The government’s imposition of a minimum price three years ago is exerting significant pressure on Kenya Tea Development Agency (KTDA) stocks, resulting in the accumulation of over 50 million kilograms of smallholder teas in Mombasa warehouses.

These stocks, originating from as far back as 2022, remain stagnant in the market due to the $2.43 minimum price set by the previous administration. The aim was to safeguard farmers’ earnings amid a decline in tea prices below the cost of production.

Critics argue that this minimum price strategy was not judicious, as it was tethered to production costs rather than the intrinsic value of the tea.

Peter Kimanga, a director with Global Tea, highlighted that the diverse quality of teas from different regions renders a uniform market price impractical.

“The minimum price was tied to production costs, and it did not align with the actual value of tea offered,” said Mr Kimanga.

He highlighted the disparity in quality between teas from the east and west of the Rift, asserting that their auction prices should reflect these differences.

The rigidity of the minimum price has led buyers to favour other high-quality teas over KTDA offerings, which fetch the same price at auctions leading to high volumes of outlotted tea.

Tea that has been withdrawn from the auction, when not sold as scheduled, is offered back at the auction flow in a fortnight.

Acknowledging the concerns raised by stakeholders, Principal Secretary for Investments Abubakar Hassan Abubakar hinted at the government’s intention to reconsider the minimum price policy.

Speaking at a forum in Nairobi last week, Mr Abubakar acknowledged the unintended consequences of the pricing control and indicated plans for a dialogue on its liberalisation.

“In terms of the unsold stock, the pricing control was introduced to address a specific issue, but it appears to have brought about unintended consequences. We are now initiating discussions on how to liberalise this aspect,” stated Mr Abubakar.