An inspirational flex of regional teas at Mombasa port

Calls for more investment in agribusiness have steadily been gaining traction and a recent visit to the Mombasa tea auction exposed me to an experiential perspective why commercial banks must improve their risk appetite for agriculture sector financing.

Recent research suggests that three in four African agri-SMEs find themselves in the quandary of not being able to access formal bank loans, yet they are also deemed too large to qualify for microfinancing, contributing to an estimated $100 billion gap in unmet demand for funding.

Tea is one of East Africa’s foremost cash crops, and I was part of a Standard Bank Group delegation that recently visited Mombasa to further understand the unique role of the port in the crop’s value chain.

During the visit, we interacted with men and women who had a strong passion for everything about tea, right from the bush to the teacup.

What we witnessed there was a beautiful flex of regional teas representing smallholder farmers from Kenya, Uganda, Tanzania, Rwanda, Burundi, Democratic Republic of Congo, Malawi, Madagascar, Mozambique and Ethiopia.

Collectively, these countries, through their farmers, seek to get a good share of the global tea industry that generated $50 billion in 2021 and is estimated to generate $93 billion by 2031, with a compound annual growth rate (CAGR) of 6.7 percent from 2022 to 2031.

But for these countries to reap more, they must first sow, which can take the form of more financing availed to processors for value addition, quality assurance, storage, and many other efforts all aimed at fetching a higher price at the auction.

Intra-regional competition

For instance, looking at the trading statistics from 2022, one would stumble on an interesting irony whereby Uganda earned $83.45 million from a huge volume of tea exports compared to Rwanda’s earnings of $107 million from a much smaller volume of the crop.

It’s clear that getting a bigger share of the global tea market is about improving the quality of the crop; for instance, despite Rwanda’s low volumes, the country’s tea supplies command the highest prices at the Mombasa auction.

With improved qualities that fetch more pay, commercial banks would have the incentive to raise their appetite to approve more loans for tea enterprises. For instance, during the February 2022 Mombasa auction, Rwandan tea sold at $3.02 a kilo, compared to Kenya’s $2.72, Burundi’s $2.44, Uganda’s $1.27, and Tanzania’s at $1.15.

Of course, the quality of tea depends on various factors including the geography, soil fertility, pest control, tillage, weeding, irrigation, the type of tea cultivar, plucking and processing methods.

Since the grade of tea is the same across the East African region, it’s the quality that determines the price difference at the Mombasa tea auction. The tea blending experts in Mombasa explained that they pay a premium for Rwandan tea due to its higher quality, on account of the high standard of tea management practices.

The experts explained that Rwanda has very strong tea plucking guidelines – which is strictly two leaves and a bud. Accordingly, without such strict controls, some farms may even pluck three to four leaves and a bud, while others include the stem.

There is a strong correlation between the plucking standards and tea quality. The higher-quality teas command a premium because they are used to improve the taste of lesser teas.

According to the National Agricultural Export Development Board of Rwanda (NAEB), the agency have set an ambitious target of training 5,000 tea pluckers per year and have trained over 50,000 tea pluckers since 2012,  and the returns are already being noted.

Art of tea tasting

As a banker, it is easy to dismiss a loan application file from the comfort of your air-conditioned desk. But a field visit to a place like the Mombasa tea auction gives you real insights to guide a more informed and helpful decision.

For instance, the highlight of my Mombasa tour was the time that I spent interacting with a professional tea taster and how their skill influences buyer decisions at the auction.

A tea taster is skilled at evaluating the quality and characteristics of different types of tea by assessing their aroma, flavour, and appearance of the leaves.  The taster is expected not only to detect the country of production, but the region as well. The taster along with the blender are responsible for creating a consistent flavour and taste of a given brand of tea.

I did try out the tea tasting skill – first you look at the dried leaves, their color and style. Then you look at the infusion – the brewed leaf, its colour brightness and smell.  

The most important step is the actual tasting, where you gulp the liquid sharpy and simultaneously suck air, with a deep inward breath—this helps you to decide on the taste and characteristics of the brand.

You then roll the liquid around on your tongue to assess the body and the weight of the tea. It’s a requirement that all tea destined for the UK must be infused into milk.

The taster demonstrated the effect of a batch of tea from Uganda on a cup of milk – the milk turned to a dark brown color! For Uganda, the key message for our country strategists, technocrats and bankers too, is we need to “wake up and smell the tea.”

karamaj@stanbic.com

The author works at Stanbic Bank Uganda