The World Bank is predicting that average black tea auction prices will drop to $1.60 in 2015 from $1.80 in 2007.
Thirteen companies including local and international firms are competing for a stake in the state-owned tea factories and estates of Gisakura and Kitabi.
Government has lined-up the two lucrative factories for sale in order to attract buyers with adequate expertise and financial means to facilitate the much needed investment for expansion of the sector.
Officials said that government is selling off 65 percent of Kitabi tea factory which is located in Nyamagabe district, Southern Province.
It is also selling off 45 percent of Gisakura tea factory in Nyamasheke district, Western Province.
“We are not selling theses factories because they are not profitable. Government thought they (factories) can be managed better in the hands of the private sector,”
Anthony Butera, Director General, Ocir-Thé said at the bidders’ conference on Wednesday.
Ocir-Thé is a government agency that is charged with overseeing the development of the tea sector in the country.
Both factories had been targeted by Dubai World in 2008 before the United Arab Emirates (UAE) consortium pulled out of the deal, citing the global financial crisis.
Official at the Rwanda Development Board (RDB) said the privatisation of these factories should be done by the end of the year. RDB, which is overseeing the sale, has set July 30 as the final date for submitting the technical bids. The bids will also be opened on that very day.
Claire Akamanzi, RDB’s Deputy CEO in charge of Business Operations and Services said the intention is to disengage the state from commercial activities in the tea sector and ensure farmers and cooperatives’ participation in the privatisation process.
She said that since the privatisation was initiated in Rwanda in 1996, a total of 50 companies have been privitised of which four are from the tea sector.
“We need the private sector to be in the driving sit of economic growth,” Akamazi said.
So far, Sorwathé, Pfunda, Rubaya and Nyabihu tea factories and Nshili-kivu plantations have been privatised.
The remaining tea factories are Mulindi, Gisovu, Mata, Kitabi, Gisakura and Shagasha.
However, Butera said that a purchase agreement for Gisovu tea factory and plantation has been reached between government and Oryana Holdings, an American firm.
Privatisation of the tea industry is seen as something that will help the tea cluster meet its ambitious export target of $91 million by 2012 by pursuing higher margin teas with direct sales, as well as blended and packaged teas.
According to the 2008 Rwanda Tea Strategy, government intends to generate wealth by selling a high quality range of branded Rwandan teas with some added value through partnerships with new and existing buyers in Europe, US and the Middle East.
Currently, Rwanda generates wealth by selling its standard CTC teas in bulk form at auction, mostly to Asian buyers and a small but growing amount to European and Middle Eastern buyers.
But OCIR-Thé says that the strategic investors should be able to diversify the product.
Butera said that diversification will reduce Rwanda’s reliance on basic CTC teas that will experience price point pressure, as well as enable a move into specialty teas that fetch higher prices.
The World Bank is predicting that average black tea auction prices will drop to $1.60 in 2015 from $1.80 in 2007, thus supporting the need for a product diversification strategy.
The Food and Agriculture Organisation (FAO) projections to the year 2017 also indicate that world black tea production will grow at two percent annually and reach 3.1 million tones.
But it says that world green tea production will grow at a considerably faster rate of 4.5 percent annually to reach 1.57 million tonnes.