High costs hurting tea sector

Escalating costs of fertilisers and transport are the major constraints that might compel the tea sector fail to meet its export targets.

Escalating costs of fertilisers and transport are the major constraints that might compel the tea sector fail to meet its export targets.

This was revealed by OCIR-THE and On The Frontier (OTF) to stakeholders during a consultative meeting at Prime Holdings held Tuesday.

The government of Rwanda in its programme called “transforming Rwanda’s tea industry” targets to earn $91 million (about Frw50 billion) and produce 36,000 tonnes yearly by 2012.

Alex Kanyankole the director general of OCIR-THE said that the main reason why these two factors are a major challenge to the sector is because OCIR-THE and other players in the market in Rwanda have no control over them.

Rwanda requires fertilisers to improve the quality and quantity of soils where tea is grown.

It is hoped this will increase the competitiveness of Rwandan tea internationally.

“By the time fertilisers reach Rwanda they are 40 per cent to 50 per cent more expensive compared to Kenya. OCIR-THE and the growers of tea, have no direct influence on this,” he explained.

He added that a tonne of fertilisers from the factory costs $300 (about 163,500) including transport costs to Mombasa or Dar es salaam.

And that by the time it reaches Kigali, it costs $450 to $500 which means $150-200 increment is a result of transport costs.

Rwanda imports fertilisers from different European and Asian countries.

Kanyankole however said that they have addressed this issue to government and hopes that these expenses are likely to reduced by between 15 percent and 20 per cent.
“We hope that the proposed East African railway line will help reduce the transport costs.

The OTF report says there is progress in the sector but issues constraining the growth must be addressed if the country is to meet revenue and production targets.

 “Despite these constrains, production and perceptions of Rwanda tea have improved more rapidly than competitors,” the report reads in part. 

The report shows five imperatives for transformation which include; focus on quality to avoid bulk market price decline and create a Rwandan tea brand to signal quality.

It also recommends stakeholders to agree on key investment priorities, develop a gradual migration path and collaboration as an industry to address constraints.

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