, NAIROBI, Kenya Dec 3 – The government is set to audit the value chain of the tea sector in bid to counter the issues that could inhibit growth of the sector.
Industrialization Cabinet Secretary Adan Mohammed said that the value chain analysis will help the country identify its competitive edge in the sector.
“We need to build capacity in a bid to drive the sector; we can’t build capacity if we don’t know what exactly is going on in the value chain from the farm to exporting,” he said.
Mohammed spoke on Wednesday, during the Kenya Tea Development Agency (KTDA) Directors Conference where the directors urged the government to look into the issues affecting the industry that include cost of doing business among others.
KTDA Chairman Peter Kanyago says the government should look into the taxes the sector is incurring making Kenyan tea uncompetitive, compared to other East African countries.
“Taxes incurred in the sector at the auction level make our tea exports more expensive than Rwanda, Tanzania Uganda and Malawi,” he said.
Kanyago has also urged the government to negotiate with other governments on new market ventures that include Russia, China Iran and Turkey among others.
He says the industry is also looking at diversifying into new products among them Green Tea and Orthodox Tea other than the Black CTC tea to counter the global fall in tea prices owing to over production.
KTDA posted Sh35.5 billion in farmer’s earnings for the 2013/2014 financial year down from Sh51.3 billion farmers earned in 2012/2013 financial year.
The weak market and depressed tea prices saw tea firms issue profit warnings for the second half of 2014.
Williamson Tea Kenya and Kapchorua Tea Company issued a 25 percent drop profit warning for the second half of 2014 compared to the same period previous year.
Both firms attribute the warning to the favourable weather conditions that will see the crop and stock levels continue to rise depressing the tea prices further as well as the global tea market that has no indication of picking up in the near future.
The firms have also raised concerns over the rising cost of doing business as consensus is yet to be reached with the labour unions on the 2014 and 2015 wage rates.
Kapchorua Tea posted 38 percent drop in first half of 2014 net profit to Sh47.7 million from Sh76.9 million in the previous year while Williamson Tea posted a 54 percent drop in their first half net profit to Sh168.2 million from Sh368.2 million shillings same period last year.