Tea sales could be affected by sanctions on Iran

Stakeholders in the tea industry have raised concerns that export to Iran could be affected by renewed sanctions by the United States (US).

They say Iran is one of the major tea buyers from Kenya and there is a potential risk of failing to get payment for export.

East Africa Tea Trade Association (EATTA) Managing Director Edward Mudibo said many banks are fearing transacting with Iran after President Donald Trum’s administration, blacklisted the Middle East nationfor, thus making it difficult for exporters to get their payment.

“With the Trump regime, he seem to be firm that the sanctions should continue. The problem is not even getting tea into Iran, the issue is how do you get your payment once you have exported to Iran,” Mudibo said.

Trump administration has reimpose economic sanctions that were lifted by the Iran nuclear agreement negotiated in 2015 during President Barack Obama’s administration. Trump withdrew from the pact in May, calling it inadequate and claiming it would not prevent Iran from making nuclear weapons.

“We need to get other innovative ways to trade with Iran, we are looking at the tea as a food item therefore it might not fall under the regime of restricted commodity. If we can get tea to Iran can we maybe get bitumen and thus we trade by barter, but Central Bank can guide us on this,” said Mudibo.

Speaking at the Tea Industry National Stakeholders Forum organized by the Agriculture and Food Authority (AFA)-Tea Directorate in Mombasa, he said Kenya is running a big risk by over-relying on five traditional market for the country.

Five countries; Pakistan, Egypt, Sudan, United Kingdom and United Arab Emirates account for 78 percent of tea export from Kenya but there are other small buyers from 60 countries. Pakistan is the biggest buyer of Kenyan tea and accounts for 39 percent of the export.

“This is big risk we are running. If there is any issue and Pakistan fails to get Kenyan tea, what happens. We need to diversify,” Mudibo said.

Mudibo said this calls for aggressive marketing and diversification so as to expand the market and avoid the risk of losing market.

Kenya has been ranked the world’s largest tea exporter and the third tea producer after China and India.

At the same time, EATTA and the Kenya Railway Corporation are negotiating a deal that could see all tea products transported to Mombasa for export through the Standard Gauge Railway (SGR).

The two bodies could finalise the deal by the end of November. This means that all tea from factories will have to be transported by road to the SGR marshaling yard at the Inland Container Depot (ICD) before the comondity is moved to the Port of Mombasa via the SGR.

“We are currently engaging in negotiations and this will culminate in the signing of an MOU will ensure all tea products from factories are transported from Nairobi to Mombasa Port awaiting exportation,” said EATTA MD.

He said the introduction of SGR has made transportation of tea from factories to Mombasa by road uneconomical because once trucks drop the commodity at KTDA godowns, the lorry have to return empty because all containers destined to Nairobi are being moved by SGR.

Mudibo said before the SGR, the trucks would drop the tea and load containers on their way back to Nairobi thus there was cost sharing.

He said EATTA is negotiating for special rates to lower cost of transportation.

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