East African Business Week

 NAIROBI, KENYA - High costs of tea production inputs and fertiliser will likely offset the anticipated high earnings for the Kenyan tea industry, Tea Board of Kenya has said.
 Sicily Kariuki managing director of Tea Board of Kenya said last week that despite the prevailing favourable exchange rate, on the background of a weakened shilling against the US dollar, the tea sector is witnessing a mixed fortune due to the high costs of importing production inputs.
 A stronger dollar against the local currency it had been projected would boost the country's overall forex earnings from tea this year, which would in turn be a boon for tea farmers in the country.
 Tea is the leading foreign exchange earner in country, with Kenya being the world's third biggest exporter of black tea.
 The Kenyan shilling has taken a beating against the dollar, with the Kenyan currency hitting an historic high of the hundredth mark.
 "Although the tea sector is enjoying the current favourable foreign exchange in terms of exports, the sector also does import quite some substantial imports which go into the sector ranging from fertilizer, the machinery, packaging and so there is almost a near netting off effect," said Kariuki.
 The country fetched Ksh 97 billion from a bumper crop of 399 million kg in 2010, surpassing horticulture as the largest source of foreign exchange.
 Kariuki said that because of hot and dry weather and poorly distributed rainfall in tea growing areas, the tea sector had cumulatively for the last 8 months witnessed 12 percent lower production compared to same period last year.
 She added however that despite the low production the earnings from the produce had been stabilized because of favourable exchange rates coupled with increased demand for tea in emerging markets.
 "We seem to be reasonably stable in terms of the earnings because of increased demand in emerging markets and the fact that the price of tea has remained relatively stable the world over," she said.  Kariuki at the same time welcomed Kenya's Central Bank's efforts to stabilize the volatile Kenyan shilling saying the weakening shilling had marked a period of delicate balancing act for the tea sector.
 "It's a balancing act so anything that will give us a form of stability is definitely welcome," she said.
 This week the Central Bank of Kenya announced that it had ceased selling foreign exchange directly to commercial banks as it changed tact in a bid to save the ailing shilling that for umpteenth time tumbled against the dollar, touching a new low of Ksh103.