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Kenyan Tea Production May Drop 30% After Drought Curbs Yields

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Aug. 22 (Bloomberg) -- Tea production in Kenya, the world’s biggest exporter of the black variety of the leaves, may drop by almost a third this year after a drought curbed yields, the East African Tea Traders Association.

“The weather has affected output and we predict a decrease of up to 30 percent of last year’s all time record output of 399 million kilograms,” Peter Kimanga, chairman of the Mombasa-based industry body, said in an interview on Aug. 19. In July, the Tea Board of Kenya said output may fall as much as 25 percent.

East Africa experienced two poor rainy seasons that caused one of the worst droughts in 60 years, according to the United Nations Food and Agriculture Organization. Kenyan President Mwai Kibaki in May declared the drought a national disaster.

Tea is the biggest foreign-currency earner in Kenya, East Africa’s largest economy, which relies on agriculture to generate a quarter of its economic output. Tea production dropped 16 percent in the first half to 178.4 million kilograms (393.3 million pounds), the tea board said last month.

“The dry weather remains the biggest challenge as it is expected to affect output in the key tea-growing regions across the country,” Sicily Kariuki, the chief executive officer of the board, said in the interview.

The impact of the drought on export earnings for the crop may be offset by the shilling’s decline against the dollar, Kimanga said. The currency weakened 13 percent so far this year and is Africa’s second-worst performer, after neighboring Uganda. Kenyan exports dropped 2.4 percent to 211.7 million kilograms in the first half, according to the tea board.

Adding Value

Industry officials are in discussions with the government to help add value to shipments of Kenya’s tea. The state currently levies a value-added-tax of 16 percent on all processed tea and charges a 25 percent import duty on packaging materials, Kimanga said.

“The country business environment is not conducive for tea processing as there are numerous levies and higher taxes which are punitive,” Kimanga said. “By doing value addition we can sale directly to new markets such as Eastern Europe, West Africa, southern Africa and the Middle East, who are currently buying from countries such as Britain which processes our tea.”

Pakistan is the biggest buyer of Kenyan tea, followed by Egypt, Afghanistan and Sudan, according to the tea board.

To contact the reporter on this story: Johnstone Ole Turana in Nairobi at jturana@bloomberg.net.

To contact the reporter on this story: Paul Richardson in Nairobi at pmrichardson@bloomberg.net.

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