Kenyan Tea Industry Curbed by Taxes, Limited Markets, Group Says

Kenya’s tea industry, the country’s largest foreign-exchange earner, is being stymied by tax levies and a failure to develop foreign markets, the East African Tea Trade Association said.

The average auction price of Kenyan tea has declined 40 percent this year amid a steep rise in production and stagnant growth in new markets, the Mombasa-based association said in a report e-mailed by its office that was presented to Kenya’s Senate last week. Value-added tax has reduced domestic consumption, while a levy on tea imports and exports that’s equal to 1 percent of customs value has imposed extra expenses and bureaucracy, it said.

Kenya, the world’s largest exporter of black tea, generated $1.3 billion from tea sales last year, according to the Tea Board of Kenya. The nation’s six biggest export markets, including Egypt, Afghanistan and Pakistan, account for about 77 percent of all tea shipments, the association said. That compares with 42 percent for China and 57 percent for Sri Lanka, it said.

International economic sanctions on tea-consuming nations such as Sudan and Iran prevent potential sales, the group said. It recommended that Kenya’s central bank “provide an avenue” for trade with Iran, “either through barter trade” or other instruments.

Removing VAT on domestic tea would increase local consumption, which has dwindled to about 5 percent of total exports, and increase sales to Kenyan exporters by producers, the group said.

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