Kenya has protested against a price cap that the Iranian government has imposed on tea exports to the country, putting the Sh4 billion market at the centre of a diplomatic tiff with Tehran.
Iran has instructed Kenya to set the maximum price per kilo of tea that it sells to the Asian country at $3 (about Sh300), with anything above the amount attracting a punitive tax. The move has seen Kenya’s
Ministry of Foreign Affairs wrote to the envoy in Tehran, asking him to seek clarification and lobby for easing of the new requirement.
“Kenya is seeking clarification as well as relaxation of the new rule that has been put in place by the Iranian government,” said the Director-General of Agriculture and Food Authority, Anthony Muriithi, in an interview.
Kenya’s tea gets to Iran at about Sh400 per kilo, making it pricier than other teas sold in the country, mainly from India and Sri-Lanka.
The quality of Kenyan tea is however superior compared to the others, which makes it highly sought after by the Iranians.
Mr Muriithi said market factors make it difficult to sell at Sh300 per kilo in Iran.
“Some of the factors that might make it difficult to achieve the Sh300 per kilo include the high quality of Kenyan tea, cost of production and the shipping costs,” he said.
The Ministry of Foreign Affairs did not respond to our requests for comments on the matter.
Nairobi has been courting Iran to become one of the major consumers of Kenya’s tea and has held sales exhibitions in Tehran aimed at wooing buyers.
Iran has a large population of more than 80 million people with a per capita tea consumption of 1.4 kilogrammes against half a kilo for Kenyans.
The country imports more than 100 million kilogrammes of tea, with Kenya supplying about 20 million kilos annually.
Pakistan is the biggest consumer of Kenyan tea, buying more than 40 percent of the total beverage produced in Kenya, earning the country about Sh50 billion a year.
Egypt, the United Kingdom, Sudan and the United Arab Emirates are the other major sources of Kenya’s tea dollars.
Export volumes to these countries have however been declining over the years hampered by trade barriers from different States.
This is the second time in two years that Kenya has been locked in a dispute with Iran over the commodity. In 2017, a tussle about the recommended minimum moisture content in the beverage saw a sharp decline in the volumes exported to Tehran.
Iran has a lower limit of three percent moisture content with an upper cap of eight percent, but Kenya’s tea normally falls below three. Kenya uses ISO 3720, a global standard that does not stipulate a minimum moisture content.
The East African Traders Association (Eatta), which manages the Mombasa tea auction, terms Iran as a key market that Kenya cannot afford to lose given its high growth potential.
“We have to do all that we can to ensure that the new rule is reversed to protect our sales to that country,” said Eatta managing director Edward Mudibo in an interview.
In January last year Kenya, nearly lost the critical Pakistani market as the country raised concerns over possible contamination of aflatoxin in the commodity, requiring the beverage to undergo rigorous tests that created a backlog on consignments destined to Islamabad.
The Plant Protection Board of Pakistan had issued a directive that all tea imports from Kenya must undergo aflatoxin tests, a move that Kenya protested, saying it is not a common occurrence in the produce.
The impasse was resolved following a meeting between the two States. Small-scale farmers affiliated to the Kenya Tea Development Agency (KTDA) earned a record gross payment of Sh85.74 billion in 2017/2018 financial year, riding on a bumper harvest that defied the fall in global market prices, marking the third year of improved earnings.
At Sh85.74 billion, Kenya’s tea earnings were up 9.4 percent compared to the previous season’s total income of Sh78.31 billion, according to the agency.