Zimbabwe’s tea-growers under pressure

via Zimbabwe’s tea-growers under pressure | Independent Online 14 December 2015

Harare – Already struggling African countries, such as Zimbabwe, Burundi, Rwanda and Tanzania have taken a knock as the drought rips havoc on non- commodities such as tea, while drought conditions are set to stunt production volumes in other source markets, including

Tea has declined in the past six months to below $1.30 (R19.60) per kilogram.

Only Kenya and Uganda have registered production growth for tea while other big producers – such as Rwanda, Burundi and Tanzania – have recorded declines, with Uganda’s earnings from tea exports remaining stagnant at $90 million despite an output jump.

Zimbabwe Stock Exchange listed conglomerate Meikles which also has interests in mining, retail and agro-processing among other sectors, said this week that its tea growing division had suffered from weaker prices.

“Average prices fell to $1.28/kg from $1.32/kg for the comparative period. It is expected that average bulk tea prices will increase over the forthcoming period but will not yet reach the favourable levels realised in the 2014 financial year,” John Moxon, the chairman of Meikles, said.

Tea is just one commodity that has been affected by international market prices and production declines.

Sugar is another commodity that has also taken a knock. Tongaat Hulett said profits had declined last month and Illovo said operating profits had fallen 37 percent.

The two companies red-flagged drought conditions for the financial declines by their operations, which include units in sub-Saharan Africa.

Kenyan tea producers have, however, realised revenue growth and economists say the tea and coffee sectors in Kenya will witness growth this year.

“Despite an expected decline in tourism, growth in the production of tea and especially coffee has accelerated,” Sherif Salem, the emerging markets portfolio manager at Invest AD, said this week.

But for Zimbabwean tea producer, Tanganda, respite could only come in the next two years.

If dry weather conditions persist, growth could come later, especially with a biting economic environment in Zimbabwe that senior executives say is creating uncertainty. Moreover, the company was expecting there to be “uncertainty concerning the expectations of rains” in the upcoming seasons.

“Tanganda needs another two rainy seasons, including the forthcoming season to realise a material contribution from its diversification programme. This programme does encapsulate the future of Tanganda, as a major contributor to the agricultural sector,” Moxon said.

Meikles’ net loss for the half year to September widened to $10.8m. Value added tax on the tourism industry also affected city and resort hotels.