EGYPT – Egypt is considering a unique solution to sustain its tea trade with Kenya amid a severe shortage of US dollars in both countries which has led to inflationary pressures and significant economic challenges.

Speaking at a panel in Nairobi, it was revealed that Egypt’s Ambassador, Wael Nasr El-Den, proposed a barter system to facilitate the tea trade between the two nations.

Under this arrangement, Egypt’s government will purchase Kenyan tea, and in return, Kenya will have the freedom to select the goods it wishes to import from Egypt.

Egypt, in particular, is seeking to reduce its reliance on its US dollar reserves as it grapples with a foreign currency shortage crisis.

The country faces mounting demands for US dollars to support essential imports of food and fuel and to meet a US$2 billion bond maturing in June 2024.

To address the US dollar liquidity shortage, Egypt has recently presented 35 state-owned companies as investment opportunities, either through its Initial Public Offering (IPO) program or by assigning them to strategic investors.

The government has also unveiled a comprehensive plan to attract an annual inflow of US$191 billion within three years, primarily sourced from revenue generated by the Suez Canal, remittances, commodity exports, and other channels.

Additionally, the global increase in beverage prices, driven by factors such as the Ukrainian conflict, volatile weather conditions, and the El-Nino weather phenomenon, has contributed to the surge in tea prices.

From the beginning of 2023 until November, tea prices have risen by US$0.19 per kilogram or 6.71%, reaching US$3.02 per kilogram with a 10.22% year-on-year increase, according to Trading Economics data.

Egypt is the second-largest purchaser of Kenyan tea, following only Pakistan. However, both countries have seen a decline in tea exports, with a 23% drop in Egypt and a 13% decrease in Pakistan in the first eight months of 2023, as reported by the Tea Board of Kenya.

The potential adoption of a barter system for the tea trade aims to address these economic challenges, allowing Egypt and Kenya to continue their tea trade while relieving pressure on their US dollar reserves.

Kenya to invest in specialty tea processing units boosting earnings for tea farmers

In a related development, Kenya is set to make significant investments in the specialty tea market segment, with plans to install specialty tea processing units worth KSh 10 billion in 32 factories managed by the Kenya Tea Development Agency Management Services Limited (KTDA-MS) across the country.

The Tea Board of Kenya (TBK) is also planning to establish an incubation hub for specialty and value-added tea with the goal of increasing earnings for tea farmers.

KTDA has already set up processing plants in 11 of its affiliated factories capable of processing green and black orthodox tea as part of its strategy to diversify products and maximize earnings.

The agency has also facilitated the installation of automated withering machinery in managed factories, reducing operational costs and enhancing processing efficiency.

Furthermore, TBK has called for machinery and equipment supplies for the incubation center, which aims to encourage product diversification and value addition along the tea value chain, ultimately benefiting farmers and processors and creating employment opportunities.