|February 27, 2008
Low prices hit tea industry
Low prices continue to haunt Malawian tea on the auction floors, a bitter irony for some producers as the country is regarded as the pioneer of tea growing in Africa. Commercial production started way back in the 1880s during the British colonial era. Large tea estates have since then been a feature of the southern region of the country. Tea was planted for the first time in Malawi in 1878. Currently Malawian tea is grown in the southern districts of Thyolo and Mulanje and the northern lakeshore district of Nkhatabay. The tea-growing areas boast sprawling estates that are also tourist attractions.
The country's current annual tea exports stand at about 43.000 metric tons, contributing three percent of global tea exports, according to the Tea Association of Malawi (TAML), an association of 10 major tea growers in the country. The crop is the country's second biggest foreign exchange earner, contributing 7.9 percent of total export earnings, says the Malawi Confederation of Chambers of Commerce and Industry (MCCCI). Tobacco remains the main foreign exchange earner. The southern Africa country ranks second after Kenya as the largest producer and exporter of tea in Africa. It is also twelfth on the global list of tea producing countries.
But despite the country's prominence in the cultivation of this crop, Malawian tea producers complain that the price for Malawian tea is low when compared to its neighbour, Kenya. Auction floor prices at the end of last year (2007) showed that the local produce was selling at 1,44 dollars per kilogram for the top grades. Kenyan tea, on the other hand, was fetching up to 3,31 dollars per kilogram at the time. A decrease was noted in the average price of the product during 2007. In 2006, prices averaged 1,22 dollars per kilogram compared to an average price of 1.02 during 2007.
Lack of competition on the tea auction floors in Malawi is the main factor that is crippling the local tea sector, according to Sangwani Hara, TAML chairperson. He ascribed Kenya's higher prices to the benefits of competition among a range of buyers. Another factor is that, unlike Kenya, Malawi does not have its own tea brand. Malawian tea is exported to European, Asian and U.S. markets. Kenyan tea, on the other hand, also has big buyers coming from Egypt, Pakistan and Russia on top of the traditional markets that it shares with Malawi.
The MCCCI says the tea industry in Malawi has been stagnant for a long period of time even though tea production has been increasing. Additional investment is necessary through joint ventures with Malawian companies to improve the farming methods and processing of the crop.
Malawi's tea production was expected to reach higher production levels of 45 million metric tons for 2007. Of the 45 million metric tons for 2007, about 2,5 million metric tons was sold locally, says Hara. He also indicates that TAML, in collaboration with the Malawi Investment Promotions Council, is working towards attracting more buyers. One of the strategies is to come up with the country's own local brand of tea. The MCCCI has identified a new opportunity in the processing of green tea for East Asian markets. TAML has also partnered with the Malawi Tea and Coffee Merchants Association of Malawi (MTCAM), Tea Brokers Central Africa and Tea Commodity Brokers in social initiatives such as charity auctions. The proceeds are donated to AIDS orphans and other people with needs.
This initiative is about tea growers showcasing their commitment to corporate social responsibility while encouraging buyers to pay higher prices for the commodity as part of fulfilling their social duty. Corporate social responsibility also extends to the workers on the tea estates who are very poor. The tea estates support the surrounding communities, which supply most of their workers, by providing social amenities such as health clinics, recreation facilities, schools and safe water. Tea prices hit a record 29 dollars per kilogram at a charity auction held in Malawi's commercial capital Blantyre on November 27, 2007.