By Nelson Mandela Muhoozi
Uganda’s tea sector saw positive pricing stability at the Mombasa Tea Auction, maintaining a steady price above $1.00 (sh3,800) per kilogram.
In the latest auction round, Sale Number 43, which closed recently, Uganda averaged $1.02 (sh3,876) per kilogram—a slight decrease of 1 US cent from the previous week but reflecting an ongoing trend of stability.
This marks the fifth consecutive week that Uganda’s tea has averaged above $1.00, bringing relief to the sector.
Prominent tea sector expert Onesimus Matsiko highlighted that Uganda’s current price is significantly better than in the same period last year.
“In Sale 43 of 2023, Uganda’s average price was historically low at $0.66 (UGX 2,508) per kilogram. An increase of $0.36 (sh1,368) in one year is something the industry can hopefully bank on for sustained growth,” Matsiko observed, pointing to a promising outlook for the tea market.
Farm-gate prices, abandoned tea gardens
Despite these improvements in auction prices, the prices paid to farmers for green leaf tea have remained stagnant at approximately sh200 per kilogram.
In regions such as Greater Bushenyi, pluckers earn between sh100 and sh150 per kilogram to produce quality tea, but low farm-gate prices have left many farmers struggling to maintain their operations.
“In Tooro sub-region, green leaf prices are even lower, around sh130 per kilogram,” explained Matsiko, attributing the decrease to accumulated financial losses at tea factories, many of which carry outstanding debts to both employees and farmers.
Due to these challenging conditions, approximately 50% of tea gardens owned by outgrowers in Tooro are currently abandoned.
Matsiko said the ongoing financial difficulties among factory operators have prevented them from increasing green leaf prices, limiting opportunities for farmers to earn a sustainable income.
Regional performance
Uganda’s tea performance lags behind that of neighboring countries, with Kenya averaging $2.17 (sh8,248) and Rwanda achieving a higher $3.55 (sh13,500) per kilogram in the latest auction.
Experts said Rwanda’s premium prices can be attributed to government-regulated quality standards and other supportive policies.
For instance, the highest grade of Rwandan tea, Kitabi Tea Factory’s BP1, sold at $6.72 (sh25,536) per kilogram, while Uganda’s highest-grade PD of Bwindi mark fetched only $1.43 (sh5,434).
Matsiko highlighted Rwanda’s policy as a valuable model for Uganda, explaining, “In Rwanda, where farmers do not own factories, the government regulates prices, setting them at 50% of the final value, including delivery costs. Kenya’s system also ensures farmer ownership with a 75% revenue share, while Uganda averages between 30% and 40% at the farm-gate.”
Unlocking Uganda’s tea export potential
Uganda’s 50,000 hectares of tea plantations could produce an estimated 150 million kilograms of tea annually without additional planting.
With best practices in farming, including fertilizer application, Uganda has achieved yields as high as 7,000 kilograms per hectare in some areas.
By diversifying into orthodox and specialty teas, experts said Uganda could potentially achieve an export price of $5.00 (sh19,000) per kilogram, generating approximately $675 million (sh2.57 trillion) in annual revenue.
Matsiko advocated for government intervention, especially in providing subsidized fertilizer, which he argues would greatly enhance both yield and quality.
“A farm-gate price of sh500 per kilogram would cover fertilizer costs without subsidies,” he noted.
“If factories can consistently achieve a $1.50 (sh5,700) price per kilogram, farmers can finance fertilization independently.”
Call for strategic Government interventions
Matsiko proposed several strategic interventions for Uganda’s tea sector, including quality regulation for green leaf, affordable financing for farmers and processors, and reduced power costs for tea factories.
He emphasized that, unlike typical banks, which have blacklisted many tea industry players, patient financing from the government would make a significant difference.
Matsiko also suggested that electricity costs for tea factories be capped at 5 US cents (sh190) per unit.
The recently held 6th African Tea Convention in Kigali underscored the importance of quality improvement for East African tea exports, especially to major markets like Pakistan, where tea is considered a staple beverage.
Pakistan’s preference for affordable, quality tea provides an opportunity for Uganda to refine its product and potentially command higher prices in international markets.
The need for fair pricing
Tea farmer William Mbonigaba urged for an equitable pricing formula that would account for Mombasa auction prices in farm-gate payments.
“If we agree on a formula that aligns with auction prices, it could stabilize the market for both farmers and processors,” Mbonigaba said.
He warned that, without such a structure, short-term players entering the market could lead to unsustainable price competition that ultimately harms the industry.
Matsiko also noted that government regulation of green leaf pricing would establish a foundation for the sector’s sustainability.
“Green leaf pricing is essential,” he said. “It worked sustainably in some factories, and it’s a simple decision for the government to institute this nationwide.”
With sustained government support and coordinated sector reforms, he said Uganda’s tea industry has the potential to increase its competitiveness, boost farmers’ livelihoods, and enhance export earnings.
