Kenya Tea Board seeks tax waiver

April 3, 2009
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, NAIROBI, Kenya, Apr 3 – The Tea Board of Kenya (TBK) has appealed to the government to remove all duties on locally produced tea in order to make it more affordable to majority of Kenyans.

The Board’s Chairman Dunstan Ngumo argued on Friday that exempting Value Added Tax (VAT) and other levies on tea could spur local consumption and help to further widen the domestic market for the commodity.

“In the neighbouring countries, tea is exempted from VAT, so you get some of their teas now getting more into the country and this threatens the consumption of some of our Kenyan tea,” he complained of the influx of cheap tea in the local market.

The scrapping of duty, he pointed out, would also help to cushion the tea industry from the vagaries of the international markets such that when they are fluctuations, the players can fall back on the local market.

Speaking during the launch of a promotion campaign which aims to encourage the increase of tea consumption locally, Mr Ngumo said they would soon venture in other key destinations around the world to broaden the scope of the markets for Kenyan tea.

He said this move would also enable them to reduce their overdependence on traditional markets.  United Kingdom ((UK), Pakistan, Egypt and Afghanistan are some of Kenya’s leading export destinations.

At the same function, Agriculture Assistant Minister Gideon Ndambuki said the government would allocate about Sh200 million to the Tea Board for the promotion of tea as a beverage of choice. Already, Sh60 million has been provided in the first phase of the campaign that runs until December this year.

It is estimated that on average each person in Kenya drinks an average of 400 grams of tea per year compared to the 1.5 kilos, 2kgs and 2.26 kgs of tea consumed during the same period in Pakistan, UK and Ireland respectively.

The campaign however seeks to double the figure to 800 gms per person or 10 percent of the tea produced in the next few years. Several initiatives such as the National Tea Drinking Week have been started to underscore the benefits of consuming the beverage and have begun to bear fruit. For instance, consumption has gone up from 12.5 million kgs to 17.5 million kgs over the last five years. The Board expressed optimism that the trend would continue and it would enable them to achieve their targets despite the challenges of high inflation, reduced purchasing power and the proliferation of herbal infusions and foreign packaged teas.
 
During the same function the Board’s Managing Director Sicily Kariuki disclosed that they would partner with (tea) packers to aggressively sell pure Kenyan tea in the international market. This type of tea accounts for 10 percent of the products sold around the globe while the remainder is used to blend with other teas because of consumer demands and preferences.

“This is the segment that we will be targeting through branded tea that is 100 percent pure Kenyan tea or has more composition of Kenya tea in it and we’ll have variations either in flavoured or organically certified,” she added.

At the same time, Mrs Kariuki forecasted that international tea prices would go up primarily pushed by the decline in production which locally has been occasioned by drought and dry weather conditions.

Kenya is the world’s tea exporter with 89.3 percent has already recorded a 12 percent drop in production in the last three months. Despite the slump however, Mrs Kariuki projected that earnings from tea would remain favourable at around Sh65 billion.

Tea contributes 11 percent to the country’s GDP annually and last year it fetched Sh62 billion in foreign exchange.

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