lost in market share,” said the envoy.

He noted that several Iranian companies had shown interest in investing in different fields like pharmaceuticals, medical equipment, agriculture value addition, renewable energy, and gas and oil. “They need the infrastructure first of all in building banking system relations … There’s a list of more than 15 companies ready to invest and create employment,” said Barmaki.

The diplomat said the trade potential between the two countries remains high, and Kenya could sell tea, coffee, and horticulture to the country.

Iran has also approached the Kenyan government for permission to launch direct flights between Nairobi and Tehran to deepen trade ties.

This would see more products and Iranian businesses trooping to Kenya.

“We are waiting for the Kenyan government to give the go-ahead,” he said.

“We are also encouraging people to come to Kenya as tourists’ direct flights can have better access and can come (in higher numbers) than before.”

Barmaki added that there is need to have more business owners from both countries travel and explore to balance out trade volumes.

Kenya and Iran are marking 50 years of relations, with Barmaki saying Kenya plays a key role in their African foreign policy on infrastructure, human resources and the open sea. 

Last month, Iran unveiled a large-scale innovation hub in Kenya. The Iran House of Innovation and Technology is expected to help develop and export ‘knowledge products’.

This will see Iranian firms share technology information acquired over the years in fields such as pharmaceuticals, manufacturing, biotechnology and nanotechnology. 

The ambassador said a team of experts would review new ideas generated at the hub, and if any has the potential to be commercialised, it would receive support. “If the idea doesn’t have the potential to be commercialised, then we have expert teams help to come up with another idea which is close to the original one,” he said. 

The hub’s support includes access to the internet, workspaces and experts. 

Iran is also working on a project that will see three Kenyan universities offer a master’s of science degree in nanotechnology.

According to Barmaki, Iran’s knowledge-based economy is now worth $12 billion (Sh1.3 trillion) annually, and the country now wants to share its experiences with Kenya. “About seven years ago we started diversifying our economy. We changed several things but first prepared a new environment for knowledge-based companies, which were then supported by government in different areas like funding some of the ideas,” he said.