Heating up a kettle of profits

African nations hope more processing and consumption will make crops pay

Africa's tea output has been steadily increasing over the years with increased farming acreage and government initiatives. Yet this has contributed to the global oversupply of black tea.

Global tea production increased significantly - by 6 percent to 5.07 million metric tons in 2013, the most recent figure available, according to a report released last year by the Food and Agriculture Organization of the United Nations.

"China remained the largest tea producer, with an output of 1.9 million tons, accounting for more than 38 percent of the world total," says the report. India followed by producing 1.2 million tons, with Kenya ranking third at 436,300 tons.

In Africa, Uganda produced 58,000 tons, followed by Malawi at 46,500 tons. Tanzania's production reached 32,400 tons, Rwanda 25,200 tons, Burundi 8,800 tons, Zimbabwe 8,500 tons and South Africa 2,500 tons.

In the same year, consumption improved. "Total tea consumption increased by nearly 5 percent in 2013 to 4.84 million tons, which was underpinned by the rapid growth in per capita income levels, particularly in China, India and other emerging economies. Growth in demand was particularly marked in China. After a spectacular rise in consumption in recent years, exceeding 8 percent annually, total consumption increased by 9 percent in 2013, on a year-to-year basis, to reach 1.61 million tons, the largest in the world," states the report.

It further states that global exports reached 1.77 million tons, a 5 percent spike compared with 2012.

While China exported 329,700 tons, Africa's total exports grew to 596,400 tons from 525,700 tons. Kenya led by selling 415,900 tons, with neighboring Uganda following at 56,700 tons. Malawi exported 40,500 tons, Tanzania 26,200 tons and Rwanda managed 23,500 tons.

High export volumes have left the continent susceptible to erratic global commodity prices. To stem this, African governments have made efforts to encourage value addition in countries where the commodities are produced to increase the earnings of the people dependent on the sector.

According to a report by the United Nations Food and Agriculture Organization, blending and packaging are manufacturing processes that represent up to 80 percent of the retail price. They are performed mainly in the consuming countries, especially in Europe. That leaves farmers with a very small portion of the earnings, which can be six times lower than the auction price. That also means African countries are cut out of many job opportunities and chances for technological advancement.

"The margin between value-added export prices and auction prices has been widening, meaning that growers are not fully benefiting from consumers' rising demand for value-added products," said a UNFAO report in 2015.

Finished products, for example, would increase Tanzania's share of the profit from sales in the rich Chinese market, says Nduguru Cosmas, director of promotion at the Tea Board of Tanzania, who was fresh from a three-week training seminar at Zhangzhou College of Science and Technology in Fujian province.

"We sell black CTC in semiprocessed form. This is disadvantageous to us because the Chinese market is highly diversified. We need to export more varieties," Cosmas says.

He says across-the-board adherence to the traditional system of plucking two leaves and a bud together is limiting and outdated. "We can classify the product and fetch more money for premium quality by selling to high-end markets, while selling the lower grades to emerging markets."

Tanzania has started diversifying to include more specialty teas such as purple leaf tea. Moreover, it is stepping up campaigns to improve the domestic tea drinking culture, which is not well developed.

Although there are no ongoing partnerships with Chinese investors, Cosmas says such ventures would have immense benefits for the 30,000 smallholder farmers in Tanzania.

"Under the public-private partnership initiative, Chinese investors can jointly own factories with the locals. Advanced technology and techniques will greatly expand our exports while also increasing product diversification that can buoy local industries such as tea tree oil in the cosmetics industry."

However, there are conditions. Once the investor has recouped his capital, the venture is handed to the locals to manage. The investor has the option of re-investing or moving on to another sector.

There are many opportunities for joint ventures in Ethiopia. The country is nurturing the nascent tea sector and would like investments to complement this growth. Even though the country is a major coffee exporter, the government is serious about exploiting its tea producing potential.

"Just like China, we want to make use of the mountainous regions," says Bekabil Insermu, general manager of marketing at the Ethiopian Ministry of Trade. "We are investing in putting up modern factories and a tea college that will spearhead training and research." Currently, the country is exporting about 1,500 tons annually.

Tea drinking culture has to be consciously pushed, Insermu says, noting that the government is keen to hold trade fairs where the art of tea making, similar to Chinese ceremonies, would be emphasized.

In Kenya, the government is promoting agricultural processing to improve the competitiveness of the economy and the tea sector.

Nairobi provides generous incentives for local value addition. It includes an exemption from value-added tax; a 10-year corporate, income and withholding tax holiday; and a tax exemption on equipment.

lucymorangi@chinadaily.com.cn

(China Daily Africa Weekly 03/04/2016 page27)